Comprehensive Financial Analysis: Bermaz Auto Berhad and Industry Insights

Broker Name: Maybank Investment Bank Berhad

Date of Report: December 13, 2024

Introduction to Bermaz Auto Berhad

Bermaz Auto Berhad, a prominent player in the automotive industry, continues to capture attention with its strategic market maneuvers and financial performance. As a franchise holder and sole distributor of Mazda, Peugeot, and Kia vehicles in Malaysia, and Mazda in the Philippines, Bermaz Auto Berhad stands at a pivotal position in the automotive sector.

Financial Performance and Market Dynamics

Bermaz Auto Berhad’s 1HFY25 core net profit (CNP) of MYR111 million aligned with market expectations, achieving 39% of Maybank’s and 38% of consensus FY25 estimates. Despite a 42% year-on-year decline in CNP, primarily due to sales normalization, the company shows potential for stronger performance in the second half of the fiscal year. This optimism is driven by upcoming model launches, including the Kia Sportage, Mazda CX60, and XPeng G6, alongside favorable seasonal factors.

Sales Normalization and Competitive Landscape

Vehicle sales experienced a 30% decline year-on-year, totaling 8,932 units, as the backlog orders dwindled and new models were awaited. The intensified competition in the mass premium passenger vehicle segment, particularly from new brands, has been a contributing factor. Kia Carnival sales saw a significant drop of 58% year-on-year to 392 units, impacted by diesel subsidy rationalization effective from June 2024.

Quarterly Performance and Dividend Declaration

On a quarter-on-quarter basis, Bermaz Auto’s 2QFY25 CNP fell by 41%, with revenue down by 24% and vehicle sales decreasing by 25%. This was largely due to intensified competition and the return of remaining Peugeot vehicles to the principal manufacturer. The company declared a 10 sen dividend per share for FY25E, comprising 3 sen interim and 7 sen special, representing a 143% dividend payout ratio (DPR), aligning with the company’s 80% DPR assumption.

Future Prospects: New Model Launches and Growth Potential

The company is poised for stabilization in sales in 2HFY25, with new model launches and distributorships expected to partially offset the sales slowdown for Mazda. With order backlogs mostly cleared, current total bookings average 1,000 units per month, indicating steady demand.

Financial Metrics and Valuation

Bermaz Auto’s share price stands at MYR 2.04, with a 12-month price target of MYR 2.42, suggesting a 19% upside potential. The company’s valuation is compelling, with a core P/E ratio projected to be 8.4x for FY25E and a dividend yield exceeding 9%. The company’s financial health is robust, with net cash positions and an asset/liability ratio of 2.0, indicating strong liquidity.

Risks and Considerations

Several risk factors could impact Bermaz Auto’s earnings estimates and target price, including soft consumer sentiment, forex volatility, and execution mishaps. The company might face challenges if model launches fail to attract consumers, or if competition intensifies further.

Conclusion: Investment Recommendation

Maybank Investment Bank Berhad maintains a “BUY” recommendation for Bermaz Auto Berhad, citing its compelling valuation, attractive dividend yield, and potential for future growth driven by new model launches. Investors are encouraged to consider Bermaz Auto as a promising investment opportunity in the automotive sector.