Berjaya Auto (BAuto) reported solid 4QFY15 (Apr) results with net profitincreasing 14.9% YoY and 18.8% QoQ, in line with expectations. Reiterate BUY with a TP of MYR4.70 (32% upside). FY15 earnings grew 62.7% YoY on the back of robust demand for Mazda vehicles. BAuto declared a fourth interim dividend of 2.75 sen per share and a special dividend of 3.25 sen per share.

• Strong QoQ growth. Despite the imposition of the goods and services tax (GST) on 1 Apr 2015, 4QFY15 revenue grew 9.2% QoQ while EBITDA margin expanded to 17.4% (3QFY15: 17.1%). The growth was underpinned by the introduction of the new Mazda 2, which debuted in Jan 2015. Net profit was also boosted by positive associate contributionin the quarter vis-à-vis a marginal loss in 3QFY15. BAuto declared a fourth interim and special dividend of 2.75 sen and 3.25 sen per share respectively, bringing total FY15 DPS to 14.6 sen (FY14: 5.3 sen).
• Steady YoY growth. Revenue for the quarter rose 7.4% YoY to MYR424.3m, helped by the new Mazda 2. EBITDA margin expanded 2ppts to 17.4% while pretax margin grew 1.9ppts to 18.2%, helped by improved operating leverage and a weak JPY. Net profit for FY15 reached MYR215.4m, up 62.7% YoY. The improved earnings were driven by a 27.8% YoY increase in Mazda vehicle registration to 12,020 units. There were full-year contributions from completely built-up (CBU) models that debuted in Malaysia in 2HFY14 – the Mazda Biante (in Nov 2013), Mazda 3 and Mazda CX-5 2.5 (in Mar 2014). Sales volume in the Philippines was also strong, driven by Mazda 3. The improvement in earnings quality was also attributed to benefits from the JPY depreciationand lower import duty for selected CBU models.
• Forecasts and risks. We keep our FY16-17 earnings forecasts unchanged and introduce our FY18 estimates. Risks to our recommendation include: i) unfavourable forex trends, ii) supply chain disruption, and iii) weaker consumer spending.
• Top Pick. We reiterate our BUY call on the stock with an unchanged TP of MYR4.70 (MYR3.36 ex 2-for-5 bonus issue) based on a 13.7x target P/E on FY16 EPS. BAuto trades at undemanding valuations and retains robust growth prospects going into FY16 from a strong product pipeline, which helps to secure gains in market share.