We reiterate BUY call on UMWH with a higher sum-of-parts (SOP)-derived fair value (FV) of RM4.75/share (from RM4.70/share previously). Our FV implies FY23F PE of 13x, at parity to its 5-year mean. We retain our neutral 3-star ESG rating.
1QFY23 core earnings beat expectations, accounting for 34% of both our FY23F net profit and streets’. The positive variance was due to stronger-than-expected earnings contribution from the automotive and equipment divisions. The sequentially higher earnings were mainly due to an increased share of profit from associates.
Hence, we raised FY23F-FY25F earnings by 7% to account for higher contributions from Perodua and increased FY23F-FY25F sales assumption for Toyota cars to 93,000/94,000/94,000 units from 80,000/85,000/85,000 units previously. UMWH did not declare any dividend during the quarter under review, as expected.
YoY, 1QFY23 revenue of RM4,380mil rose 20% with all segments outperforming. Consequently, 1QFY23 core earnings of RM135mil surged by 24% YoY.
Automotive revenue grew 18% YoY driven by higher vehicle sales. The group sold 25,219 (+12% YoY) Toyota cars during the reporting quarter. On the other hand, the equipment segment grew 17% YoY due to encouraging demand from both local and overseas markets. Meanwhile, the manufacturing & engineering segment (M&E) division rose 43% YoY with all sub-segments, especially lubricants posting higher sales volume (+14% YoY).
On a side note, management indicated that aerospace segment managed to maintain sales momentum from 4QFY22 as more fan cases were delivered (+30% QoQ).
QoQ, topline grew marginally but bottomline improved by 27%, mainly driven by stronger core net profit from associates (+61%), together with better performance in automotive (+31%) and equipment (+44%) divisions. The automotive segment’s earnings were accelerated by robust vehicle sales while equipment earnings were supported by better product mix and cost optimisation initiatives.
We continue to like UMWH due to: 1) robust order book of more than 240,000 units for both Perodua and Toyota (6 – 7 months of earnings visibility), and 2) continuous recovery in its all-other segments.
The company is currently trading at an attractive FY23F PE of 10x, lower than its 5-year average of 13x while offering a decent dividend yield of 3%
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