Highlights

• MAA reported strong Dec TIV at 64.7k units (+6.9% yoy; +16.9% mom), boosted by Perodua Axia as well as heavy discounts among the OEMs (especially foreign marques). Despite 2014 TIV fall behind market expectation, 666.5k units (+1.6% yoy) was still another new record high. We expect 2015 TIV to stay relatively flat at 663k units (-0.5% yoy), mainly due to consumer uncertainties towards GST implementation and slower economy growth.

Comment

• Perodua (UMW and MBM) remained at the top with 29.3% market share and 195.6k sales (-0.3% yoy) vs. targeted 195k sales in 2014. Sales rebounded in 4Q14 after successful launch of Axia in mid-Sept. Perodua is targeting 208k sales (+6.3% yoy) in 2015, betting on the highly demanded Axia and newly launched MyVi facelift.

• Conversely, Proton (DRB) market share fell to 17.4% with 115.8k units (-16.6% yoy), after a weak 2H14 performance, due to foreign OEMs aggressive promotions and Perodua successful Axia launch. Proton has not seen meaningful sales rebound from newly launched Iriz (end Sept).

• Toyota (UMW) remained top among foreign marques with 102.0k sales (+11.9% yoy), attributed to new Vios, Altis and MPV variants. It has recently introduced upgraded Vios and Hilux, in an attempt to defend market share from close competitors Honda City, Nissan Almera and Mazda 2.

• Honda (DRB) achieved strong growth of +50.3% yoy to 77.5k sales, beating its targeted 76k units in 2014, due to successful launch of City and Jazz. Both models have recently been categorized as Energy Efficient Vehicle (similar to Perodua Axia). Newly launched HRV (mini SUV) is expected to sustain Honda sales in 2015.

• Nissan (TCM) sales declined 12.8% yoy to 46.4k units due to heavy competitions from Toyota and Honda. It has introduced Almera facelift recently to boost sales in 2015.

• Other OEMs reported combined stronger sales at 129.2k units (+3.3% yoy) in 2014, driven by Mitsubishi (DRB & MBM), Ford (Sime Darby), Mercedes (C&C) 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

• Neutral

Positives

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

Negatives

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

Valuation

• We maintained Neutral outlook on the Automotive sector, with MBM (TP: RM4.00) as our Top Pick.

Source: Hong Leong Investment Bank Research - 22 Jan 2015