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Affin Hwang slashes FY20 forecast on BAuto, cuts TP to RM1.99

KUALA LUMPUR: Affin Hwang Capital has slashed its FY20 earnings forecasts on BERMAZ AUTO BHD but raised its FY21-22 earnings by 2% to 5% to reflect the pent-up demand in car sales volume.

It reaffirmed its hold rating on the stock while cutting its target price to RM1.99 from RM2.06 previously.

According to the research house, there could be poor consumer sentiment owing to the slowing global economy and fears over the Covid-19 outbreak while competition in the SUV space could also impact Mazda Malaysia sales volumes in the near term.

However, it is optimistic over the resolution of the car pricing issue in 1HFY20 and the new models that should fuel long-term sales prospects.

Affin Hwang expects Bermaz Auto’s Ebitda margins in FY21-22 to gradually normalise to 11% to 11.5% given the higher margin product mix, higher CKD participation and growing contribution of after-sales service/parts.

It also expects the contribution from its Mazda and Inokom associates to recover on the back of higher production volume for the CKD CX-8.

“In the long run, Bauto is still eager to obtain a third SUV localisation programme and to upgrade the Inokom production facility,” it said.

Source: TheStar