Highlights

As expected, MAA reported lower TIV sales in Aug with 51.1k units (-1.4% yoy; -25.3% mom), after record sales of 68.4k units in Jul 13, due to shorter working month (Raya festive and Merdeka day). YTD, TIV increased by +4.96% yoy (driven mainly by Perodua, Honda and Nissan). Passenger car segment increased by 5.07% yoy, while commercial car segment increased by 4.21% yoy. We maintained our FY13 TIV projection of +3.5% yoy due to higher base effect in subsequent months.

Comment

Perodua (UMW and MBMR) sales dropped significantly to 13.9k units (-11.1% yoy; -27.6% mom) after record month sales of 19.2k units in Jul’13. Perodua is on track to achieve its FY13 target of 194k units given YTD sale of 129.9k units. It is expected to introduce a new model in 2014 that will be the most affordable car in the market.

Proton (DRB) sales was considerably stronger at 11.8k units (+7.5% yoy; -29.0% mom) with market share of 23.1%. The newly launched Suprima S was well received by the market (sales order was better than expected), and expected to support Proton’s sales for the remaining year.

Toyota (UMW) sales in Aug 13 was disappointing at 5.0k units (-39.3% yoy; -48.6% mom), due to minimal Vios contribution (stock clearance in Jul 13). We expect continued disappointing sales in Sep 13 (in absent of Vios contribution) before the launch of new Vios in Oct 13.

Honda (DRB) reported strong sales in Aug 13 at 5.4k units (+70.7% yoy; -11.1% mom) which overtook Toyota and Nissan, due to high demand of Jazz CKD. The newly launched Accord is expected to support sales in 4Q13.

Nissan (TCM) sales normalized in Aug 13 to 4.4k units (+24.7% yoy; -16.5% mom). We expect sales momentum to pick-up again in Oct 13 from the launch of Grand Livina replacement by 23 Sep.

Other marques reported combined sales of 10.7k units (+5.5% yoy; -8.2% mom), with improved market share at 21.0% level (historically ~19%), due to slow down of the main marques Perodua, Proton, Toyota, Honda and Nissan. The number was sustained by Hyundai-Inokom, BMW and Mercedes.

Risks

• Slowdown in the Malaysian economy.
• Global automotive supply chain disruption.
• Sudden jump in fuel prices and interest rate.

Rating

Neutral

Positives –

• Potential export to regional market, i.e. Malaysia as a hub.
• Implementation of Energy Efficient Policy.

Negatives –

• Implementation of responsible lending guideline.
• Depreciation of RM.

Valuation

BUY on DRB (TP: RM3.14) and MBM (TP: RM4.70); HOLD on TCM (TP: RM6.40); and SELL on UMW (TP:RM11.26).

Source: Hong Leong Investment Bank Research- 20 Sep 2013