Stay NEUTRAL, new MYR3.20 TP from MYR3, 3% downside. 3Q22 earnings beat our full-year forecasts, mainly on higher-than-expected YTD Perodua sales. While we are still cautious on car sales in FY23, especially that of the national marques, we think the popularity of this year’s new Perodua Alza and next year’s new model will provide cushion for Perodua’s 2023 sales.
9M22 made up 78% of full-year estimates, but we consider it a beat, given our expectations of a strong 4Q22, which has also historically been seasonally stronger. The deviation is also because Perodua’s YTD unit sales of 222k units seems on track to exceed our 2022F Perodua unit sales of 250k units. No dividend declared, as expected.
Results highlights. QoQ, revenue rose 11.5%, lifted by its auto parts manufacturing and motor trading businesses, both of which have benefited from the QoQ growth for most of its marques (+4%) and sector-wide TIV (+8%). QoQ, associate contribution softened 14%, likely due to higher costs of materials and/or labour, as we believe Perodua likely saw higher revenue from its 5% increase in unit sales. Consequently, PBT fell 6.3% QoQ, and a higher effective tax rate caused net profit to fall by 8.7% QoQ. However, removing a MYR9m gain on disposal of assets held for sale in 2Q22, core net profit rose by 5.8% QoQ. YoY metrics show significant improvement as 3Q21 saw COVID-19 restrictions.
Outlook. As we expected, 9M22 saw strong unit sales and earnings, and we expect the same for 4Q22. We remain cautious on FY23 car sales, given expectations of macroeconomic headwinds. However, with the encouraging new-Alza bookings, especially after the SST exemption has ended, we lift FY22F-FY23F Perodua unit sales assumption to 265k-220k from 250k- 210k. The FY22F adjustment is also due to the stronger-than-expected YTD Perodua unit sales. We also lifted FY24F unit sales to 230k from 220k, as we assume YoY growth from FY23F, partially fuelled by Perodua’s potential launch of its first hybrid EV in 2024.
Forecast. We lift FY22F-FY24F earnings by 7-9%. The higher earnings lifted our TP to MYR3.20 (previously MYR3). We maintain our 6.5x FY23F P/E, at around -0.5SD its 5-year mean, to account for our cautious view of the national marques in FY23F. Our TP also includes a 4% ESG discount, based on its ESG score of 2.8 out of 4.0. We keep our NEUTRAL call on the stock, as we maintain our view that affordable marques will be disproportionately affected by macroeconomic headwinds.
Key downside risks includelower-than-expected orders and deliveries, and sustained disruptions in the supply of chips and other components. The opposite represents upside risks.
