BAuto expected to face challenges

PETALING JAYA: Bermaz Auto Bhd (BAuto) is expected to face ongoing challenges despite efforts to boost sales through new model launches, as analysts anticipate stiff competition in the Malaysian automotive landscape.

The company’s latest financial results reveal a significant decline in earnings, underscoring the difficult road ahead.

BAuto’s net profit for the third quarter ended Jan 31, 2025 (3Q25) fell by more than 65% year-on-year (y-o-y) to RM24.14mil, with revenue sliding 32.8% to RM602.08mil.

For the nine months of its financial year ending April 30, 2025 (FY25), net profit dropped 61% y-o-y to RM134.71mil, while revenue fell 30% to RM2.09bil.

The company declared a dividend of 1.75 sen. BAuto attributed the weaker results to declining sales of Mazda and Kia vehicles amid growing competition from Chinese-made brands.

According to Hong Leong Investment Bank Research (HLIB Research), BAuto’s results were “below expectations”, with the full-quarter contribution from the newly launched Xpeng G6 failing to lift the group’s performance.

HLIB Research expects the Malaysian market to remain highly competitive, driven by the influx of Chinese original equipment manufacturers (OEMs) offering attractive price points.

“On the brighter side, the recent launch of Xpeng X9, along with upcoming new model launches by Mazda (CX60 and CX90) and Deepal (S07, S05 and E07), may cushion the group’s bottom line in the coming quarters,” the brokerage noted in its report yesterday.

HLIB Research maintained a “hold” call on BAuto with a revised target price of RM1.05, down from RM1.80, citing a weaker earnings outlook and market sentiment.

Meanwhile, CIMB Research revised its FY25 to FY27 net profit forecasts downwards by 26% to 37%, projecting a 30% y-o-y decline in Mazda sales volume in FY25.

However, the research house expects sales to rebound in FY26 with the launch of the Mazda CX60 and CX90.

“The rebound could come at the expense of margins, owing to increasing competition for its flagship CX-5 and CX-30 models in the RM100,000 to RM200,000 segment,” CIMB Research stated.

The brokerage maintained its “hold” call with a lowered target price of RM1.10 (from RM2.10), citing ongoing uncertainty in the earnings outlook. It highlighted BAuto’s attractive FY26 to FY27 dividend yields of 9% to 10% based on a 62% payout ratio, which remains below its historical mean of 80%.

Maybank Investment Bank Research (Maybank IB) pointed out that BAuto’s vehicle sales are normalising after a two-year super cycle, with added pressure from rising competition in the mass premium segment.

“XPeng’s G6 has gained traction with 497 units sold in six months, but we remain cautious on Mazda and Kia, which face stiff competition with no major launches ahead,” it said.

Maybank IB has downgraded BAuto to a “hold” from a “buy” and reduced its target price to RM1.06 from RM2.42.

RHB Research noted that BAuto’s market share had dropped to 1.8% in 2024 from 2.4% in 2023. The group is now focusing on volume-heavy completely knocked down models like the Mazda CX-30, CX-5 and CX-8, as well as the Kia Sportage to mitigate losses.

“Its electric vehicle (EV) brands, namely, Xpeng and Deepal, should also help the group establish a stronger presence in the local EV market, though it would not contribute significantly to BAuto’s overall sales volumes,” RHB Research added.

The brokerage maintained its “buy” rating with a lower target price of RM1.20 from RM2.30, reflecting a reduction in earnings forecasts and anticipated dividend payouts.

MIDF Research revised its earnings estimates downward by 28% to 29% for FY25 to FY27, citing disappointing results.

The research house maintained a “buy” call, citing an attractive dividend yield of 16.6% as a potential upside, but at a lower target price of RM1.43 from RM1.97 previously.

TA Research expects FY25 to be challenging for BAuto due to heightened competition from Chinese OEMs offering competitive pricing and advanced features.

The brokerage believes the Deepal E07 EV launch in Malaysia by 4Q25 will help diversify BAuto’s product range, though its contribution to overall sales volumes may be limited.

TA Research downgraded BAuto to a “sell”, with a revised TP of 94 sen from RM2.42, reflecting a reduced earnings outlook.

Despite the difficult environment, analysts pointed to BAuto’s strong balance sheet and net cash position of RM244.7mil (20.9 sen per share) as a positive factor that should help sustain its dividend payout.