Investment Highlights

• We retain our OVERWEIGHT call with a higher total industry volume (TIV) target of 700,000 units vs. 665,000 units previously (+5.3%) to close 2022E. Our 2022E TIV forecast revision is premised on the continuing sales growth seen in most marques, except for Proton (-12% MoM) and Nissan cars (-19% MoM). We expect the strong momentum to carry into 2023F on the back of a sizeable industry order book, new launches and electrification plays.

• The Malaysian Automotive Association’s (MAA) November TIV grew to 64,404 units (+6% MoM). Sales volume of passenger vehicles climbed 6% MoM to 57,545 units in November whereas commercial vehicles posted a similar growth to 6,859 units. Meanwhile, cumulative sales volumes surged 45% YoY to 642,306 units. We opine that full-year TIV is likely to breach the 700,000-unit threshold (+57,694 units).

• Dominance of Perodua continues with a year-to-date (YTD) market share of 39.0% (+1.3%-point YoY) as cumulative sales jumped 50.0% YoY to 250,795 units. Separately, 28,592 units were sold in November (+10.6% MoM and +40.9% YoY). While Axia, Myvi, and Bezza were among the top selling models in 2022E, we expect some new models to be unveiled in 2023F.

• Toyota leads foreign marque with YTD market share of 14.1% (vs. 14.2% in YTD 2021). The brand’s sales volumes were commendable at 10,442 units in November (+12.5% MoM and +23.0% YoY). After surpassing its 80,000-unit target, the automaker is expected to end the year with a sales volumes of almost 100,000 units. YTD sales had already hit 90,594 units (+43.6% YoY).

• Honda sold 6,558 units (+12.1% MoM and -13.6% YoY) in November due to improvements in its inventories. Recall that previously, the group was affected by shortages of inventory in its City, Civic, and HR-V models. The group sold 72,590 units in 11M2022 (+61.1% YoY) and command a market share of 11.3% (+1.1%-point YoY).

• Mazda sold 1,208 units in November (+18.7% MoM and -6.7% YoY) driven by sales of CX-5. YTD, the Japanese brand delivered 12,911 units (+35.9% YoY). Mazda will be introducing the completely knocked down (CKD) variant of the CX-30 in 2023F, which would boost sales.

• Separately, Proton’s cumulative market share shrank by 3.2%-point YoY to 18.9% in November even though its YTD sales volume jumped 24.1% YoY to 121,654 units. Compared to its peers, the carmaker’s recovery was affected by low inventory and production levels. Nonetheless, new model launches in 2023F such as the next Geely-based marque would help underpin a sales recovery.

• Nissan continues to underperform. Car sales (-19.3% MoM and -42.0% YoY) remained weak in the absence of new model launches. Although the carmaker has hinted at the introduction of a new generation X-Trail model (T33), the exact timeline has yet to be known.

• Our TOP PICKS are BAUTO (fair value RM2.25) and MBM Resources (fair value RM5.00). The companies have strong earnings trajectory, which is expected to be underpinned by a firm order book visibility of 7-8 months.

Source: AmInvest Research - 21 Dec 2022