Bermaz Auto (BAUTO)
Recommendation: HOLD
Target Price: RM1.42 (Revised from RM2.10)
Bermaz Auto has faced significant headwinds in 2024, resulting in a 35% drop in its share price since December 2024. The challenges stem from market concerns about Mazda’s sales volume, increased competition, and weaker earnings expectations for 3QFY25.
The report highlights that forecasts for FY25-27 have been revised downward by 10%, 32%, and 30%, respectively, reflecting the lower vehicle sales expected from its key Mazda brand. Intense market competition, particularly from Chinese automakers, has taken a toll on Mazda’s market share, with its sales declining by 12% in 2024.
Despite these challenges, Bermaz Auto remains attractive for investors with a dividend yield of 10%. The stock is currently trading at 7.8x FY25F PE, which the analysts consider fair given the challenging market conditions.
Sime Darby
Recommendation: BUY
Target Price: RM2.62 (Revised from RM2.80)
Sime Darby faced a challenging 2024 due to slower-than-expected recovery in the Chinese market and increased competition in Malaysia. These factors led to a downward revision of FY25-27 earnings forecasts by 6%, 10%, and 10%, respectively. However, the company’s industrial division is expected to offset the challenges in its motors segment. The industrial arm benefits from strong demand and a stable order book valued between RM4.2 billion and RM4.6 billion.
In the motors division, Sime Darby continues to face pressure in China due to an ongoing price war, as well as stiff competition in Malaysia. These conditions are likely to impact 2QFY25 earnings, with softer sales volumes and lower margins anticipated. Despite these difficulties, the company remains a strong pick due to its diversified revenue streams and robust industrial performance.
