Investment Highlights

• We retain OVERWEIGHT rating on the sector based on the expectation that automobile sales would remain strong throughout the next 2 quarters. Our optimistic outlook stems from robust order backlogs, healthy booking trends, new model launches and facelifts to current models in the market. Model debuts during the month including the all-new Honda City and Toyota Corolla GR Sport along with its updated model are anticipated to support sales volume over the coming months. Also, our view is supported by steady employment and firm 2023F-2024F GDP growth projection of 4%-4.5%, which will continue to support resilient domestic spending.

• Malaysian Automotive Association (MAA) August total industry volume (TIV) increased 12.7% MoM to 71,745 units as sales volume of passenger cars grew by 12% MoM to 64,633 units whereas the commercial segment rose 24% MoM to 7,112 units. The growth was attributable to the National Day promotional campaign and improved automotive supply chain ecosystem. On a YoY basis, TIV increased 6.2%, mainly supported by the growth of Mazda (+37%), Perodua (+20%) and Toyota/Lexus (+13%). This was partly dragged down by sales of Nissan/ Renault, which plunged 26% YoY. The strong sector performance in August resulted in TIV year-to-date (YTD) sales of 498,842 (+11% YoY), which is on course to reach our 2023F TIV target of 650,000 units.

• Perodua’s cumulative market share grew to 40.9% (+2.7%-point YoY) with year-to-date (YTD) sales of 204,232 units (+19% YoY). This improvement indicates a 65% achievement of its 314,000 units 2023 sales target and is on track to achieve our forecast of 300,000 units. In August, Perodua recorded a sale of 311,111 units (+9% MoM and +20% YoY). We believe that sales of affordable car models such as Axia, Myvi, Bezza, Alza and Ativa will continue to drive monthly sales volume growth going forward.

• YTD market share for Toyota dropped by 0.2%-point YoY to 13.5% despite improved year-to-date (YTD) sales of 67,283 units (+9.2% YoY). 10,275 units were sold in August (+23% MoM, +13% YoY), which will continue to be supported by facelifts of current models and the launch of new marques. Recently, the Toyota Yaris, Malaysia's top-selling foreignmade B-segment hatchback underwent a considerable upgrade to strengthen its lead in the highly competitive market.

• Honda’s cumulative market share declined by 2.3%-point YoY to 9.5%. 7,787 units sold in August marked a growth of 30% MoM, albeit declining on an annual basis by 3% YoY. As of 6 September 2023, Honda WR-V recorded 7,300 bookings just under 2 months after its local debut with 3,300 units delivered.

• 1,880 Mazda cars were sold during the month (+19.3% MoM, +37.1% YoY), which contributed to the slight growth of market share to 2.6% (+0.4%-point YoY). Bermaz Motor has published a new pricing list for the Mazda 3, which takes effect on 1 September 2023, replacing the previous one since 1 July 2022. The price revision comes ahead of an anticipated upgrade for the C-segment model.

• Proton’s cumulative market share increased 2%-point to 20.6% with 13,693 units sold in August. This indicated a 5% MoM growth, but an 8% YoY decline on a yearly basis. Proton has begun exports of its X90, with the SUV making its debut last month in 3 export markets, namely Mauritius, South Africa and Brunei.

• Expected drop in Nissan sales. Sales in August fell by 0.5% MoM and 25.5% YoY to 800 units despite offering National Day promotions during the month. Nissan cumulative market share remained small at 1.3% (-0.9%-point). We do not anticipate a rebound anytime soon in view of the lack of new model launches to bolster sales volume growth.

• Our top picks are Bermaz Auto (BUY, FV:RM3.10/share) and MBM Resources (BUY, FV:RM5.22/share) on the back of substantial order backlogs, robust pipeline of new model launches and upgrades to current car models. Also, FY23F dividend yields are also highly attractive at 7% for Bermaz Auto and 8% for MBMR.

Source: AmInvest Research - 25 Sept 2023