Investment Highlights

• We retain OVERWEIGHT call as 2022 total industry volume (TIV) surpassed the 700,000-unit level, as expected. The high performance was mainly buoyed by the sales & service tax (SST) incentive which ended on 30 June 2022. Given that the tax-free window has expired, we expect normalisation to kick in in 2023 but do not foresee a steep drop in TIV, which we think would be held up by sustained order book together with continuous new launches under way. Therefore, our 2023F TIV remains unchanged at 615,000 units.

• The Malaysian Automotive Association’s (MAA) December TIV grew 19% MoM to 76,657 units, the highest level seen in 2022. Sales volume of passenger vehicles climbed 20% MoM to 68,889 units in December whereas commercial vehicles increased by 13% to 7,768 units. Meanwhile, cumulative sales surged 12% YoY to 720,658 units.

• Perodua marched forward with a leading market share of 39.1% (+1.7%-point YoY) as 2022 sales jumped 48% YoY to 282,019 units. Separately, 31,224 units were sold in December (+9.6% MoM and +35.5% YoY). We expect Perodua to come out with an all-new Axia this year, taking a cue from the anticipated launch of its sibling models in Indonesia – Toyota Ayga and Daihatsu Ayla. To recap, Axia was first introduced in 2014, subsequently facelifted in 2017 and 2019.

• Toyota’s market share remains stable at 14.0% (vs. 14.2% in 2021) with total 101,034 units sold in 2022 (+40% YoY). On a monthly basis, the foreign marque delivered 10,440 units in December, relatively consistent with the previous month. It is planning to introduce a second hybrid electric vehicle (HEV) in 2023, on top of a potential battery electric vehicle (BEV).

• Honda sold 7,699 units (+17% MoM and -4% YoY) in December, as demand continues to improve. The group sold 80,290 units last year (+51% YoY) and command a market share of 11.2% (+0.8%-point YoY).

• Mazda delivered 1,733 units in December (+44% MoM and +50% YoY), highest ever monthly sales post-SST period. Cumulatively, the Japanese brand sold 14,644 units (+37.4% YoY) in 2022 and scheduled to introduce the completely knocked down (CKD) variant of the CX-30 in the first quarter of this year, which would underpin its 2023 sales.

• Proton closed 2022 with a consecutive decline in market share at 18.9% (-3.0%-points YoY). The national brand posted annual sales of 136,026 units (+22% YoY). In December, it sold 14,372 units (+30% MoM and 5% YoY). While we have no visibility on its new model launch pipeline, an introduction of its next Geely-based model could bolster the carmaker’s 2023 prospect.

• Nissan is still a laggard. The brand’s December sales volume improved by 23% MoM but dropped 41% YoY compared to the same period last year. Full-year car sales improved to 13,832 units (+9% YoY) despite the absence of new model launches. Nonetheless, the automaker has lined up two EVs – Nissan Leaf EV and Renault Zoe EV for 2023.

• Our TOP PICKS are BAUTO (fair value RM2.51), MBMR (fair value RM5.10) and UMWH (fair value RM4.89). BAUTO’s large order backlog pipeline of more than 6 months coupled with promotional incentives are supportive of its earnings

visibility. Meanwhile, MBMR and UMWH are poised to capitalise on Perodua’s ongoing launches.

Source: AmInvest Research - 20 Jan 2023