Review

• MBM Resources Bhd (MBM)'s 2QFY24 results came in within expectations. Excluding non-core items, the core net profit for 2QFY24 increased by 30.3% YoY to RM67.6mn on the back of 5.5% rise in revenue.

• For 1HFY24, the cumulative core net profit rose by 12.3% YoY to RM147.9mn, while revenue increased by 8.3% YoY to RM1.2bn. This robust performance was driven by higher contributions from both divisions and improved performance from JVs and associates.

• Motor Trading Division – 1HFY24 revenue rose 10.2% YoY to RM1.0bn, driven by a rise in Perodua sales volume (+17.2% YoY) and improved aftersales performance, which up 4.7% YoY. PBT grew 12.3% YoY to RM149.0mn. Excluding contributions from the associated entity, the adjusted PBT would have increased by 10.7% to RM24.7mn

• Auto Parts Division – Despite lower revenue, 1HFY24 PBT increased by 16.1% to RM29.0mn, primarily driven by improved margins emanated from high demand coupled with sustained cost efficiencies.

• The group declared a first interim dividend of 6.0sen/share and a special single tier dividend of 10.0sen/share for this quarter. This brings the total dividend to 16sen/share, compared to 26sen/share declared in the same period last year.

Impact

• No change to our earnings forecasts.

Outlook

• Management remains cautiously optimistic about the outlook, considering the risks of global macroeconomic headwinds and potential fuel subsidy rationalisation.

• Meanwhile, the Group has expanded its portfolio of vehicle offerings with a new Jaecoo dealership.

• Forward sales orders are indicating a softening trend, which could potentially lead to weaker sales in 2H24, despite the introduction of new models, facelift versions, and new variants.

• Meanwhile, we expect an increasing number of Chinese EV brands to enter the domestic market, which will heighten competition among automotive companies and make the landscape more challenging for existing players. The intense competition would lead to a price war, in our view.

Valuation

• Maintain SELL on MBMR with an unchanged TP of RM4.70/share, based on CY25 PER of 7x.

Source: TA Research - 29 Aug 2024