Highlights

MAA reported March 2013 TIV at 57.6k, +7.5% yoy due to low base 2012 year (driven by Honda and Nissan), and +28.1% mom (mainly driven by non-national marques) after Feb’s shorter working day effect. We maintained our growth expectation of 3.5% yoy for 2013, despite ytd growth of 13.8% yoy, due to higher base in 2H12.

Comment

The dominant national cars reported lower combined market share of 48.9% in March and 51.3% in 1Q13, as foreign marques continued to report stronger sales growth due to new model launches; competitive pricing; and aggressive campaigning. Perodua (UMW and MBMR) reported 16.3k sales (+2.0% yoy; +11.3% mom), followed by Proton (DRB) with 11.9k sales (-6.9% yoy; +16.0% mom). Perodua is banking on S-Series to boost sales growth in remaining 9M.

Toyota (UMW) sales rebounded +69.9% mom in March with 8.4k sales and 14.5% market share. However, it was still considerably bad with -17.0% yoy. Ytd market share has dropped significantly to 12.8% vs. 16.8% in 2012. Vios replacement by 2H13 will likely to excite the market.

Nissan (TCM) maintained its second position after Toyota with market share of 9.2% in March and 9.3% ytd. The sales was 5.3k units (+70.5% yoy; +39.9% yoy), driven by continued strong Almera sales. The upcoming Livina is likely to maintain market interest on Nissan.

Despite strong sales of CRV (933 units), Honda (DRB) remained in third place with market share of 8.6% in March and 7.6% ytd. The strong +295.7% yoy sales was due to the closure of Alor Gajah manufacturing plant in 1Q12 and +62.3% mom was due to CRV contribution and longer working days.

Other foreign marques have relatively stable combined market share at 18.9% in March and ytd vs. 19.3% in 2012. Total sales was 10.9k (+4.1% yoy; +30.0% mom), leaded by Mitsubishi (DRB & MBM), Naza-Kia, Hyundai-Inokom, Ford, Isuzu (DRB) and VW (DRB & MBM).

Risks

• Prolonged tightening of banks’ HP rules.
• Slowdown in the Malaysian economy.
• Global automotive supply chain disruption.
• Sudden jump in fuel prices and interest rate.

Rating

Overweight

• Positives –
  • Potential export to regional market, i.e. Malaysia as a hub.
  • Implementation of Energy Efficient Policy.
  • Appreciation of RM.
• Negatives –
  • Implementation of responsible lending guideline
  • Instability of global automotive supply chain.

Valuation

• Top Pick: DRB (TP: RM3.36) and MBM (TP: RM4.35). JP¥ depreciation will benefit MBM the most followed by TCM (TP: RM5.50).

Source: Hong Leong Investment Bank Research - 19 Apr 2013