Low inventory, strong order to spur MBM growth

TA Research says that the group will be able to continue riding on Perodua sales, as well as introduce new models including electric vehicles at more competitive prices, to drive revenue growth for this year.

PETALING JAYA: MBM Resources Bhd is cautiously optimistic about its outlook for this year, as its low inventory levels and strong order book are set to fuel sales growth on the back of a recovering economy.

The supply constraint led by the shortage of microchips is also easing and this should further benefit auto manufacturers.

However, the rise in raw material prices and logistics expenses as well as intermittent disruption in the supply chain due to Covid-19 could still pose some challenges to the group’s operations, said TA Research.

Nonetheless, the research house added that the group will be able to continue riding on Perodua sales, as well as introduce new models including electric vehicles at more competitive prices, to drive revenue growth for this year.

Hong Leong Investment Bank Research (HLIB Research) pointed out that new orders are still coming in strongly, as consumers take advantage of the lower car prices during the sales and service tax exemption period, which was extended to June 2022.

Note that the group recently announced stronger-than-expected results for the financial year ended Dec 31, 2021 (FY21), with performance in the final quarter boosted by its 23%-owned Perodua.

Based on that, Maybank IB Research has raised its FY22-FY23 earnings forecast by 15%-16%, on stronger consumer spending post-pandemic with a focus on improved FY22 onward.

The increase in its earnings forecast mainly reflects Perodua’s improved performance. It expects Perodua to register higher vehicle sales of 233,000 units (22% growth year-on-year) in FY22.

Perodua is aiming to sell 6,000 units per month for its face-lifted MyVi model, which was launched in the fourth quarter of 2021. It will also continue to bank on Ativa and the refreshed Aruz to spur sales.

Maybank revised its target price on the counter to RM4 per share and maintained its “buy’’ call on the stock.

Meanwhile, HLIB Research, TA Research and MIDF Research also maintain their “buy’’ calls with target prices of RM4.80, RM4.19 and RM4.05, respectively.

MIDF Research sees MBM as a cheap proxy to Perodua, trading at an undemanding 6.4 times FY22 price-earnings ratio, a 24% discount to historical mean.

Perodua, in turn, is one of the prime beneficiaries of a cyclical recovery in the auto sector, given its dominance of about 40% market share.