Broker: Maybank Investment Bank Berhad
Date of Report: September 12, 2025
Bermaz Auto Berhad Faces Steep Earnings Decline Amidst Intense Automotive Market Headwinds
Executive Summary: Tough Road Ahead for Bermaz Auto Berhad
Bermaz Auto Berhad (BAUTO MK) has reported a significant earnings miss for 1QFY26, with results sharply impacted by falling sales, contracting margins, and losses from associates. Despite maintaining a solid balance sheet and healthy dividend capacity, the company faces persistent challenges in Malaysia’s competitive automotive sector. Maybank Investment Bank Berhad reiterates a HOLD rating, lowering the target price to MYR0.68.
Key Highlights
- 1QFY26 core net profit plunged 87% YoY to MYR8.8 million.
- Revenue dropped 42% YoY as vehicle sales and margins deteriorated.
- Sales and margin assumptions for FY26–28E cut by up to 64%.
- Dividend yield remains attractive at approximately 5% on a 70% payout assumption.
- Strong net cash position (over MYR180 million, ~29% of market cap) provides downside protection.
- Order backlogs rebounding, led by Mazda CX60 and Mazda 3 models.
1QFY26 Results: A Disappointing Quarter
| Metric |
1QFY26 |
1QFY25 |
4QFY25 |
YoY Change |
QoQ Change |
| Turnover (MYR m) |
491.3 |
846.2 |
528.6 |
-41.9% |
-7.1% |
| EBIT (MYR m) |
31.7 |
88.7 |
35.7 |
-64.2% |
-11.3% |
| Core Net Profit (MYR m) |
8.8 |
69.7 |
21.5 |
-87.3% |
-58.9% |
| EBIT Margin (%) |
6.5 |
10.5 |
6.8 |
-4.0ppt |
-0.3ppt |
| Vehicle Unit Sales |
2,638 |
5,117 |
2,969 |
-48.4% |
-11.1% |
Performance Drivers: Weak Sales, Margin Squeeze, and Associate Losses
- Vehicle sales dropped 48% YoY to just 2,638 units, attributed to:
- Absence of backlog orders and new model launches
- End-of-cycle models and rising competition in the mass premium segment
- EBIT margin fell 4.0 percentage points YoY on higher dealer incentives.
- All associate companies swung into losses, further dragging results.
Dividend Remains a Silver Lining
- 0.75 sen dividend per share (DPS) declared for 1QFY26, representing a 105% payout ratio.
- Assuming a 70% payout for FY26-28E, dividend yields are expected at approximately 5%.
- Robust cash buffer (MYR355 million or 31 sen per share) ensures continued dividend capacity.
Financial Health and Valuation: Strong Balance Sheet Offers Downside Protection
- Net cash position exceeds MYR180 million, about 29% of market capitalization.
- Recurring free cash flow above MYR120 million per annum supports operations and dividends.
- Valuation basis shifted to 1.2x FY26E P/B, reflecting cash-rich, asset-light structure.
- Revised target price to MYR0.68 (from MYR0.96), maintaining HOLD recommendation.
Sales Outlook: Mixed Signals
- Order backlogs have increased to 3,580 units (up from 1,580 last quarter) due to demand for the CX60 (500 units) and Mazda 3 (1,700 units).
- Industry headwinds remain, with intense competition from Chinese marques impacting Mazda and Kia sales.
- Near-term recovery is anticipated from 2QFY26 onwards, aided by Mazda’s renewed principal support starting July 2025.
Key Financial Metrics and Forecasts
| FYE Apr (MYR m) |
FY24A |
FY25A |
FY26E |
FY27E |
FY28E |
| Revenue |
3,930 |
2,624 |
2,180 |
2,222 |
2,265 |
| EBITDA |
446 |
224 |
118 |
116 |
118 |
| Core Net Profit |
346 |
157 |
51 |
77 |
79 |
| Core EPS (sen) |
29.7 |
13.4 |
4.3 |
6.6 |
6.8 |
| Core P/E (x) |
7.8 |
7.8 |
15.5 |
10.2 |
9.9 |
| Net Dividend Yield (%) |
11.3 |
16.0 |
4.5 |
6.9 |
7.1 |
| ROAE (%) |
43.7 |
21.4 |
7.8 |
11.5 |
11.5 |
Product Portfolio and Model Lineup
- Bermaz Auto is the franchise holder and sole distributor for Mazda, Peugeot, and Kia vehicles in Malaysia, and Mazda in the Philippines.
- New launches for Mazda and a growing EV (electric vehicle) lineup are expected to support future sales, though recent performance shows a lag due to end-of-cycle models and lack of new launches.
- Notably, XPeng EVs entered the sales mix with 386 units sold in 1QFY26.
Shareholder Structure
- Dynamic Milestone Sdn. Bhd. (15.2%)
- Employees Provident Fund (10.5%)
- Permodalan Nasional Bhd. (8.2%)
- Free float: 66.1%
Key Risks to Watch
- Persistent soft consumer sentiment
- Unattractive or delayed new model launches
- Forex volatility impacting operational margins
- Execution risks, cost overruns, and absence of new orders
Valuation and Price Performance
- Current share price: MYR0.68; 12-month target price: MYR0.68
- Price has fallen 72% over the past year, underperforming the broader market index
- Valuation now based on 1.2x FY26E PB (-2SD), reflecting a cautious stance despite ample cash reserves
Conclusion: HOLD Maintained Amidst Headwinds, Cash Strength Provides Support
Bermaz Auto Berhad is navigating a challenging landscape, with earnings hit by contracting sales volumes, squeezed margins, and associate losses. However, its strong balance sheet, hefty net cash position, and robust free cash flow generation offer substantial downside protection and dividend sustainability. The outlook hinges on successful new model launches, competitive positioning, and normalization of vehicle sales after a “super cycle” period. Investors are advised to maintain a cautious stance, recognizing the ongoing risks as well as the company’s defensive financial posture.
Contact Information
For more details, contact Maybank Investment Bank Berhad, Loh Yan Jin ([email protected]), Tel: (603) 2297 8687.
