Investment Highlights

• We maintain OVERWEIGHT on the sector with the anticipation that motor vehicles sales remain robust until the end of this year. Our optimism stems from the year-end promotions and large discounts on offer as car dealers are clearing their inventory stocks for the year. Therefore, we foresee an upward bookings trend and higher industry order backlogs that will support the momentum of motor vehicle sales. The sector’s attractiveness persists with introduction of new models such as the Proton X50 R3, Neta V (Malaysia’s most affordable EV) and Hyundai Ioniq 6 Max. Meanwhile, facelifted models include the Mazda 6, Mazda 3 and Tesla Model 3. In the near term, a stable labour market and higher wages will be supportive of household spending.

• Malaysian Automotive Association (MAA) October total industry volume (TIV) significantly increased by 10% MoM to 74,896 units. The strong growth marked the second-highest monthly TIV in 2023, underpinned by the rise in commercial vehicle by 12.5% MoM to 7,418 units whereas the passenger segment climbed 9.6% MoM to 67,478 units. Also, improved sales of national marquees contributed to the rise during the month as they remain favourable among domestic consumers. On a YoY basis, TIV surged by 22%, primarily driven by growth in most models, notably Mazda (72%) and Perodua (31%). Nissan/Renault models recurrently lagged behind other models as it plunged 15% YoY, pulling down the performance of overall sales volume. Moving forward, MAA expects that November 2023 sales would at least be on par with October 2023 as automobile sales would keep up the pace. In view of this, we see that our TIV forecast of 650,000 units for the full year is within reach.

• Expansion in Perodua’s year-to-date (YTD) market share to 41.5% (3%-point YoY) with 267,063 units of sales recorded. Towards the final tranche of production, Perodua has improved its operational efficiency with at least 30,000 units produced a month, implying that it is expected to well surpass its 314,000 units sales target and exceed our projected target of 300,000 units sold. According to Perodua’s Q3 2023 sales and production figures, Bezza sold 65,158 units, making it the top-selling car with prospects to take over Myvi’s throne as the national best-selling vehicle for the year.

• Toyota cumulative market share inched downwards by 0.3%-point YoY to 13.6% despite a year-to-date (YTD) sales growth of 9% YoY to 87,442 units. Monthly TIV recorded a five-year high with a jump to 10,931 units (18.5% MoM, 17.8%YoY). We anticipate a bright sales prospect going forward as Toyota has recently launched the all-new Vellfire and Alphard models, two of the country’s most popular luxury vehicles.

• Honda’s year-to-date (YTD) market share dropped to 9.5% (-1.9%-point YoY). Nonetheless, the extended promotional campaigns contributed to the growth in monthly sales to 7,314 units (12.3% MoM, 25.0% YoY). Attractive campaigns including the November 2023 “Last Hoo-Ray Bonanza” and the Honda City’s zero down payment promotion are expected to draw in more buyers and boost the last stretch sales performance.

• Mazda’s TIV rose to 1,753 units (25.8% MoM, 72% YoY), implying another strong achievement in Oct 2023. Sales volume growth will continue to be supported by updated model offerings and healthy booking rates for the CX5 and CX30 models.

• Proton’s cumulative market share rose by 0.6%-point to 19.7%, to register a TIV monthly sales of 12,188 units. We are optimistic that Proton will surpass last year’s performance due to the robust demand for both current and new models with the S70 C-segment sedan expected to be launched before the year end. The production for the X-90 model has normalised during the month and continues to be the national best-selling D-segment SUV with 3,435 sold in 3Q 2023.

• Nissan’s sub-par performance was expected. In October, Nissan’s sales marginally improved by 5% MoM to 857 units, however on yearly basis, it decreased by 15%. Meanwhile, Nissan’s year-to-date (YTD) market share declined to 1.3% (- 0.8%-point). Outlook remains cloudy for Nissan in view of the more intensive competition in Malaysia’s automotive industry.

• Our top picks are Bermaz Auto (BUY, FV:RM3.29/share) and MBM Resources (BUY, FV:RM5.22/share), primarily driven by strong order backlogs and production improvements to meet the high demand. Also, CY24F dividend yields are also compelling at 5% for both Bermaz Auto and 7% for MBMR.

Source: AmInvest Research - 17 Nov 2023