Investment Highlights

• We maintain our OVERWEIGHT stance on the auto sector with an unchanged TIV projection of 600K units for 2021. We expect the strong sales volume momentum to be sustained in 1H2021, bolstered by the extension of the SST exemption from 1 January until 30 June 2021. We believe that the SST exemption will continue to spur consumers’ buying interest on passenger vehicles, especially the national brands Proton and Perodua.
   
• In December 2020, the auto sector recorded an impressive 60-month high TIV of 68.8K units (+19% MoM, +26% YoY), driven by three key reasons: 1) the extension of SST exemption from the Penjana stimulus package; and 2) new key volume-driven model launches. Cumulatively, 2020 TIV stood at 529.3K units (-12% YoY), beating our full-year estimates of 500K units by 6%, underpinned by the strong sales in December, which we believe was due to a rush in purchases as consumers expected an end to the SST exemption on 31 December 2020.

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

1. Perodua registered another magnificent total sales volume of 25.2K units (+37% YoY) in December. This brings its total sales volume to 220.2K units (-8% YoY) for 2020, exceeding its full-year target of 210.0K units. The Aruz continued to be the most popular B-segment SUV in Malaysia with 3.1K units sold for the month. Cumulatively in 2020, the Aruz sold a total of 25.5K units. From our checks, we understand that Perodua introduced a cash rebate of up to RM2.2K for the Aruz in December, on top of the saving from the SST exemption. We continue to be optimistic on Perodua’s outlook in 2021 with the imminent debut of the Perodua D55L A-segment SUV, which we expect to be launched in 1Q2021.
    
2.  Proton delivered 12.8K units (+15% YoY) in December, with the X50 and X70 chalking up a combined 3.4K units for the month. The total 2020 total sales for Proton stood at 108.5K units (+8% YoY), making Proton the only major automaker to record growth throughout the year. We understand that Proton’s B-segment X50 model has exceeded 40.0K booking units as at end-December, with 3.8K units already delivered to customers. We have gathered from our channel checks that the waiting period for the Proton X50 is about 6 months – an indication of how well-received the model is, locally.
   
   Proton’s market share stood at 19% in December, resulting in a runner-up YTD market share of 20.5%, behind Perodua’s 41.6%. We note that Proton has introduced its sales volume target for 2021 at 132.0K units.
    
3. Mazda posted a sales volume of 1.7K units (+87% YoY) in December, recording its best sales performance in 25 months. We believe that the bulk of its sales volume came from the CX-5 and CX-8 as the mainstay models are the main beneficiaries of the 100% SST exemption, compared to its other CBU models. Mazda recorded a total sales volume of 12.1K units (+4% YoY) for 2020. Management has recently guided that it will be reverting to its 5-year warranty and free maintenance promotion, which we believe will substantially help Bermaz Auto improve its profit margin for CY2021.
    
4. Honda sold 11.6K units (+60% YoY) in December and the group managed to maintain its position as the top nonnational marque for the sixth consecutive year, beating its rival Toyota. Cumulatively for 2020, sales volume stood at 60.5K units (-29% YoY). We believe the sharp decline in demand was due to: 1) the upward price revision of 5%–9% all of its CKD products since February 2020; and 2) the impact from the lockdown in March–May 2020. Honda’s full-year market share stood at 11.4%, edging out Toyota at 11.1%. We understand that the All-New Honda City recorded the highest monthly sales in its history with over 5.5K units sold in December 2020, allowing them to edge over Toyota in terms of market share in the final leg before wrapping up the year.
    
5. Toyota sold a decent 9.1K units (+13% YoY) in December, bringing its 2020 sales total to 58.5K units. YTD, Toyota lost the top spot for the market share in the non-national segment at 11.1%, marginally below Honda’s 11.4%. The 2021 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 to RM89.2K for the latter, both available in 3 variants.

• The approval rate for loans on passenger cars was 59.5% in November, a decrease of 7.8% from October 2020 and lower than the average of 61.4% in 2019.

Source: AmInvest Research - 27 Jan 2021