MBM Resources Berhad - Navigating a Soft Patch, Positioned for Recovery
Tue, 27-May-2025 06:31 am
by Amir Hamdan • Apex Research

Counter

MBMR (5983)

Target Price (RM)

6.300

Recommendation

Buy

  • MBMR’s 1QFY25 core net profit of RM71.4m (11.0% yoy, -12.8% qoq) came in slightly below ours and consensus expectations, accounting for 22% and 23% of respective full-year forecasts, mainly due to lower Perodua supply and softer Volvo sales amid intensified competition in the premium segment.

  • We cut our earnings forecast for FY25F/FY26F by -3.6%/-2.7% to account for the model mix and end-of-production normalisation.

  • Maintain BUY with a lower target price of RM6.30 based on P/E multiple of 8.0x to rolled over FY26F EPS of 78.7 sen.

 

Results slightly below expectations. 1QFY25 CNP stood at RM71.4m (-11.0% yoy) came below expectations, accounting to 22% and 23% of ours and consensus forecasted CNP at RM316m and RM304m respectively. While this is broadly within the typical range for 1Q, we view the results as below expectations due to softening trends in core operations namely, weaker Perodua supply, declining Volvo sales amid rising competition, and significantly lower JV and associate contributions. These point to potential downside risks to subsequent quarters should volume recovery fails to materialise.

 

YoY. 1QFY25 CNP came in at 71.4m declining -11.0% yoy, primarily due to softer Volvo sales volume -39.43% amid intensified competition from other premium brands. The subdued performance aligns with the -7.4% yoy contraction in Total Industry Volume (TIV) for the quarter at 181,801 units. On a more positive note, commercial vehicle sales under the Daihatsu marque recorded commendable growth, driven by improved stock availability. The division also benefitted from encouraging demand for Jaecoo models and stable contributions from aftersales, with resilient revenue and margin performance.

 

QoQ. CNP fell -12.8% qoq, mainly due to seasonally shorter working months and a post-peak demand adjustment following record-high sales at the end of last year. Correspondingly, total industry volume (TIV) contracted by 15.6% qoq.

 

Outlook. Looking ahead to remainder quarters of FY25, MBMR’s earnings growth will be driven by sustained Perodua sales, strong contributions from its auto parts division, and cost optimisation efforts. Perodua’s market leadership and steady demand will support vehicle sales, while the auto parts segment benefits from higher production volumes and efficiency improvements

 

Earnings Revision. We trimmed our FY25F/FY26F earnings by -3.6%/-2.7% to account for the stiffer competition in the overall automotive industry with the mushrooming of Chinese brand makers lately.

 

Valuation. Following the weakness in share price lately, we reiterate our BUY recommendation with a revised target price of RM6.30 (from RM6.54), by pegging a 8.0x P/E multiple to rolled-over FY26F EPS of 78.73 sen and 0% ESG factored premium/discount based on three-star ESG rating.

 

Risk. US-China trade tensions and tariff impositions have heightened global uncertainties, potentially leading to raw material cost volatility, FX fluctuations, and softer domestic demand amid weaker GDP and TIV outlook.

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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.

Apex Securities Berhad does not warrant the accuracy of anything stated herein in any manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against Apex Securities Berhad. Apex Securities Berhad may from time to time have an interest in the company mentioned by this report. This report may not be reproduced, copied or circulated without the prior written approval of Apex Securities Berhad.

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