PETALING JAYA: Bermaz Auto Bhd
(BAuto) looked poised for steady growth in the coming financial year, driven by its new model offerings and strategic focus on customer retention.
While the competitive landscape in the mid-segment remained intense, the group’s valuation continued to appear attractive, underpinned by a strong dividend yield and a promising vehicle line-up.
MIDF Research, following a virtual call with BAuto, maintained its earnings estimates ahead of the group’s third-quarter results announcement on March 12, 2025.
However, the research house revised its target price to RM1.97 from RM2.21, adjusting its valuation methodology to “better reflect the intense competition in the mid-segment.” Despite this revision, it reiterated its “buy” call, citing an appealing dividend yield of 12.8%.
“We believe that BAuto’s new model offerings remain promising, and we are sanguine about the group’s efforts to prioritise customer retention over aggressive discounting,” MIDF Research stated.
The introduction of new models was expected to bolster BAuto’s performance. The fifth-generation Kia Sportage, launched as a completely knocked-down (CKD) unit in December 2024, saw its initial demand affected by late deliveries in mid-January, coinciding with festive celebrations.
“At present, approximately 100 units have been sold, while about 50 remain on order,” the research house noted, adding that further updates on customer reception would be disclosed in BAuto’s upcoming results announcement.
Meanwhile, Xpeng’s sole offering in Malaysia, the 6G (completely built-up, or CBU), which debuted in August 2024, maintained a steady sales pace, averaging 130 units per month, with 150 outstanding orders.
The upcoming introduction of Deepal, a new electric vehicle (EV) brand under BAuto’s distributorship secured from Changan Automobile in November 2024, was also expected to contribute positively.
The Deepal S07, imported from China, was scheduled for a June 2024 launch, while the S05, sourced from Thailand, was slated for the fourth quarter of 2025.
However, with Thai operations commencing only in March 2025, its launch timeline remained uncertain. Notably, the tax exemption for CBU EVs in Malaysia was set to expire at the end of 2025, which could influence demand dynamics.
EV localisation plans were also under consideration, with BAuto evaluating the feasibility of assembling the Mazda 3 locally.
“While further completely knocked down (CKD) expansion is planned, potentially including the Mazda 3 – its next best-selling model – this typically takes 2-3 years to materialise, requiring an annual volume of 2,000 to 3,000 units and an estimated RM30mil investment in the production line,” MIDF Research highlighted.
The CKD segment accounted for 70% of BAuto’s total sales volume in the first half of its financial year ending April 30, 2025, and generally delivered a 3% higher margin than CBU internal combustion engine (ICE) vehicles.
Plans to localise EV production for Xpeng and Deepal were also being explored, though challenges remained. “A key challenge is meeting the 30% local content requirement, with batteries making up about 40% of the total cost,” the research house noted.
Amid rising competition, BAuto prioritised customer retention over price cuts. Mazda’s total industry volume (TIV) declined to 14,464 units in calendar year 2024, down 23.6% year-on-year, as Chinese entrants intensified their discounting strategies.
Instead of following suit, BAuto launched a loyalty campaign in October 2024, offering returning customers an additional year of free warranty and maintenance.
“So far, approximately 1,000 customers have taken up the offer,” MIDF Research stated.
