Supercharged growth in 4Q21
? FY21 core net profit trumped our estimate and consensus by 24% and 49%, respectively, due to better-than-expected sales and margin recovery in 4Q21.
? We expect 12% yoy sales volume growth for UMWT and Perodua in FY22F, driven by healthy order backlog and sales tax holiday, to drive EPS growth.
? Raise FY22-23F EPS by 3-13%. Reiterate Add with a higher RM4.00 TP.
Supercharged growth from Auto segment in 4Q21
Revenue in 4Q21 surged 80.8% qoq to RM3.6bn mainly due to higher contribution from the automotive division on the back the ongoing sales tax holiday and easing of Covid-19 restrictions as the previous quarter was affected by the full movement control order. UMW-Toyota (UMWT) sales volume in 4Q21 jumped 2.2x qoq to 26,276 units. Stripping out exceptional items such as loss on sale of investment and reversal of impairment, UMW posted RM233m core net profit in 4Q21 against RM47.7m core net loss in 3Q21. The group also declared a 5.8 sen/share final DPS during the quarter, broadly in line with our expectation of 6 sen/share.
FY21 core net profit fell by 9% yoy
Revenue surged 15.8% yoy in FY21 to RM11bn, mainly due to higher contributions from the automotive and equipment divisions, which grew 21% and 16% yoy, respectively. UMW-Toyota’s (UMWT) sales volume rose 22% yoy in FY21 to 72,394 units, outperforming the total industry volume which fell 4% yoy. In addition, UMWT also successfully overtook Honda as the leading player in the non-national segment in 2021. Meanwhile, Perodua registered a 13.6% yoy drop in FY21 sales volume, due to semi chip shortages and disruption at its vendors due to positive Covid-19 cases. The group also incurred positive tax charges in FY21, mainly due to the recognition of RM140m deferred tax assets in 4Q21 arising from the approved investment tax allowance. Overall, UMW posted a low er RM259m core net profit in FY21 (vs. RM285m core net profit in FY20).
Riding the economic recovery in FY22F
We expect UMWT and Perodua to deliver higher sales volume in 2022F, driven by new model launches and outstanding order backlog, supported by an improving semi chips supply situation. We gathered from the management that UMWT has over 30k order backlog, which translates into about four months waiting period. Meanwhile, Perodua has set an ambitious sales target of 247.8k units (+30% yoy) in FY22F on the back of new launches such as Myvi, Aruz, Axia facelifts and potentially one new model.
Raise FY22-23F EPS: Reiterate Add with a higher RM4.00 TP
We raise our FY22-23F EPS by 3-13% to reflect better margin delivery from automotive. Reiterate Add with a higher RM4.00 TP, still based on 14x CY23F P/E, in line with the auto sector target P/E. UMW trades at 10.9x CY23F P/E, about 1 s.d. below its 3-year mean of 15.5x, and 0.85x CY22F P/BV, below its net asset value of RM3.52/share as at end-Dec 2021. The stock also offers a decent 2.6-3.2% FY22-24F dividend yield.