Softer Mazda sales weigh on Bermaz Auto
In a report, CGSI International Research (CGSI Research) said the aggressive expansion of Chinese automotive brands in Malaysia with their competitive pricing and technologically advanced models could erode Mazda's market share, further pressuring BAuto's margins
'Additionally, if macroeconomic conditions weaken, leading to reduced consumer purchasing power, spending on vehicles could decline. This would negatively affect BAuto's sales volume across all its brands and reduce earnings visibility,' the research house noted.
For its fourth quarter ended April 30, 2025, the car distributor's core net profit fell 6% year-on-year (y-o-y) and 20% quarter-on-quarter to RM21.5mil due to weaker contributions from its associates.
'FY25 core net profit slumped 55% y-o-y to RM159mil, which is below 85% of our full-year estimate and 95% of Bloomberg consensus,' CGSI Research said.
CGSI Research said it is downgrading BAuto's call from 'add' to 'hold' with a lower price-to-earnings-based target price of 84 sen.
It also said it cut its forecast FY26 and FY27 earnings per share by 33% and 20%, respectively, to factor in the lower Mazda sales, lower earnings before interests and taxes due to the competitive environment as well as weaker earnings from the sales of spare parts.
'We revise our valuation methodology from the Gordon Growth Model to a price-to-earnings-based approach to better reflect evolving sector dynamics and investor preferences.
'Given structural shifts in the automotive industry, including margin pressure and changing consumer preference, we believe that a price-earnings framework offers a more relevant benchmark,' the research house said.
However, on a brighter note, CGSI Research said it expects the lower forecasts for BAuto's earnings to be partially cushioned by its launch lineup, which includes the Mazda CX-60, CX-80, and three Deepal electric vehicles in the third quarter of this year, alongside its XPeng's G6 and X9 models that might provide a higher margin.
'We think there is potential for XPeng's contributions to grow considering that it only formed 13% of BAuto's Malaysia sales volume in over the last year,' it said.
CGSI Research noted that BAuto's net cash position was RM244.7mil as of Apr 30.
The research house added that there were both positives and negatives for the car distributor.
It said upside included the easing of competition in the automotive sector and improving Mazda sales in Malaysia, while downside risks consisted of greater competition from Chinese brands in Malaysia, and a decline in consumer spending power.
BAuto closed at 78 sen in yesterday's trading, giving it a market capitalisation of RM902.96mil.
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