MBM Resources Berhad - Perodua set to propel growth
Thu, 29-Aug-2024 07:20 am
by Steven Chong • Apex Research

Counter

MBMR (5983)

Target Price (RM)

5.36

Recommendation

Hold

Summary

MBMR recorded CNP of RM66.7m (+31.8% yoy, -15.7% qoq) in 2QFY24, bringing 1HFY24 CNP to RM145.9m (+13.0% yoy), which was above our expectations at 60% but within consensus expectation at 54%. The variation was mainly stemmed from higher-than-expected P2 sales which exceeded our forecasts by +12.4%.

We raised our earnings forecast for FY24-26 by +6.8%/+6.3%/+6.4% to account for the stronger-than-expected demand for P2.

We upgrade our recommendation to HOLD (from SELL) with a higher target price of RM5.36 with forward PE of 7.7x (from 7.1x) on EPS of 70.0 sen after rolling forward our valuation metrics to FY25. 

 

Results Review

  • Results review. MBMR’s 2QFY24 core net earnings stood at RM66.7m, grew +31.8% yoy but drop -15.7% qoq. The improved year-over-year CNP was driven by higher sales from P2 dealership offsetting tepid demand for Volvo and VW. Similarly, revenue was recorded at RM569.2m, increased +5.5% yoy and -7.8% qoq.

  • Results exceeded expectation. The Group’s 1HFY24 core net profit of RM145.9m came above our expectations, at 60% of in-house forecast, but was within consensus expectation at 54%. The variation was mainly derived from higher-than-expected P2 sales which exceeded our forecasts by +12.4%.

  • Operations Highlights. During the quarter, revenue from the motor trading division grew +6.9% yoy. Growth was driven by strong demand for P2 vehicles, which saw an increase of +24.1% yoy, outperforming TIV growth of +8.3% yoy. On the other hand, sales volume in Volvo and Volkswagen remained subdue due to model limitations. Revenue from autoparts manufacturing slid -3.8% yoy despite higher volume due to changes in model mix.

  • Industry Highlights. TIV in July 24 surged +23.6% mom and +10.8% yoy backed by longer working month and a barrage of new model launches from luxury brands including Suzuki, Mercedes, Mini cooper, Persche, Lexus and others. YTD, TIV stood at 462,088 unit (+7.2% yoy) buoyed by the delivery of strong backlog order from previous year. Concurrently, MAA has adjusted its previous TIV forecast for CY24 from 740k to 765k, revising the projected yoy decline from -7.5% to -4.3%. The optimism was stem from better-than-expected GDP growth, stable OPR rate, and aggressive promotional activities.

  • Outlook. Perodua’s management has set a conservative sales target of 330k units for CY24, slightly lower to last year’s actual sales of 331k. Nonetheless, the Group is off to a strong start, having sold 170k vehicles in 1H24, marking a 17.4% yoy increase. We opined that demand for national marquess should remain resilient going forward backed by i) increased spending power resulting from revision in civil servant wages, and ii) demand boost from Merdeka sales campaign. 

  • Valuation. We raised our earnings forecast for FY24-26 by +6.8%/+6.3%/+6.4% to account for the stronger-than-expected demand for P2. As a result, we upgrade our recommendation to HOLD with a higher target price of RM5.36 (previously RM4.46) based on forward PE of 7.7x to rolled over FY25 EPS of 70.0 sen.

  • Risk. Supply chain disruption changes in government regulations, softer-than-expected consumer demand amid economic slowdown.

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