Highlights

The released Jun 2013 statistics by MAA, shows signs of recovery, with TIV improved 8.05% mom to 53.6k units (a drop of 5.33% yoy), as the expectation of reduced car priced eased among consumers as well as increasing discounts and promotions. YTD, TIV increased by +4.06% yoy due to low base in early-2012 (driven mainly by Perodua, Honda and Nissan). Passenger car segment increased by 3.79% yoy, while commercial car segment increased by 6.02% yoy. We maintained our FY13 expectations of +3.5% yoy.

Comment

Perodua’s (UMW and MBMR) sales weakened to 15.8k (- 5.9% mom; -4.1% yoy) in Jun’13, as we believed that sales were diverted to Proton’s newly launched Saga SV (which DRB expect the model to help it recapture market share to 30%). Proton sales improved +19.3% mom to 10.8k units (- 20.3% yoy). YTD, Perodua’s market share was 30.9% vs Proton’s 20.7%.

Toyota (UMW) sales improved 22.6% mom to 9.4k units (- 9.3% yoy) on the back of its aggressive pricing strategy and promotions to recapture market share. YTD, its market share was only 14.0% vs. FY13’s 16.8%, due to intense competition from Nissan, Honda and other marques.

Nissan (TCM) also reported sales recovery with 4.0k units (+10.0% mom; +31.7% yoy) on strong demand for Almera. Nissan will launch its MPV Serena Hybrid (first in the market) by end Jul’13, which will drive sales growth further. YTD, Nissan market share has improved to 8.4% vs. FY13’s 5.8% on its competitively priced Almera.

Honda (DRB) sales declined 4.9% mom to 3.2k units on lower sales of CRV (priced at RM149k), due to the competition from newly launched Mazda CX-5 CKD (priced at RM137-155k). Honda expects sales to recover with the recently launched 2.4l CRV variant. YTD, Honda’s market share has improved to 7.0% vs. FY13’s 5.6%, after CKD manufacturing recovery since Mar’12.

Other marques reported combines sales improvement of 14.3% mom to 10.5k units (-0.8% yoy). YTD, sales growth was 4.8% yoy, driven by Mazda, Ford, Mitsubishi and Audi.

Risks

• 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: RM5.00).

Source: Hong Leong Investment Bank Research - 23 Jul 2013