Investment Highlights

• We maintain OVERWEIGHT rating on the sector in anticipation of continued strong sales of motor vehicles throughout 2023. Our positive outlook is underpinned by a range of factors, including strong order backlogs, favorable booking trends, and imminent launches of new models. We believe new models launched this year (notably Perodua Axia, Proton X90, Honda WR-V and Toyota Vios) will continue to drive new orders. Our recommendation is also premised on an improving economy and robust job market conditions, which create a favorable environment for resilient domestic consumption.

• Malaysian Automotive Association (MAA) July total industry volume (TIV) rose 1.8% MoM to 63,676 units as sales volume of passenger cars increased 4% MoM to 57,939 units while commercial segment plunged 17% MoM to 5,737 units. On a YoY basis, TIV surged 28%, driven by substantial YoY increase in most major marques. Notably, Perodua witnessed a remarkable growth of 55%, Mazda +41%, Toyota/Lexus +26%, Proton +18% and Honda +13%. However, this growth was partially offset by a YoY decline of 29% in Nissan/ Renault.

• Perodua’s cumulative market share improved to 40.5% (+2.3%-point YoY) with year-to-date (YTD) sales of 173,121 units (+19% YoY), achieving 55% of its 2023 sales target of 314,000 units and 58% of our forecast (300,000 units). We believe that Axia, Myvi, Bezza, Alza and Ativa supported Perodua’s sales of 28,431 units in July (+26% MoM and +55% YoY).

• Toyota’s YTD market share declined by 0.5%-point YoY to 13.3% although sales remained strong at 57,008 units (+8.5% YoY) due to robust sales growth from national marques. In July alone, 8,349 units were sold (-4% MoM, +26% YoY), comprising mainly all-new Vios, Yaris, Corolla Cross and Hilux.

• Honda’s cumulative market share declined by 2.5%-point YoY to 9.3%. July sales of 5,989 units improved 19% MoM and 13% YoY. On 13 July 2023, Honda officially launched a new model, WR-V, which has garnered strong interest with 2,500 units booked since reservations commenced on 12 June 2023.

• 1,576 Mazda cars were sold during the month (-6.2% MoM, +40.7% YoY), translating to a steady YTD market share of 2.6%. Going forward, we anticipate that the introduction of the more affordable Mazda CX-30 CKD model could play a crucial role in bolstering 2023 sales volume.

• Proton’s cumulative market share grew 2.9%-point to 20.9% as sales declined 6% MoM but grew 18% YoY to 13,095 units in July. Within a span of less than 3 months since the launch of Proton X90 launch on 7 May 2023, a total of 2,225 units of the Proton X90 have been sold, with 886 units sold in the month of July alone.

• No surprise from decline in Nissan sales. July sales volume dropped 2.2% MoM and 29% YoY to 804 units. YTD market share was a small 1.4%. In the absence of new model launches to stimulate sales volume growth, we do not foresee a resurgence in the foreseeable future.

• Our top picks are Bermaz Auto (BUY, FV:RM2.77/share) and MBM Resources (BUY, FV:RM5.22/share) on the back of sizeable order backlogs. We like Bermaz Auto as the introduction of the more affordable Mazda CX-30 CKD model will positively impact sales volume, while bookings of Kia and Peugeot cars should continue growing from a low base. FY23F dividend yields are also highly attractive at 7% for Bermaz Auto and 9% for MBM Resources.

Source: AmInvest Research - 21 Aug 2023