BAuto’s dividend appeal holds despite profit miss

PETALING JAYA: The outlook for Bermaz Auto Bhd (BAuto) remains clouded by intensifying competition in the non-national automotive segment, prompting analysts to lower earnings forecasts and trim target prices (TPs) for the stock.

Maybank Investment Bank Research (Maybank IB) has maintained a “hold” call on BAuto but reduced its TP to 96 sen from RM1.06, citing weaker sales and margin assumptions.

“BAuto’s vehicle sales are normalising post a two-year super cycle, further pressured by intensifying competition in the mass premium segment with the influx of Chinese marques weighing on Mazda and Kia,” it noted in a recent report.

BAuto’s core net profit of RM157mil for the financial year ended April 30, 2025 (FY25), came in below expectations, making up 94% of consensus estimates, according to Maybank IB.

As a result, the research house cut its earnings forecasts for FY26 and FY27 by 10% and 13%, respectively.

It added that backlog orders have mostly been cleared, but a potential catalyst lies in stronger-than-expected contributions from new Chinese marques XPeng and Deepal, for which BAuto secured distribution rights in November 2024.

While the outlook remains muted, the research house noted that BAuto still offers an “attractive yield of over 9%, assuming a 70% dividend payout ratio”.

RHB Research also maintained a “neutral” rating on the stock, with a revised TP of 86 sen, down from 95 sen, noting that “fierce competition within the non-national segment will continue to pressure the company’s volumes”.

“Management also shared its pessimism that FY26 will be another challenging year due to inflationary pressures, geopolitical uncertainties, as well as continuous influx of Chinese marques,” it noted.

RHB Research cut its earnings forecasts for FY26 and FY27 by 9% and 12%, respectively, mainly due to lower Mazda volume assumptions.

It revised Mazda sales volume assumptions down by 18% and 17% for FY26 and FY27, respectively, citing “annual housekeeping adjustments”.

“Our revised Mazda volume assumption translates to estimated market share of 1.4% in 2025, down from 1.8% in 2024,” it said.

“Despite the lukewarm market sentiment for non-national automotive brands, we believe investors should hold their positions in this counter due to its attractive 11% FY26 yield,” RHB Research noted.

Meanwhile, MIDF Research downgraded BAuto to “neutral” from “buy”, slashing its TP to 86 sen from RM1.43 on lower volume guidance and a more conservative earnings outlook.

It cut FY26 and FY27 forecasts by 20% and lowered its price-to-earnings (PE) ratio assumption to six times, down from eight previously.

“We excluded contributions from Deepal as its launch could be delayed,” the research house said.

It also reduced its dividend payout ratio assumption to 65% from 80%.

Hong Leong Investment Bank (HLIB) Research was more bearish, downgrading BAuto to “sell” with a TP of 78 sen from RM1.05.

“Competition in Malaysia is expected to intensify with the influx of Chinese original equipment manufacturers offering feature-rich models at competitive prices.

“Similarly, operations in the Philippines continue to face mounting pressure from Chinese entrants,” the research house said.

In light of the weakening automotive outlook, HLIB Research cut its earnings forecasts for FY26 and FY27 by 31.4%.

“Despite the downgrade, BAuto maintains a strong balance sheet with net cash of RM207.2mil (17.8 sen per share) as of end-FY25, supporting continued dividend payouts,” it said.

CIMB Research maintained a “hold” call on BAuto but lowered its TP to 80 sen from RM1.10, highlighting that the company’s sales are increasingly under pressure from Chinese marques such as BYD and Chery, “which are gaining market share at the expense of Japanese marques in Malaysia.”

The research house cut its earnings estimates by 21% and 29% for FY26 and FY27, respectively, citing weaker margins and a lower share of profits from associates.

“We now project Mazda sales volume to grow at a low single-digit rate of 5% year-on-year to 12,000 units in FY26, driven by the upcoming launch of CX-60 and CX-80 in the second half of this year,” it said.

“However, 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.”