PETALING JAYA: Bermaz Auto Bhd’s (BAuto) sales are expected to remain strong in the first quarter (1Q) of financial year 2023 (FY23), as buyers will be rushing to purchase vehicles before the sales and service tax (SST) exemption incentives expire by end of this month.
While there may be some booking cancellations if the SST exemption is not extended, TA Research viewed this as a temporary hiccup.
“We expect bookings to resume after one to two months,” the research house said in its latest report.
It noted that the reopening of business post the nationwide lockdown and the resumption of manufacturing activities will help to improve sales volume going forward.
In addition, future sales will also be supported by other positive drivers such as better consumer sentiment and launches of new models, said TA Research.
In its recent 4Q22 results, BAuto posted another commendable performance, mainly driven by higher car sales and margin expansion.
Its core net profit increased by 17.8% year-on-year (y-o-y) to RM78.7mil on the back of a 40% increase in revenue.
BAuto declared a fourth interim dividend of 2 sen and a special dividend of 2.5 sen for the quarter under review. This brings the total dividend per share to 8.75 sen in FY22 from 6.5 sen in FY21.
TA Research, which maintained a “buy” call on the stock, has revised its FY23-FY24 earnings forecasts higher by 0.8% to 0.9% after incorporating FY22 results.
It has also revised BAuto’s target price (TP) higher to RM1.98 from RM1.96 previously.
In its latest report, RHB Research expects BAuto will be able to absorb the SST for orders placed before end June, fuelling an estimated five to six months of backlogs.
With such a strong backlog, management is not concerned over any cancellations post the 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,” it added.
Although a higher CKD sales mix may marginally enhance margins, RHB Research said it will reduce BAuto’s ability to reap the benefits from a weakening Japanese yen and ringgit, given that Mazda CBUs are purchased in Japanese yen.
RHB Research lifted its estimated FY23-FY24 core earnings by 15% to 7% and also, introduced an estimated FY25 core profit of RM250mil with an 18% y-o-y growth fuelled by the continued growth of its Peugeot and Kia models.
“The elevated earnings, coupled with a higher ascribed price earnings of 13 times from 12 times, lifts our TP to RM2,” it said.
The research house added that the higher valuation accounts for BAuto’s improving prospects and resilience against any softening demand and rising costs.
Meanwhile, MIDF Research has re-affirmed its “buy” call on BAuto at a higher TP of RM2.20 from RM1.98 previously.
“The group is morphing into a multi-brand auto conglomerate following its recent brand acquisitions, which is expected to drive above-industry earnings and volume growth throughout our forecast horizon,” it added.
Key catalysts for the group include sustained earnings improvement for underlying Mazda operations on normalising margins and demand recovery, a weaker yen, the rollout of new Kia models-CKDs from FY22 onwards and the rollout of new Peugeot models.
In addition, BAuto is well positioned to capitalise on Budget 2022’s electric vehicle (EV) duty exemptions which may incentivise consumer take-up of EV models with its ready EV models from Kia (EV6), Peugeot (2008 EV) and Mazda (MX30 EV).