Bermaz Auto Berhad - Riding the EV wave
Fri, 25-Apr-2025 07:16 am
by Amir Hamdan • Apex Research

Counter

BAUTO (5248)

Target Price (RM)

1.40

Recommendation

Buy

Executive Summary

  • BAuto engages in distributorship and dealership of international brands namely Mazda, Kia, Xpeng, and Deepal as well as manufacturing of vehicles and automotive parts in Malaysia.

  • Looking forward. We project BAuto core earnings to taper off -25.4%/-3.5% yoy in FY25F-FY26F reflecting the heightened Chinese competition before recovering by +8.8% yoy to RM271m in FY27F, supported by i) Broader product lineup ii) Expansion into EV iii) Strong net cash of RM557.74m.

  • We initiate coverage on BAuto with a BUY recommendation and a target price of RM1.40 pegged to 6.0x PER based on FY27F EPS of 23.3 sen and based with three-star ESG rating.

 

Key Investment Highlights

Strategic Brand Diversification and CKD Focus. We favour BAuto for its diversified brand portfolio Mazda, Kia, and newly secured Deepal EV and its integrated business model across CBU/CKD distribution, after-sales, and parts. FY24 core net profit rose +15% yoy to RM351m, on strong CKD Mazda CX-30 sales. Despite a -66% yoy drop in 3QFY25 earnings on intensified competition and softer Mazda volumes, the pivot to higher-margin CKD units remains in focus.

 

Government Support on Automotive Sector. BAuto’s proactive approach to leverage government initiatives enhance its competitiveness in Malaysia’s evolving automotive landscape. The pro-automotive policies such as EV tax exemptions, CKD incentives, and NAP strengthens market demand for EVs, and create opportunities for the Group to expand its product offerings and strengthen its market position. 

 

Strategic Multi-Marque Distribution and Assembly. Expanded brand line-up comprising Mazda, Kia, Xpeng, and Deepal is backed by a comprehensive business model spanning CBU and CKD vehicle distribution, after-sales services, and spare parts. Strategic partnerships and local assembly via associates for Mazda and Kia enhance vertical integration, supporting operational resilience and recurring revenue streams.

 

Expansion into Electric Vehicles (EVs). Progressively positioning itself within Malaysia’s EV landscape through strategic brand partnerships and selective model introductions. Its EV portfolio led by Xpeng and Deepal targets the mid-to-premium segment, enabling exposure to evolving consumer demand without diluting brand positioning.

 

Valuation & Recommendation. We initiate coverage on BAuto with a BUY recommendation and TP of RM1.40 based on 6.0x PER pegged to FY27F EPS of 23.3 sen and based on three-star ESG rating. The ascribed P/E multiple reflects a 14.3% discount to the 5-year sector average of 7.0x, which we view as justified given near-term macro headwinds, such as 1) intensifying Chinese OEM competition 2) inflationary environment 3) Limited EV Contribution over the near term.

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Disclaimer

The report is for internal and private circulation only and shall not be reproduced either in part or otherwise without the prior written consent of Apex Securities Berhad. The opinions and information contained herein are based on available data believed to be reliable. It is not to be construed as an offer, invitation or solicitation to buy or sell the securities covered by this report.

Opinions, estimates and projections in this report constitute the current judgment of the author. They do not necessarily reflect the opinion of Apex Securities Berhad and are subject to change without notice. Apex Securities Berhad has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.

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