Bermaz Auto Bhd (BAUTO) posted a significantly weaker performance for the first half of FY26, with core net profit falling 77% year-on-year amid softer demand for Mazda vehicles and the phasing out of its Kia and Peugeot portfolios. Despite the slump, Kenanga Research views the results as broadly within expectations, anticipating a stronger second half driven by new model launches.
For 1HFY26, core net profit came in at 38% of Kenanga’s full-year forecast and 37% of consensus estimates. The research house expects earnings to strengthen in the coming quarters on the back of robust sales for new models introduced across March to October 2025, including the XPeng X9, Mazda CX-60 and the refreshed Mazda 3 1.5L.
BAUTO also declared a second interim dividend of 1.25 sen, bringing its 1HFY26 payout to 2 sen, in line with expectations, but sharply below the 13.5 sen declared in the same period last year.
Sales Hit by Competition, Portfolio Changes
Group revenue for the half-year fell 30% year-on-year, dragged primarily by a 41% drop in Mazda sales to 4,689 units. Sales of Kia vehicles declined 30% to 315 units as the brand is being phased out, while Peugeot dealerships have been fully sold. The company continues to face intense competition from Chinese automakers offering attractive entry-level pricing.
Stronger XPeng sales, which surged 381% year-on-year to 750 units, provided some offset following the electric vehicle marque’s introduction in 2QFY25.
Regionally, Malaysia recorded a 38% drop in sales to 4,940 units, while the Philippines saw a 20% decline to 814 units.
Associates Turn Loss-Making
The sharper contraction in core profit was compounded by a swing to losses among BAUTO’s associates, which reported RM16 million in losses compared to RM14.1 million in profit last year. Key contributors included: Mazda Malaysia Sdn Bhd: RM0.7m profit (vs RM8.9m), Inokom Corporation: RM5.3m loss (vs RM5.1m profit), Kia Malaysia Sdn Bhd: RM11m loss (vs RM0.8m profit), largely due to lower production volumes.
Sequentially, 2QFY26 showed early signs of recovery. Revenue rose 13% qoq driven by stronger Mazda demand (+28%) and steady deliveries of XPeng models, while core net profit more than doubled. Losses from associates also narrowed materially.
Kenanga maintained its FY26 earnings forecast but raised FY27 profit projections by 13%, citing expectations of stronger sales and margins following the earlier-than-expected July 2026 launch of the all-new Mazda CX-5 MS LE (CBU).
The research house lifted its target price to RM0.80 from RM0.70, based on an unchanged 7x CY27 PER—representing a steep discount to both sector and BAUTO historical averages due to competitive risks in the non-national segment.
Investment Case: Order Backlog and CBU Expansion
Kenanga remains optimistic on BAUTO’s prospects and reiterated an OUTPERFORM call, citing:
A healthy order backlog of 3,500 units, comprising 3,000 Mazdas, 300 XPeng EVs and 200 units from BAP. Stronger margins from Mazda’s premium mid-market positioning. An attractive dividend yield of ~7%.
Potential margin upside from the weaker Japanese yen, especially as BAUTO shifts further toward CBU models (expected 50% CBU mix in FY26 vs 40% in FY25).
The research house also highlighted positive market reception for BAUTO’s new Mazda 3 1.5L High Plus variant, priced at RM118,900.
Potential downsides include weaker consumer spending on big-ticket items, supply chain disruptions, higher input costs and adverse MYR/JPY movements.
