RHB Research has maintained a “Buy” recommendation for Bermaz Auto Bhd with a target price of RM2.30 from RM2.00, a 35% upside.
It said that its TP is based on an unchanged 13x FY23F P/E, and includes a 2% ESG premium for its above-median ESG score of 3.1.
It said that its ascribed 13x P/E is slightly below BAUTO’s 5-year historical average of 13.3x P/E – the slight discount is to account for concerns of a slowdown in orders, amidst the lack of SST-exemption and higher living costs.
Currently, RHB said that the stock is trading at 10x FY23F EPS – below -1SD from its 5-year historical average P/E, which we think undervalues the stock. Key downside risks include a strengthening JPY/MYR, softer-than-expected demand post SST exemption, and worse-than-expected component shortages.
It said that while the The Edge, in a 29 Jun article, reported that BAUTO had almost 9k outstanding orders for Mazda vehicles, we would not be surprised if strong orders on the last day of the SST exemption brought this number to over 10k.
It said that the company saw very strong orders on 31 May, as it had offered to absorb customers’ SST for orders placed before end-May.
It said that with such an order backlog, we suspect that it could take BAUTO seven months or more to fulfil most orders.
It said that it gleaned that, lately, it has been getting insufficient CKD kits from its principal in Japan, as the impact from China’s lockdown starts to flow through. That said, the company is still fairly confident that it can fulfil most CKD backlog orders before 31 Mar 2023.
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