Investment Highlights

• We maintain our OVERWEIGHT stance on the auto sector with an unchanged TIV projection of 500K units for 2020. We expect the strong sales volume momentum to sustain in 4Q2020, bolstered by the implementation of the SST holiday from 15 June until 31 December 2020. We believe that the SST exemption will continue to spur buying interests for passenger vehicles, especially the national brands Proton and Perodua.

• In October 2020, the auto sector recorded an impressive TIV of 56.7K units (+0% MoM, +5% YoY), driven by three key reasons: 1) the SST holiday from the ERP stimulus package; 2) aggressive promotional campaigns by car companies to further promote sales; and 3) the launch of new key volume-driven models.

• We note the following for major car marques in October’s sales figures:

1) Perodua registered yet another record high total sales volume of 26.8K units (+18% YoY) in October, with 3.2K units of the Aruz SUV, bringing the YTD total sales to 16.8K units. Perodua guided that the launch of the unnamed Perodua D55L 5-seater SUV will be delayed till 2021. We note that Perodua has purchased about RM600mil worth of auto parts from local suppliers – which we believe is to cater to the stronger demand of its vehicles throughout the SST exemption period. In terms of production, Perodua averaged at about 98% in October 2020 – which is also the highest-ever monthly production figure in its 27-year history. Perodua is introducing a cash redemption of up to RM1.5K for the Aruz throughout November, on top of the current SST exemption.

2) Proton delivered 11.0K units (+16% YoY) in October, with the X70 chalking up 2.8K units for the month. The model continued to be the best-selling SUV in Malaysia for 10M2020 with an estimated 17.8K units sold YTD. We expect the X70 and Proton’s mainstay PIES models to continue doing well in 4Q2020 as these entry-level models are even more affordably priced and offer better value-for-money now with the price reductions from the SST exemption. The Proton Bsegment X50 model has crossed 27.4K units booked as at end-October, with 447 units already delivered to customers nationwide. We gathered from our channel checks that the waiting period for the Proton X50 is 6 months – an indication of how well-received the model is locally.

Proton’s market share stood at 19% in October, resulting in a runner-up YTD market share of 21.2%, behind Perodua at 43.2%.

3) Mazda posted a sales volume of 1.3K units (+30% YoY) in October, recording its best sales performance in 18 months. We believe that the bulk of its sales volume is from the CX-5 and CX-8 as these two models are the main beneficiaries of the 100% SST exemption, compared to its other CBU models. We are optimistic on the upcoming 2QFY21 results of Bermaz Auto (BUY; RM1.61), which will be released on 10 December 2020, as it has sold a significantly higher number or cars throughout the SST exemption period, totalling 3.7K from August to October (+37% QoQ, +51% YoY).

4) Honda sold 5.5K units (-14% YoY) in October and its market share of the non-national marques over total TIV is now 10.1%, trailing behind Toyota. YTD at 10M20, sales volume stood at 40.0K units (-44% YoY) and we believe that the sharp decline in demand was due to the upward price revision of 5–9% all of its CKD products since February 2020. The new Honda City has been officially launched in 4 variants, with prices ranging from RM74.1K to RM86.6K respectively.

5) Toyota sold a decent 6.4K units (-1% YoY) in October, bringing its 10M20 sales total to 43.2K units. Toyota managed to clinch the top spot for market share in the non-national segment at 10.9%, marginally above Honda’s 10.1%. The 2020 Toyota Yaris and Vios CKDs are now open for bookings nationwide with prices ranging from RM72.2K to RM85.6K for the former and RM75.7K–RM89.2K for the latter with 3 variants available for both models.

6) Nissan continued to show a lacklustre performance in its sales volume, recording a total of 1.6K units (-7% YoY) in October despite the SST exemption and the launch of the all-new Nissan Almera CKD. We believe that the ongoing weak performance was due to Nissan’s unattractive product line-up, uncompetitive pricing and a lack of new launches. We note that only 0.5K units of Serena S-Hybrid were sold for the month.

• The approval rate for loans on passenger cars stood at 57.5% in September, an increase of 1.0% from August 2020 and was lower than the average of 61.4% in 2019.

Source: AmInvest Research - 25 Nov 2020