KUALA LUMPUR: Bermaz Auto Bhd (BAuto) is expected to post stronger earnings growth in the second half of financial year ending 2025 (2HFY25), according to CIMB Securities.
This will be driven by the launch of the new Kia Sportage complete-knocked down (CKD) programme and higher electric vehicle (EV) sales, with a potential special dividend from Mazda Malaysia as key re-rating catalyst for the stock.
CIMB Securities said BAuto remained cautiously optimistic on its FY25 outlook driven by resilient demand for CKD models such as Mazda CX-5, CX-30 and CX-8, which accounted for 80 per cent of Mazda sales volume in FY24.
The company is targeting 25,000 units' sales volume in FY25 driven by higher contribution from Kia on the back of the brand's new and facelift launches.
"We gathered the group has secured over 100 units bookings registration over the past two weeks."
There are potential downside risks to BAuto's sales target for FY25 given a softer consumer sentiment and intensifying competition, especially from the EV segment.
"Nevertheless, we see the upcoming Kia Sportage CKD model, scheduled for launch in January 2025 would pave the way for stronger growth beyond FY4/25."
CIMB Securities said its channel checks indicated that BAuto's order backlog stood around 1,500-1,600 units as of end-August.
BAuto's results for the first quarter ended July 31, 2024 (Q1FY25) came in within CIMB Securities' and consensus estimates at 22 per cent and 23 per cent respectively.
The company's revenue fell 22 per cent year-on-year (YoY) due to lower sales volume from Malaysia and the Philippines.
Total sales volume in Q1FY25 dropped 23 per cent YoY to 5,100 units.
Overall, BAuto's Q1FY25 core net profit slipped 31 per cent YoY to RM70.22 million versus RM100.22 million a year ago.
Meanwhile, CIMB Securities said BAuto's RM20 million investment into EP Manufacturing Bhd serves as diversification strategy to ensure the viability of its CKD program amid growing interest for domestic assembly program from Chinene automotive original equipment manufacturers (OEMs).
The company will hold an 11.5 per cent equity stake in EP Manufacturing after the completion of the deal, targeted in December this year, making it the second largest shareholder.
BAuto's unit Bermaz Capital Sdn Bhd entered into an agreement with EP Manufacturing on Wednesday to subscribe for 33 million new shares at 60 sen a share, representing 15 per cent of uts existing share capital, for RM19.8 million.
CIMB Securities maintained its earnings forecasts and "Buy" rating on the stock with an unchanged target price of RM3.20.
It also estimated that every 10 per cent movement in the ringgit against the yen will potentially impact BAuto's earnings per share by 3.0 per cent.