PETALING JAYA: Hong Leong Investment Bank (HLIB) Research has upgraded Mazda distributor Bermaz Auto Bhd
’s (BAuto) outlook from “hold” to “‘buy” .
The research house said the upgrade was due to a recent drop in BAuto’s share price which became an “attractive” entry point backed by the group’s strong group order book and a healthy balance sheet position.
BAuto has a 33.3% stake in Kia Malaysia Sdn Bhd, 30% stake in Mazda Malaysia Sdn Bhd and 29% stake in Inokom Corp Sdn Bhd.
HLIB Research said the projected car volume of the BAuto is expected to increase further in 2024 and 2025.
“This will be driven by strong sales demand and the localisation of new models for both the domestic market and exports with the earning growth contributions of all three associates of BAuto,” said the research house.
Mazda had recorded RM32.3mil in profit for financial year 2023 (FY23) compared with RM1.1mil FY22.
This was on the back of an increase of 38.8% year-on-year (y-o-y) in production for the domestic market.
Kia’s contribution fell due to its initial startup operation in FY23 but it has seen a turnaround in the fourth quarter of this year.
Inokom’s contribution decreased 10.3% y-o-y to RM7.2mil in FY23 due to higher operational costs despite selling a higher number of cars.
The company has a new auto paint shop worth RM237mil that will have a capacity of 50,000 units per annum.
It is expected to be functional by the end of 2024 and will increase the overall capacity by 119%. according to the research house.
“Inokom has recently secured new contract assembly services from Chery Malaysia, which has reported a strong order book for the newly launched Omada 5 model,” the research house said. “Inokom has projected total production volume to increase to 40,000 units in FY24 and 62,000 units in FY25.”
HLIB Research has retained its target price on Bermaz to RM2.30 a share based on an unchanged 12 times price to earnings (PE) ratio for 2024.
