Competition from China marques to have an impact on BAuto

PETALING JAYA: CGS International (CGSI) Research has downgraded auto company Bermaz Auto Bhd (BAuto) from “hold” to “reduce”, on the back of a likely shift in consumers’ purchasing patterns towards Chinese car brands.

The research house said, in a note to clients, that it expected the heightened competition from the influx of Chinese marques to continue dampening Mazda’s sales and market share for the financial year ending April 30, 2026 (FY26).

It said the outlook for BAuto remained subdued as it has observed a structural shift in consumer preference towards technologically advanced and value-driven Chinese automotive brands.

“In our view, buyers are prioritising vehicles that offer modern features at more competitive price points, which poses growing threat to Mazda,” it said.

CGSI Research reckoned that the ongoing competitive pricing environment in the automotive sector would continue to compress BAuto’s margins as the automotive player is compelled to price new model launches more competitively.

While upcoming launches of the facelifted Mazda 3 1.5L and Mazda CX-60 may help ease the decline in sales of its flagship model Mazda CX-5, the research house expects FY26 earnings to remain under pressure due to continued margin compression.

It has downgraded BAuto with a lower target price of 63 sen, based on 2026 earnings tagged to a seven times price/earnings multiple to reflect heightened price competition.

“We cut FY26/FY27 earnings per share by 25% and 34% to incorporate softer Mazda sales in Malaysia and lower earnings margins due to intensifying price competition in the automotive sector,” said the research house.

Upside risks to its call include easing competition in the automotive sector and recovery in Mazda’s sales momentum.

De-rating catalysts are greater competition from Chinese brands in Malaysia and margin pressure amid intensifying price competition, it said.

At the time of writing, BAuto’s stock was at 72 sen each.

Citing the Malaysian Automotive Association, CGSI Research said Mazda sold 526 units representing a decline of 12% and 53% on a quarter-on-quarter/year-on-year basis in June, its lowest monthly sales volume since 2022.