More high-margin cars seen from BAuto

PETALING JAYA: Bermaz Auto Bhd (BAuto) is expected to launch more high-margin vehicles, especially sports utility vehicles (SUVs) and electric cars, which could boost earnings growth.

The auto distributor recently launched its all-new Mazda CX-8, a completely knocked-down (CKD) model that is expected to further boost current backorders.

Amid rising inflation, Kenanga Research believes that the higher price of Mazda CX-8 at RM3,000 is to protect BAuto’s margin due to increased operating costs.

“Mazda CX-8 accounted for 15% and 30% of BAuto’s total unit sales and revenue, respectively,” it said in a report.

“Mazda’s current order book stands at 10,000 units, to be fulfilled by the first quarter of next year, further strengthening its high profit margin position without the need to incur additional costs for absorb sales and service tax for orders before June 30, 2022,” he added.

Mazda Malaysia Sdn Bhd, 30% owned, and Inokom Corp Bhd, 29% owned, BAuto’s partners, are expected to increase capacity, capitalizing on exciting new CKD launches including the CX-8 for the export.

Kenanga Research expects utilization at both plants to exceed 50% over the next three quarters, compared to 30% utilization in fiscal 2021, especially with the expected arrival of auto parts following the recent reopening of the Port of Shanghai.

According to the research house, there is a growing demand for SUVs and electric vehicles (EVs), which are seeing growing awareness as global EV volume grew by 120% in 2021.

“In response to demand from the EV niche market, BAuto launched the all-new MX-30 EV Completely Built Units (CBU) and the all-new KIA EV-6 GT-Line AWD CBU with limited units for the first batch to test the response for greater CBU volume or a shift to CKD production,” he said.

He added that on average, CKD’s margin is 5% higher than CBU’s.

BAuto has the highest after-tax profit margin (PAT) among automakers, averaging 8% compared to the average PAT margin of local and Japanese peers at 5%, according to Kenanga Research.

The research house favors BAuto because it offers the most high-margin new launches and the highest after-tax profit and minority interest margin, which is head and shoulders above its peers.

He reiterates his call to “outperform” BAuto with a target price of RM2.30 per share.

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