CGS CIMB has maintained an Add Recommendation on Bermaz Auto with a higher target price of RM2.10
It said that it was excited with the group’s strong earnings growth prospects in FY4/23, underpinned by resilient demand and three new localisation programmes.
It said that it has raised its FY 22-24F EPS to account for stronger sales volume and margin expansion from higher shares on CKD models and associate profits.
The research house is encouraged to learn that the management is upbeat about BAuto’s growth prospects, underpinned by resilient demand and multiple new localisation programmes to begin in CY22F.
It said that the group is optimistic of delivering higher qoq sales volume in 4QFY4/22F, driven by healthy order backlog, which stands at 3.6k units as of 10 Mar 22. In addition, the group has also delivered 1k sales volume in Feb 22, despite a shorter operating period due to the Chinese New Year holidays
The research house said that management highlighted that Bermaz’s sales volume in 4QFY4/22F will also depend on its ability to fulfill backlog orders, especially for the complete built-up (CBU) units, which accounted for around 40% of total orders.
Nevertheless, CGS CIMB expects to meet the outstanding orders for CX-5 and CX-8, given that it has secured sufficient completely knocked-down (CKD) packs for these models.
Overall, It expects Bermaz to deliver healthy margin expansion in 4QFY22 in view of a better sales mix, given that CKD offers a 4-5% higher margin vs. CBU models.