Highlights

MAA’s Mar 2014 statistics showed further improvement in TIV sales with 58.9k units (+2.3% yoy; +16.2% mom), from improved sales of foreign marques, on delivery of new models as well as more working days. Despite ytd TIV improved 1.4% yoy, we maintained our 3.5% yoy TIV growth in 2014 as we anticipates aggressive campaigns and new launchings (Proton, Perodua, Toyota, Honda & Nissan) in the upcoming months to boost demand.

Comment

Perodua (UMW and MBM) sales improved to 16.3k sales (+0.3% yoy; +4.6% mom) or 27.7% market share, due to strong demand for Alza MPV. Perodua has introduced a new MyVi variant in April to sustain its sales until it launch new EEV model with fuel efficiency of >20km/l in Aug.

Proton (DRB) sales also improved to 12.3k units in Mar (+3.7% yoy; +15.3% mom), after suffering since Nov 2013 on potential NAP announcement. Proton is focusing on its new GSC model, which have been delayed until end 2Q14. The GSC is expected to be EEV compliant, and targeted to drive Proton’s turnaround.

Toyota (UMW) reported strong rebound in Mar with sales of 9.9k units (+18.4% yoy; +28.0% mom) from new model Altis and new Camry variant as well as aggressive promotional campaigns.

Honda (DRB) maintained its second spot with 4.9k units (- 0.3% yoy; +13.6% mom) or 8.3% market share in Mar. We expect Honda sales to remain strong in Apr, driven by newly launched City by end Mar. Honda has plan to introduce new hybrid City CKD in 2H14, which will further strengthen its position.

Followed behind was Nissan (TCM) with 4.0k units (-24.8% yoy; +15.6% mom) or 6.8% 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), to achieve its 60k sales target in 2014.

Other marques’ combined market share climbed to 19.5% in Mar (vs. 17.6% in Feb), driven by strong sales of Mitsubishi (DRB & MBM), Ford, Naza-Kia and Mazda (BAuto).

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; 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

We upgrade the sector to Overweight from Neutral. BUY on DRB (TP: RM3.30), MBM (TP: RM4.52) and UMW (TP:RM12.55)

Source: Hong Leong Investment Bank Research- 21 Apr 2014