Affin Hwang Capital Research Highlights

Author: kltrader   |   Latest post: Wed, 28 Oct 2020, 4:54 PM


Sector Update – Malaysia Auto & Autoparts (OVERWEIGHT, Maintain) - A Steady Recovery in Aug-20

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  • Aug-20 Total Industry Volume (TIV) rose marginally by 3% yoy to 53k units. However, Aug20 TIV was lower by 8% mom, after pent-up demand of orders, following the lockdown easing and Sales & Service tax (SST) exemption in July-20 as well as a shorter working month in Aug-20
  • Although 8M20 TIV of 285k units (-28% yoy) only accounted for 61% of our full-year forecasts, we believe the cheaper car prices from the SST exemption and new model launches should sustain sales momentum
  • Maintain Overweight. Our sector and country top pick is Sime Darby.

Both national carmakers continued to perform well

Proton’s Aug20 sales volume rose by 25% yoy to 62k units (-14% mom), with 8M20 sales volume of 62k units (+1% yoy). Proton is expected to launch the X50 SUV in Oct20, and targets to sell 4k units for 2020, which we think is achievable given that the all-new B-segment SUV has received >10k bookings. Meanwhile, Perodua’s performance was also commendable – Aug20 sales rose by 13% yoy to 23k units (- 3% mom), led by healthy demand for its existing Perodua line-up, maintaining its dominant position with a 42% market share (8M19: 40.6%). Overall, the national’s combined 8M20 market share stood firm at 63.7% (vs 8M19: 56%).

Mixed performance for the non-nationals

Performance for the Japanese brands were mixed in Aug20, with Mazda (+20% yoy, thanks to the extended warranty/service maintenance) and Toyota (+3% yoy) leading the pack, whereas Honda (-25% yoy) and Nissan (-42% yoy) were the laggards. However, we believe the latter two brands should see better sales volume in the remaining months as Honda and Nissan are expected to launch the Honda City and Nissan Almera in 4Q20. We are unable to ascertain the sales performance for BMW/Mini, Mercedes-Benz and Scania as these carmakers would only disclose their sales volumes on a quarterly basis.


Our 2020E TIV forecast remains unchanged at 465k units (-23% yoy), as we expect cheaper SST exempted car prices to support sales in the coming months. Sime Darby Sime; RM2.30, BUY) is our preferred sector and country pick. Sime is a good proxy to regional recovery - we anticipate the higher equipment deliveries and parts sales from Australasia and China as well as catch-up spending from affluent consumers will boost luxury car sales in China and Malaysia. Given our BUY rating for large-cap, Sime Darby, we keep our Overweight on the sector. Downside risks could come from: i) a prolonged tightening of auto financing hindering the borrowing ability of car buyers; ii) exchange rate risk; and iii) a slowdown in the economy.

Source: Affin Hwang Research - 22 Sept 2020

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