KUALA LUMPUR: Research firms are positive on Bermaz Auto Bhd (BAuto) on the back of the strong order book and improved sales volume.
As such, CGS-CIMB Securities Sdn Bhd (CGS-CIMB), MIDF Research and AmInvestment Bank has reiterated a "buy" call on the company with target price (TP) of RM2.40, RM2.20 and RM2.25 respectively.
Meanwhile, RHB Research upgraded the recommendation to "buy" call from "neutral" with 12.4 per cent better TP of RM2.00 from RM1.74 previously.
In a research note today, CGS-CIMB said it projects BAuto's sales volume to grow by 24 per cent in financial year 2023 (FY2023), driven by its robust order backlog.
"We gathered from management that BAuto has an outstanding order backlog of about 8,000 units for Mazda as of early June versus 12,000 unit sales volume for Mazda in FY2022.
"It attributed the higher bookings to last-minute registration from customers ahead of the sales and service tax (SST) holiday expiry at end-June," said the research firm.
CGS-CIMB also projects the group to deliver 13,000 sales volume for Mazda, and 4,000 for Kia and Peugeot combined, translating to 24 per cent volume growth in FY2023.
As such, CGS-CIMB has raised FY2023 to FY2024 forecast earnings per share (EPS) by 11 to 16 per cent for expectations of better margins and higher sales volumes.
AmInvestment Bank opined the strong order book will provide Bermaz Auto with sales visibility while the impact of the additional cost could be offset by lower advertising and promotional spending.
"The group's booking order rate in June remains healthy as demand outstrips supply. Despite the strong demand, the shortage of inventories likely will limit the number of vehicles that Bermaz Auto could deliver.
"We gathered the lockdown in China is currently affecting the supply of Mazda's inventory and a more normalised level of monthly deliveries (1,000 to 1,200 units) is expected for upcoming months," said AmInvestment Bank.
RHB suggests that with such a strong backlog, BAuto management is not concerned over any cancellations post-SST exemption.
"As completely built-up (CBU) supply remains tight, we expect the completely knocked down (CKD) and CBU ratio to remain at similar levels in the coming quarter or two.
"Although a higher CKD sales mix may marginally enhance margins, it reduces BAuto's ability to reap the benefits from a weakening yen, given that Mazda CBUs are purchased in yen," it said.
Meanwhile, MIDF Research said BAuto is expected to morph into a multi-brand auto conglomerate following its recent brand acquisitions, which is expected to drive above-industry earnings and volume growth.
BAuto's performance will be driven by higher Mazda sales as well as further growth at the newly acquired Kia and Peugeot operations as new launches pick up pace, said MIDF Research.
As at 12.30 pm, Bermaz Auto declined one sen to RM1.77 with 1.99 milion shares traded