Highlights

Despite a shorter working Feb month (Chinese New Year), MAA’s Feb 2014 statistics showed stronger mom TIV sales with 50.7k (+12.6% yoy; +0.9% mom), from improved sales of Perodua, Proton and Toyota, after the announcement of NAP 2014, which quashed market expectations of lower car pricing. We maintained our forecast of 3.5% yoy TIV growth in 2014 due to aggressive campaigns and new launchings (Proton, Perodua, Toyota, Honda & Nissan) during the year.

Comment

Combined market share of national marques (Perodua & Proton) recovered to 51.9% in Feb, post announcement of NAP. Perodua (UMW and MBM) sales improved in Feb (+6.7% yoy; +29.1% mom) due to strong sales of facelift Alza (deferred registration from Jan due to technical glitches).

Proton (DRB) sales also improved to 10.7k units in Feb (+3.7% yoy; +9.7% yoy). Currently, Proton is entering its second year of restructuring, which is to focus on global expansion (including export markets), banking on its expected new GSC model and Hybrid model to boost sales in 2014.

Thanks to newly launched Altis (20 Jan 2014), Toyota (UMW) sales showed improvements in Feb (+57.1% yoy; +17.4% mom). However, we are concerned about the competition from new Mazda 3 (March 2014) and Nissan Sylphy (June 2014).

Honda (DRB) maintained its second spot with 4.3k unit sales (+42.1% yoy; -32.4% mom) or 8.5% market share in Feb. Honda is targeting 76k units sales in 2014, banking on new City (April) and CKD Jazz hybrid.

Nissan (TCM) sales remained weak with only 3.5k units (- 9.0% yoy; -23.4% mom) or 8.0% market share. Nissan is hoping to gain momentum in 2H14 with the upcoming launch of new Sylphy (2Q14), Teana (3Q14) and CKD Serena Hybrid (3Q14).

Other marques’ combined market share slipped to 17.6% in Feb (vs. 21.8% in Jan), mainly due to shorter working days.

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

Neutral

Positives :–

• Potential export to regional market, i.e. Malaysia as a hub;
• Implementation of Energy Efficient Policy; and
• Implementation of Annual Car Check Policy.

Negatives :–

• Tightening of bank lending rules and rise in inflation;
• Instability of global automotive supply chain; and
• Depreciation of RM.

Valuation

Top Pick: Maintain BUY on DRB (TP: RM3.30) and MBM (TP: RM4.52).

Source: Hong Leong Investment Bank Research - 20 Mar 2014