Highlights

• MAA’s Jan 2015 data showed weak start to the year with TIV sales of 50.6k (+0.7% yoy; -21.7% mom) after the end of 2014 Year-End promotions, as well as increasing consumer’s uncertainties ahead of the implementation of GST by April 2014. Nevertheless, we maintained our 2015 TIV assumption at 663k units (-0.3% yoy), with higher national car sales to offset the decline in foreign marques.

Comment

• Perodua (UMW and MBM) maintained its top spot with 31.8% market share and 16.1k sales (+32.9% yoy; -15.1% mom) in Jan. Perodua is targeting 208k sales (+6.3% yoy) for 2015, driven by full year contribution of Axia and newly launched Myvi.

• Proton (DRB) sales remained weak with 8.9k units (-8.6% yoy; +2.3% mom) with 17.6% market share in Jan. Proton is facing tough competitions from other OEMs offering discounts and introducing lower priced models. Management indicated Iriz sales have started to pick up. The model is expected to be launched in Indonesia by mid- 2015.

• Disappointing the market, Toyota (UMW) sales dropped significantly to only 4.1k units (-38.2% yoy; -63.4% mom), and slipped to 3rd spot within the foreign marques despite newly launched upgraded Vios and Hilux. It is likely to fall behind its targeted 97k units for 2015, given the lack of new models and intense competitions.

• Honda climbed to top spot within the foreign segment with 6.5k units (+2.0%; -21.2% mom). Honda is targeting 85k sales (+9.5% yoy) for 2015, driven by continued strong demand for City and Jazz, as well as newly launched HRV and new CRV variant.

• Nissan (TCM) also climbed ahead of Toyota with 4.8k sales (+6.5% yoy; -12.3% mom) and 9.5% market share. It is targeting to maintain its sales at 47-48k sales in 2015, banking on newly launched Almera facelift and X-Trail.

• Ford (Sime Darby), Mitsubishi (DRB & MBM) and Mazda (BAuto) sales remained strong in Jan, while other marques reported significant decline in sales.

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 - 23 Feb 2015