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• The Malaysian Automotive Association (MAA) reported 40,581 units (-48% MoM, +22% YoY) of total industry volume (TIV) in January.

• The sequentially lower sales volume is mainly attributed to the high base effect of seasonally stronger December 2021 sales and the Selangor floods that further disrupted the already strained sector’s supply chain.

• Note that January 2021 TIV was negatively affected by the movement control order implementation and a spike in Covid-19 cases which dampened showroom footfall.

• Proton’s January sales were hit by floods that hit Klang Valley and Selangor in December 2021. The carmaker recorded only 4,453 units sold (including exports) during the month, compared to 14,187 units in the prior month. The flood in the Shah Alam area has affected Proton’s vendors and disrupted the production of the Proton Saga and Exora. Only 76 units of the Saga and 54 units of the Exora were sold during the month. Nevertheless, the carmaker has resumed production for all models in January hence we should see improved sales in February.

• On the other hand, the production of Toyota and Perodua vehicles were not directly impacted by the floods despite also being assembled in Selangor.

• We maintain our OVERWEIGHT recommendation on the sector with a 2022 TIV forecast of 555,000 units (MAA: 600,000 units), implying a 9% YoY growth. Our top picks for the sector are Bermaz Auto (fair value RM2.00) and UMW Holdings (FV RM3.90).

Source: AmInvest Research - 18 Feb 2022