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HLBank Research Highlights

Author: HLInvest   |   Latest post: Thu, 26 Nov 2020, 4:50 PM

 

Automotive - Continued Strong Sep TIV

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MAA reported continued strong TIV of 56.4k units (+26.4% YoY; +6.9% MoM) in Sep 2020, driven by SST exemptions. However, YTD TIV still dropped -23.0% YoY to 341.0k units, affected by Covid-19 during the earlier of the year. With the current implementation of CMCO and EMCO in several areas affecting TIV in the near term, we expect pent-up deliveries by year end, 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 another strong TIV in the month of Sep 2020 at 56.4k units (+26.4 YoY; +6.9% MoM), driven mainly by SST exemptions advantage. Nevertheless, TIV was still down by -23.0% YTD to 341.0k units (there are some data still not yet provided by BMW, Mini, Mercedes and Scania, which we estimate to amount c. 9k 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 note that national marques Perodua and Proton have continued to outshine non-national marques. We maintain our 2020 TIV forecast at 492.0k units (-18.6% YoY). With the current implementation of CMCO and EMCO in selected areas, we do expect slower sales in the near term with pent up deliveries by year end.

As we expect continued strong demand by year end (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 (record 3Q2020 sales) with sustainable strong dividend yields. We also like DRB (BUY; TP: RM2.52) on the 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 September 2020;
2) Monthly sales for BMW and Mini from April to September 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-September 2020.

Perodua (UMW and MBMR) recorded its highest ever monthly sales in Sep at 25.0k units (+47.5% YoY; +10.8% MoM), driven by strong demand during SST exemption period. The group achieved 145.0k units YTD, a drop of -18.9% (outperformed industry of -23.0%) while maintaining its top position with 42.5% 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. Perodua may outperform its sales target of 210k unit sales in 2020 (a drop of -15.0% YoY).

Proton (DRB) recorded yet another strong sales month in Sep at 11.9k units (+36.7% YoY; +4.4% MoM), driven by strong demand for its X70 SUV, Saga and Persona. YTD, the group outperformed the market with a growth of +5.2% YoY to 73.5k units, holding a market share of 21.6%. Management is targeting 100k unit sales in 2020. Booking for the highly anticipated X50 CKD has started since mid-Sep with more than 20k units (waiting period up to 6 months) within the first 2 weeks.

Honda (DRB) reclaimed its top spot position within the foreign segment in Sep with sales of 5.9k units (+2.1% YoY; +3.8% MoM). However, YTD sales was still behind Toyota at 34.7k units (-46.8% YoY) with 10.2% market share. We expect Honda to overtake Toyota in 4Q20 following the recent introduction of the all new City in Oct at attractive pricing of RM74-87k. The model has received over 5k units of bookings and management is targeting monthly sales of 3k units.

Toyota (UMW) registered sales volume of 5.5k units (+4.5% YoY; -2.9% MoM) and 36.8k units YTD (-22.5% YoY) with 10.8% 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 1.7k units (+8.7% YoY; +7.8% MoM), with YTD sales at 9.3k units (-40.6% 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 (+168.2% YoY; +0.2% MoM), driven by consumers taking advantage of the SST exemptions. Nevertheless, YTD sales were still down by -12.3% to 7.8k 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 - 21 Oct 2020

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