Affin Hwang Capital Research Highlights

Author: kltrader   |   Latest post: Thu, 9 Jul 2020, 9:43 AM


Auto & Autoparts - Auto Sales Veer Off the Growth Track

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Total Industry Sales Volume (TIV) in June 2019 fell by 34% yoy to 42.5k units (-30% mom) off a high base from the tax-holiday boost (between June to August 2018) and Hari Raya promotions in May 19. We expect sales volume to moderate moving into 3Q19 as we think consumers would have taken advantage of the attractive Raya deals last month. 6M19 TIV of 296.3k units (+2% yoy) is still within expectations, constituting for 49% of our 2019E forecasts. Maintain our NEUTRAL sector call.

Unwavering Support for the National Carmakers

The national carmaker’s 6M19 market share stood firm at 56% (6M18 market share: 50%) as both Proton and Perodua continued to grow at the expense of the Japanese marques. Proton stood out as the champion – June 2019 car sales rose by 23% yoy to 7.6k units, as the Proton X70 as well as the recently facelifted Iriz and Persona continued to captivate Malaysians’ interest. Although Perodua’s June 2019 car sales fell by 18% yoy to 16k units, its lowest monthly sales for 2019, we expect the popular demand for Perodua’s key models should sustain sales volumes forward.

Bumpy Road for Foreign Car Brands in June 2019 (ex BMW)

Most of the foreign brands experienced lower numbers in June 2019 due to the accelerated purchases mentioned above: Toyota (-23% mom; -55% yoy), Honda (-49% mom; -53% yoy), Mazda (-23% mom; -46% yoy), Nissan (-27% mom; -60% yoy) and Mercedes-Benz (-31% mom; -62% yoy). Notably, BMW was the only top foreign car brand to cause a cheer as the BMW/MINI’s aggressive product pipeline pushed its June 2019 sales volume to 965k units (+4% mom).

Maintain NEUTRAL; Top Pick / Key Risks

We maintain our NEUTRAL rating on the auto sector. Following our recent downgrade on Bermaz Auto (BAUTO MK; HOLD), our sector top pick is MBM Resources (MBM MK; BUY) for its appealing valuation. Key risks to our call include: 1) higher-/lower-than-expected car sales volume, 2) tighter bank lending policies, 3) intensifying price competition; 4) fluctuation of RM vs US$/JPY, 4) delay on new car pricing approvals, and 5) worse-thanexpected economic slowdown that potentially affects market sentiment.

Source: Affin Hwang Research - 19 Jul 2019

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