Highlights

HLBank Research Highlights

Author: HLInvest   |   Latest post: Wed, 28 Oct 2020, 10:11 AM

 

Automotive - A Normalised Aug

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MAA reported a normalised Aug TIV of 52.8k units (+3.2% YoY; -8.3% MoM), post pent-up deliveries in Jul. However, YTD TIV still dropped -28.6% YoY to 284.6k units, affected by Covid-19 during the earlier of the year. We expect continued strong TIV for the remaining months of the year, mainly driven by lower car prices by 2-7% during SST exemptions until 31 Dec. Our 2020 TIV expectation is maintained at 492.0k units (-18.6% YoY). We reaffirm our OVERWEIGHT call on the automotive sector with a selective stock approach in view of the recovery in 2H20. Top picks are Pecca (BUY: TP: RM1.75); MBMR (BUY; TP: RM5.00); DRB (TP: RM2.52) and Sime Darby (BUY; TP: RM2.68).

Malaysian Automotive Association (MAA) reported normalising Aug 2020 TIV at 52.8k units (+3.2 YoY; -8.3% MoM), post pent-up deliveries in Jul. TIV was still down -28.6% YTD to 284.6k units, mainly affected by MCO and deteriorated consumer sentiment during 1H20. With the introduction of SST exemptions (car prices have reduced 2-7%; paultan.org) and PENJANA measures from 15 Jun to 31 Dec 2020, we expect continued recovery of TIV for the remaining months of 2020. We maintain our 2020 TIV forecast to 492.0k units (-18.6% YoY), after taking into account the eased MCO period and government’s stimulus plan.

As we expect stronger TIV in coming months (due to SST exemptions), we maintain our OVERWEIGHT rating on the sector with a stock selective approach with 4 BUY and 3 HOLD recommendations. Our top picks include Pecca (BUY; TP: RM1.75) and MBMR (BUY; TP: RM5.00), leveraging onto national marques with sustainable strong dividend yields. We also like DRB (BUY; TP: RM2.52) on turnaround of Proton and Sime Darby (BUY; TP: RM2.68) for its strong balance sheet and potential leverage to the China market rebound.

Note that no data was provided for the following:
1) Monthly sales for Mercedes (passenger cars) from April to August 2020;
2) Monthly sales for BMW and Mini from April to August 2020. Nevertheless, 2Q20 was provided for BMW at 638 units and Mini at 55 units, which we believe most of the sales were registered in June 2020.
3) Monthly sales for Scania for July-August 2020.

Perodua (UMW and MBMR) continued to record strong sales in Aug at 22.6k units (+12.6% YoY; -2.6% MoM). The group achieved 120.0k units YTD, a drop of -25.8% (in line with the industry of -28.6%) while maintaining its top position with 42.2% market share. In view of the strong demand for its existing models, Perodua has increased its monthly production volume to 25k units (vs. 20k units previously) for Aug-Dec 2020. Management is targeting 210k unit sales in 2020 (a drop of -15.0% YoY).

Proton (DRB) experienced another strong sales month in Aug at 11.4k units (+24.7% YoY; -13.9% MoM), driven by strong demand for its X70 SUV, Saga and Persona. YTD, the group outperformed the market with flattish growth of +0.7% YoY to 61.7k units, holding a market share of 21.7%. Management is targeting 100k unit sales in 2020. Booking for the highly anticipated X50 CKD has recently started in mid-Sep with more than 15k units (waiting period up to 6 months) within a week.

Honda (DRB) recorded Aug sales at 5.7k units (-25.3% YoY; -5.6% MoM) and YTD sales at 28.8k units (-51.5% YoY) with 10.1% market share. We expect Honda to overtake Toyota in 4Q20 following the recent introduction of BR-V facelift and CR-V facelift as well as upcoming all new City in October.

Toyota (UMW) registered sales volume of 5.7k units (+5.0% YoY; -23.5% MoM) and 31.3k units YTD (-25.9% YoY) with 11.0% market share, relatively in line with industry trends. We expect Toyota to face stiff competition for the remainder of 2020 following the expected upcoming attractive launches by close competitors.

Nissan (TCM) sales remained disappointing at only 1.6k units (-6.4% YoY; +0.3% MoM), with YTD sales at 7.6k units (-46.1% YoY), due to its lack of attractive new model launches. Management has indicated the upcoming new Almera is due to launch in October while the new Kicks and Sylphy may only come post 2020.

Mazda (BAuto) sales remained high at 1.2k units (+20.1% YoY; +0.2% MoM), driven by consumers taking advantage of the SST exemptions. Nevertheless, YTD sales were still down by -21.9% to 6.6k units, but outperformed the market trend. Management indicated strong demand for its products due to government’s stimulus plan and combined with its attractive 6+6 program for an extended 6 years free warranty and free maintenance.


 


 

Source: Hong Leong Investment Bank Research - 22 Sept 2020

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Labels: PECCA, MBMR, DRBHCOM, SIME

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