Investment Highlights

• We retain OVERWEIGHT call as automakers remain committed on their new launches while sitting on sizeable backlog that could last them at least two-thirds of the year. Now that the updated excise duty calculation method is unlikely to be implemented in 2023, this removes part of the uncertainties in the sector. Recall that Malaysian Automotive Association (MAA) has previously forecasted a surge of 8% - 20% in the prices of locally assembled (CKD) cars should the excise duty reform come into play. As such, we raise our 2023 TIV forecast by 35,000 units to 650,000 units, in line with MAA’s.

• The MAA January total industry volume (TIV) dropped 36% MoM to 49,461 units as sales volume of passenger vehicles declined 36% MoM to 43,927 units and commercial vehicles decreased by 29% MoM to 5,534 units due to 1) a high base effect as December 2022 was the all-time high monthly sales achieved; 2) January 2023 was a relatively short working month with the festive holidays, as well as certain makes were still impacted by microchip and component shortages. On a positive note, the first TIV reporting of the year was up by 19% YoY as compared to 41,533 units a year ago due to sales of passenger vehicles growing 27% YoY, offsetting the 21% YoY fall in commercial vehicles.

• Perodua continues to grow its market share to 43.4% (+1.4%-point YoY) as there were 21,449 units sold in January (-31% MoM and +21% YoY). The automaker has officially launched its blockbuster of the year - all-new Axia on 14 February 2023, receiving robust reception of more than 20,000 units since bookings were opened on 31 January 2023. Leveraging on that, Perodua targets to sell 314,000 units (+11% YoY) in 2023.

• Toyota’s market share slid 4.4%-point YoY to 13.7% with 6,786 units sold (-35% MoM, -10% YoY). Our checks reveal that the foreign marque is planning to introduce 5 new models, which we believe will also include a second hybrid electric vehicle (HEV) as well as a battery electric vehicle (BEV). There might also be some potential facelifts for its existing models.

• Honda sold 3,475 units (-55% MoM and -10% YoY) in January with a market share of 7% (-2.3%-point YoY) due to stiff competition within the B-segment space. We gathered that Honda Malaysia’s backlog order now stands at 5-6 months, mostly for its best-selling Honda City model.

• Mazda delivered 1,216 units (-30% MoM and +44% YoY) with a growth of 0.5%-point in its market share to 2.5%. The Japanese brand will be introducing the locally assembled (CKD) variant of the CX-30 in the first quarter of the year, which would support its 2023 sales.

• Proton registered January sales of 11,506 units (-20% MoM), clocking in higher market share of 23% (+13%-point YoY) as sales improved by 2.7x 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 2023F prospect. The brand currently has 5 – 6 months of bookings with the majority for the X-series models.

• Nissan remains a laggard. January sales volume plummeted to 660 units (-34% MoM, -40% YoY) given the prolonged absence of key new model launches needed to drive sales volume. Nonetheless, the automaker has lined up two EVs – Nissan Leaf EV and Renault Zoe EV on its plate.

• Our TOP PICKS remain Bermaz Auto (fair value: RM2.51), MBM Resources (fair value: RM5.22) and UMW Holdings (fair value: RM4.89). Bermaz Auto’s earnings visibility is underpinned by its large booking pipeline of more than 6 months coupled with promotional incentives. Meanwhile, Perodua’s ongoing launches will drive prospects of MBMR and UMWH. We also like Sime Darby (fair value: RM2.76) for China’s recovery theme play.

Source: AmInvest Research - 21 Feb 2023