Maybank IB has cut the earnings forecast for Bermaz Auto by 21%/8%/6% for year 25,26 and 27 and reduce the TP by 20% to MYR2.42. Despite this, the house remained positive on BAuto's acquisition of Deepal distributorship in Malaysia, which adds a competitive EV brand to its portfolio.
The house is maintaining its BUY call on BAuto for its attractive valuation with a special dividend likely to be paid out from Mazda Malaysia.
Creating a synergy of excellence
Deepal, owned by Changan Automobile – one of China's top 4 automotive groups (ranked after BYD, Chery, and Geely), is set to enhance BAuto's portfolio. Models slated for Malaysia will include the S05 (compact SUV) and S07 (mid-size SUV), with the S05 achieving impressive sales of 21.7k units within a month of its Oct 2024 launch in China. Deepal's launches in Malaysia are anticipated by mid-2025, likely as CBUs from Changan's new TH plant.
While the current forecasts exclude contribution from Deepal, initial expectations indicate an additional c.1k annual sales for BAuto.Earnings revision reflects weaker sales forecasts. The earnings revision reflects weaker-than-expected Mazda and Kia sales with Mazda reporting just 6.8k units sold (May–Oct) vs. initial FY25E assumption of 18.0k units (our revision is 12.0k units).
Looking ahead, Maybank believes BAuto is prioritising Kia's growth, with the Kia Sportage launch slated for Dec 2024, potentially contributing c.5k units p.a. Future launches may include the Carens MPV and Seltos SUV. Notably, XPeng recorded 119 monthly sales in Oct, following its Aug 2024 launch.
Strong fundamental despite short term headwinds
The house remains optimistic about BAuto's solid fundamentals despite short-term industry headwinds, particularly in the crowded mass premium segment. Over the medium term, BAuto aims to replicate Mazda's success with Kia through new model launches. The addition of Deepal's distributorship, alongside XPeng's first model launch in Aug 2024, is expected to enhance
its portfolio, partially offsetting normalising Mazda sales, with no major new Mazda models anticipated until 2026.
