FY21 results came in line
Maintain BUY and MYR1.45
FY21 core results were within our FY estimate, on stronger 4Q21 showings, especially at its MY ops. The sub-par FY21 is well-flagged and we remain positive of its recovery in FY22, on stronger consumer spending post-pandemic. Our TP is pegged to 16x FY22 PER (mean valuations).
Spectacular 4Q21
TCM returned to the black in 4Q21, with core net profit of MYR7m (vs. – MYR31m in 3Q21). This lowered its FY21 core net loss to MYR36m (vs. MYR134m in FY20). The QoQ turnaround was impressive, with stronger QoQ results at its MY and VN ops. The MY ops (95% of Group’s earnings) reported a 7.3x QoQ jump in EBITDA in 4Q21, driven by a: (i) 2.4x rise in vehicle sales (4.6k units), (ii) better sales mix and (iii) improved opex management. The underlying QoQ strength led to a higher EBITDA margin (+9.3-ppts). Its VN ops reported relatively similar performance trend, albeit on a smaller scale (EBITDA: MYR3m in 4Q21 vs. -MYR2m in 3Q21).
Looking ahead to a recovery in FY22
The sub-par FY21 has been well-flagged. We posit that the worst is over for TCM, operationally-speaking. Most of the major setbacks experienced in 2020-21 (i.e. settlement of excise duties, end of partnership with Nissan VN) are unlikely to recur. Focus should be on FY22, on a recovering outlook ahead. We expect TCM to report net profit of MYR59m in FY22, as businesses in MY and Indo-China markets normalise progressively post-pandemic.
Post-pandemic growth, going electric
Vehicle sales volume-wise, we expect its MY vehicle sales to reach 23.5k units in FY22 (vs. 12.3k units in FY21), as it continues to enjoy the benefits of 0%-5% SST impact up to Jun 2022 and the progressive roll-outs of its EVs models pipeline (only BEV Leaf is on sale to-date). The industry is in a strong position to leverage on the incentives (zero taxes) accorded to EVs, as the Government promotes e-mobility and low carbon economy agendas.