Highlights

• MAA’s Mar 2015 statistics showed jump in TIV to 67.4k units (+14.2% yoy; +33.6% mom) due to inventory clearing campaigns launched by OEMs and dealers ahead of the implementation of GST by April 2015. Despite YTD TIV improved by 4.9% yoy to 168.3k units, we maintained our flat TIV growth projection at 663k units (-0.3% yoy) for 2015 as we anticipate eroding consumer sentiments post GST implementations.

Comment

• Perodua (UMW and MBM) reported record monthly sales at 22.5k sales (+37.8% yoy; +21.0% mom), due to strong demand for Axia and MyVi. Axia has received 100k bookings by mid-Apr and delivered only 60k units by end- Mar. We expect Perodua to achieve its targeted 208k sales for FY15 after strong 1Q15 sales of 57.2k units.

• Proton (DRB) sales improved mom to 10.5k units (-14.5% yoy; +27.0% mom) in Mar, after aggressive sales campaigns launched by end Feb to regain market share. Management has guided improving demand for Iriz in coming months, after they sorted out the production line for 1.3L version. Proton is also boosting its 3S centers to improve sales and brandings.

• Honda (DRB) maintained top spot within the foreign segment with record monthly sales of 9.6k units (+94.9%; +58.6% mom), on the back of highly demanded new HRV and campaigns to boost sales for other models. Honda seeks to expand its presence in Malaysia.

• Maintaining at second spot, Toyota (UMW) sales remained weak at 7.2k units (-27.3% yoy; +44.0% mom) due to stiff competitions and new launches by competitors. We believe its newly set 90k sales target for FY15 is relatively farfetched, given 1Q15 sales of only 16.2k units.

• Followed behind was Nissan (TCM) with 5.2k units (+29.4% yoy; +42.9% mom) or 7.7% market share, likely due to aggressive sales campaigns to clear the existing inventory prior to GST implementation.

• Similarly, other marques also reported strong combined monthly sales at 12.4k units, leaded by Ford (Sime Darby), Mazda (BAuto), Isuzu (DRB) and Mitsubishi (DRB & MBM).

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 stance on the Automotive sector, with MBM (TP: RM4.28) as our Top Pick.

Source: Hong Leong Investment Bank Research - 23 Apr 2015