Highlights

MAA statistics showed a rebound in overall sales in Sept 2013 at 54.9k units (+19.6% yoy; +7.5% mom), after slowdown in Aug 2013. National marques recorded substantial sales growth mom, which was partly offset by the declines in the overall foreign marques. YTD, TIV increased by +6.43% yoy (driven mainly by Perodua, Honda and Nissan). Passenger car segment increased by 6.58% yoy, while commercial car segment increased by 5.32% yoy. We maintained our FY13 TIV projection of +3.5% yoy due to higher base effect in subsequent months.

Comment

Both national marques registered strong sales volume in Sept 2013, and high combined market share at 58.9%. Perodua (UMW and MBMR) sales rebounded to 17.5k units (+26.1% yoy; +26.3% mom). Perodua is likely to outstrip its FY13 target of 194k units given 9M13 sale of 147.4k units (76% of sales target). We anticipate continued strong sales of Perodua S-Series going forward and the expected Viva Replacement model by 3Q14. Similarly, Proton (DRB) sales gained pace in Sept with 14.8k units (+42.9% yoy; +25.6% mom), on the back of high demand for Saga SV and Suprima S. We expect sales volume to remain robust, as Proton is likely to introduce more variants into the market from time to time as new model Global Small Car and Perdana replacement model enter the market in 2014.

Overall non-national marques reported sales declined mom in Sept to 22.6k units vs. Aug’s 25.4k units. The drag is from B-segment market, as consumers withhold purchases in anticipation of new Vios as well as lower production volumes in Aug (low inventory).

Major foreign marques reported disappointing sales: Toyota (UMW) sale was only 5.6k units (-17.1% yoy; +12.7% mom); Nissan (TCM) was 3.9k units (+54.3% yoy; -11.0% mom); and Honda (DRB) was 3.3k units (-5.9%yoy; -38.3% mom). We gathered that sales recovered in Oct, with strong sales of new Vios (8,000 orders) and Almera.

Other marques reported combined sales of 9.8k units (+10.7% yoy; -8.6% mom), with declined market share of 17.8% (historically ~19%). However, Audi (DRB) and BMW (Sime Darby) reported strong sales in Sept.

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 - 21 Oct 2013