BAUTO guided for upbeat sales in FY23 for Mazda, Peugeot and Kia. Its current total booking backlogs of 10k units is unchanged from three months ago - indicating that deliveries have been replenished with new bookings. Meanwhile, we expect BAUTO’s 2QFY23 net profit to come in at RM55m-RM65m, up 10% to 30% sequentially. BUY with a TP of RM2.65 based on ascribed CY23F PER of 15x, which is a premium to the sector’s average forward PER of 11x given its niche in the premium mid-market segment and ability to consistently pay out good dividends.

BAUTO guided upbeat sales in FY23 for Mazda at 13k units (+8% YoY), Peugeot at 2k units (+107% YoY) and Kia at 2k units (+456% YoY). For FY24, we raise our assumptions to 13.7k units for Mazda (+5% YoY), and 2.1k units for both Peugeot (+5% YoY) and Kia (+5% YoY)

With the strong response to CKD models such as Kia Carnival, BAUTO plans to put onto the market a second Kia CKD model, i.e. Sorento, scheduled for an official launch in Jan 2023 or Feb 2023, and a third thereafter, either Sportage or Seltos. These will be earnings accretive for BAUTO as CKD models command higher margins than CBU models of up to 5ppts. Over the longer term, BAUTO targets its annual sales of Kia vehicles to hit 10k units within the next 3-4 years, a five-fold increase from its FY23F target of 2k units.

BAUTO is committed to a gradual transition towards electric vehicles. It is working hand in hand with other carmakers to gradually strengthen the ecosystem for hybrid and electric vehicles locally to make their prices more affordable. For a start, it is bringing various CBU EV models to the local market including Mazda MX-30 EV, Peugeot e-2008 EV, Kia EV6, and Kia PBV1 and beefing up after-sales support in term of maintenance services and spare parts support system.

We expect BAUTO’s 2QFY23 results, due out by the later part of this week, to come in at RM55m-RM65m at the core net profit level (up 10% to 30% sequentially), taking cue from Mazda’s sales in 2QFY23 of 3,394 units (+16% QoQ) that brought 1HFY23 sales to 6,331 units (+49% YoY) and assuming its net profit margin could sustain at between 7% to 8%.

Source: Rakuten Research - 5 Dec 2022