KUALA LUMPUR (Sept 11): Analysts turned bullish on Bermaz Auto Bhd (KL:BAUTO) after a rebound in first-quarter earnings, prompting upgrades to reflect better-than-expected growth for the financial year ending April 30, 2027 (FY2027).
RHB Research upgraded Bermaz Auto to 'buy' from 'neutral', with a higher RM1.15 target price from RM1, implying 24% upside, saying 1QFY2027 core profit beat estimates.
RHB said it grows more confident on Bermaz Auto's earnings prospects for FY2027, underpinned by new model launches and higher margins while inflationary pressures seem contained at this juncture.
It noted Bermaz Auto currently trades at seven times 2027 price-earnings (P/E)(at its historical mean) versus its target P/E of eight times, which it views as appealing given the robust earnings growth (three-year compound annual growth rate: 20%), alongside an attractive yield of 9% for FY2027 as a sweetener.
RHB said 1QFY2027 core profit of RM42 million came in above expectations at 33%-35% of its and the street's full-year estimates.
"The robust numbers were mainly due to a better product mix and lower-than-expected opex, as Bermaz Auto cleared some of its high inventory costs, leading to a higher-than-expected PBT (profit before tax) margin of 10.1% in 1QFY2027."
RHB said Mazda's order backlog stands at 1,700 units (Mazda 3: 650 units; CX-60: 100 units), with steady Mazda 3 deliveries of 500-600 units per month, and the third-generation CX-5 CBU will be launched on Oct 8 with bookings reaching 600 units.
RHB upgraded its call on the stock to 'buy' after increasing its earnings by 14.9%, 12.6%, and 14.9% for FY2027-FY2029 after accounting for higher margin assumptions, based on an unchanged eight times 2027 P/E with a 6% ESG premium.
Meanwhile, Public Investment Bank said Bermaz Auto's 1Q outperformance was mainly attributed to stronger-than-anticipated demand for Bermaz Auto’s models, especially the continued popularity of the Mazda 3.
Given the sustained demand for its refreshed product pipeline and improving margins, the house raised its FY2027-FY2029 earnings forecasts by an average of 26%.
Consequently, PublicInvest raised its target price to RM1.28 (from 82 sen) based on eight times FY2028 earnings per share (EPS) and upgraded Bermaz Auto from 'neutral' to 'outperform'.
Bermaz Auto's 1Q results also beat MBSB Research's expectations, though it maintained 'neutral' with an unchanged target price of 85 sen, based on an unchanged eight times FY2027 P/E.
MBSB maintained its earnings estimates as unchanged, pending further details from the briefing, noting Mazda MY's backlog moderated to 17,000 units while XPeng and Mazda PH backlogs stood at 250 units and 200 units respectively.
Bermaz Auto's shares gained two sen or 2.2% to 95 sen at time of writing on Friday, valuing the group at RM1.11 billion.