MBM: Quarterly Earnings Outperform, Yet Headwinds Persist as Competition Intensifies

A recent investment bank research report indicates that the subject company reported its 4QFY25 results above expectations, primarily driven by stronger-than-anticipated associate contributions. Despite an 11.5% year-on-year increase in revenue for 4QFY25, cumulative core net profit for FY25 remained largely flat, attributed to margin compression experienced throughout the year.

Performance Review

The Motor Trading Division saw its FY25 Pre-tax Profit (PBT) rise by 5.6% year-on-year, largely due to robust associate earnings. Conversely, the Auto Parts Division experienced a 13.4% year-on-year decline in FY25 PBT. This downturn was mainly a result of lower sales volumes, tighter operating margins, and a one-off settlement related to supplier claims. No dividend was declared for the quarter under review.

Future Outlook and Industry Headwinds

Looking ahead, Malaysia’s Total Industry Volume (TIV) is projected to moderate in 2026, following a period of strong demand as the majority of backlog orders have been fulfilled. While the company’s current backlog of approximately 60,000 units remains healthy, this figure signifies a normalization from previous peak levels and suggests lower sales visibility in the near term.

Intensifying competition, particularly from new model launches by competitors, is expected to gain traction and capture additional market share. Preserving market share across both conventional and EV segments is likely to come at the expense of margins, potentially leading to profit erosion due to greater pricing pressure. The Electric Vehicle (EV) segment, while offering opportunities, also presents challenges, including rising competition from domestic and international brands, elevated vehicle prices, and limited charging infrastructure, all of which are expected to impact sales growth and margin sustainability. The company’s FY26 performance will hinge on its ability to balance competitive pricing strategies, operational efficiency, and value-added offerings to defend market share while maintaining profitability.

TA Securities has raised its FY26 and FY27 earnings projections by 2.2% to 4.8%, respectively, primarily to account for stronger associate contributions. The investment bank is also initiating its FY28 forecast at RM287.0 million.

Investment Recommendation

The investment bank reiterates a SELL recommendation with a revised target price of RM4.70 per share (previously RM4.60 per share), pegged to a CY26 PER of 6x. This valuation aligns with its five-year rolling forward average PER. The cautious stance is driven by moderating industry volumes, heightened competitive pressures, and persistent cost headwinds, all of which are anticipated to continue weighing on margin sustainability.