Affin Hwang Capital Research Highlights

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


Auto & Autoparts - National Marques Remain in Favour

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The total industry volume (TIV) for July 2019 dropped by 26% yoy to 50.9k units due to a high base in 2018 when sales were elevated during the zero-rated GST period between June and August 2018. Conversely, the sales volume grew by 20% mom due to a longer working month (ie. Hari Raya holidays in June 19). We believe the August sales volume should improve mom as consumers may be enticed by the attractive “Merdeka” promotions. All in, the 7M19 TIV of 347k units (-3% yoy) is within expectations, constituting 58% of our 2019 forecast. Maintain NEUTRAL.

Perodua Continues Its Reign; Proton’s 7M19 Market Share Rose to 15%

Proton vehicle sales picked up to 8.6k units in Jul19 (+6% yoy; +13% mom), driven by the strong-selling Proton X70 and bolstered by a renewed product pipeline. This has boosted Proton’s 7M19 market share to 15% (7M18: 10%). Proton has in 2019 reclaimed the runner-up spot from Honda in the Malaysian automotive market, for the first time in four years. Meanwhile, Perodua’s vehicle demand remained healthy – 7M19 car sales rose marginally by 1% to 141.7k units. Overall, the national carmaker’s 7M19 market share remained firm at 55.8% (7M18 market share: 49.2%).

Foreign Carmakers’ Sales Dip Further in 7M19

Most foreign brands saw lower 7M19 sales volumes – Toyota (-10% yoy), Honda (-19% yoy), Mazda (-5% yoy), Nissan (-35% yoy), BMW/Mini (-8% yoy) and Mercedes-Benz (-25% yoy) as sales of the national brands gained traction. On a monthly basis, Honda was the top performer among the Japanese marques, growing by 40% mom to 7.5k units in July 19. In the premium segment, BMW/Mini continued to best MercedesBenz by 201 units in 7M19.

Maintain NEUTRAL, Top Pick/ Key Risks

We maintain our NEUTRAL rating on the auto sector. Our sector top pick is MBM Resources for its appealing valuation. Key risks to our sector call include: 1) higher/lower-than-expected car sales volumes, 2) tighter bank lending policy, 3) intensifying price competition; 4) fluctuation of the RM vs. US$/JPY, 4) delays on new car pricing approvals, and 5) worse-thanexpected economic slowdown that affects market sentiment.

Source: Affin Hwang Research - 22 Aug 2019

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