Highlights

• As expected, MAA’s April 2015 statistics showed disappointments with only 45.2k units (-23.1% yoy; -32.9% mom) after a strong March sales (consumer took advantages of the heavy discounting and incentives offered by OEMs and dealers) prior to the implementation of GST in April. YTD, TIV declined by 2.4% yoy to 213.5k units. We maintained our flat TIV growth projection at 663k units for 2015 as we expect lower base effect and normalizing consumer sentiment by year end.

Comment

• Perodua (UMW and MBM) maintained its top spot at 17.6k units (+0.3% yoy; -21.8% mom) with 38.9% market share in April. With the strong demand of Axia and MyVi, it is on target to achieve the targeted 208.0k sales for FY15.

• Proton (DRB) sales disappointed the market with only 5.0k units (-50.7% yoy; -52.8% mom) and 11.0% market share (slipped behind Honda and Toyota) in April. The national marque continued to restructure its dealership networks in order to improve customer experiences for sales and services.

• Honda (DRB) sales remained healthy with 6.6k units (-5.1%; -31.5% mom), climbed to second spot with market share of 14.5% in April, on the back of highly demanded new HRV and campaigns to boost sales for other models.

• Toyota (UMW) sales remained lackluster in April at 6.0k units (-34.2% yoy; -16.1% mom) due to stiff competitions and weakened consumer sentiments. It has recently launched an aggressive campaign (offering rebates up to RM6k) in a bid to boost sales volume.

• Similarly, Nissan (TCM) reported lower sales at 3.1k units (-10.2% yoy; -39.4% mom) or 6.9% market share. Given the sustained strong sales of X-Trail in April, we believe its passenger car segment has been facing stiff competitions.

• With the exception on luxury marques, most of the other car marques faced similar disappointing sales, which has dragged the overall combined sales to only 6.9k units (-40.2% yoy; -44.1% mom) in April. The luxury car segment increased by 2.8% yoy at 1,817 units, leaded by Mercedes (DRB & C&C).

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 - 21 May 2015