Highlights

• MAA’s reported continued weak TIV in Feb 2015 with 50.4k units (-1.6% yoy; -0.4% mom) on shorter working days (Chinese New Year) as well as consumer’s uncertainties (with -holding purchases ) ahead of the implementation of GST by April 2014. YTD, TIV was 101.0k units (-0.5% yoy). We maintained our 2015 TIV assumption at 663k units (-0.3% yoy), as higher national car sales (mostly from Perodua) will offset the decline in foreign marques .

Comment

• Perodua (UMW and MBM) sales remained strong in Feb at 18.6k units (+19.1% yoy; +15.7% mom) as it rushed the deliveries of Axia. Perodua is on-track to achieve its target ed 208k sales (+6.3% yoy) for 2015, driven by full year contribution of Axia and facelifted Myvi.

• Proton (DRB) sales stayed weak with 8.3k units (- 22.7% yoy; -7.3% mom) or 16.4% market share in Feb. It has launched an aggressive sales campaigns since end Feb in order to boost sales and clear the inventory ahead of GST implementation. It has also embarked on its international expansion plan into China and Bangladesh.

• Honda (DRB) maintained top spot within the foreign segment with 6.0k units (+39.9%; -7.4% mom), on the back of highly demanded new HRV and new variant CRV. Honda is targeting 85k sales (+9.5% yoy) for 2015, banking on attractive models line up.

• Despite recovery to second spot (overtook Nissan), Toyota (UMW) s ales remained relatively weak at 5.0k units ( -35.4% yoy; +22.8% mom). Toyota has launched an aggressive sales campaign in Feb to boost sales . T he upcoming Camry Hybrid (priced below RM200k) is aimed at 7k sales in FY15.

• Nissan (TCM) slipped back to third spot with 3.6k sales (+4.7% yoy; -24.6% mom). It is targeting to maintain its sales at 47-48k sales in 2015, banking on newly launched Almera facelift and X -Trail.

• The combined sales of other marques also declined to 8.9k units (-5.7% yoy; -13.2% mom) on shorter working days. The segment was leaded by Ford (Sime Darby ), Mitsubishi (DRB & MBM) 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;
• I mplementation 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 stance on the Automotive sector, with MBM (TP: RM4.28) as our Top Pick

Source: Hong Leong Investment Bank Research - 25 Mar 2015