Highlights

• September TIV recorded further drop of 4.4% MoM, reflecting the ongoing negative consumer sentiment post GST implementation and drops in commodity prices. However, there is a growth of 7.0% yoy due to low base effect (consumer withheld purchases prior to new launches of Perodua Axia and Proton Iriz). YTD TIV dropped 1.4% yoy to 485.4k units, on the back of weakened consumer sentiment on GST implementation, drops in commodity prices and RM depreciation. We maintained our 2015 TIV expectation of 650k or -2.5% yoy.

Comment

• Perodua (UMW and MBM) maintained its leading position with 14.9k sales (+19.5% yoy; -12.7% mom) and 28.3% market share in Sept. YTD, it registered 157.5k sales (+12.3% yoy), on track for 208k target in 2015, given its recent campaign to boost MyVi and Alza sales.

• Proton (DRB) sales remained weak at 8.7k units (+8.3% yoy; -3.4% mom). YTD, it recorded 78.8k sales (-13.1% yoy), affected by aggressive competition and obsolete models. Proton is banking on turnaround in 2016 with planned 3 new models launch.

• Toyota (UMW) achieved 7.9k sales (+5.9% yoy, -2.6% mom), retaining its top position within foreign segment, mainly due to ongoing heavy promotional campaigns. Toyota is likely to remain disappointing towards year end.

• Followed by Honda (DRB), which registered 7.5k sales (+21.9% yoy; +9.7% mom). YTD, Honda is still ahead of Toyota, with 13.7% market share (vs. Toyota 12.8%) mainly due to new models contribution and competitive pricings.

• Nissan (TCM) sales sustained at 3.7k units (+4.8% yoy; -2.7% mom), with ongoing aggressive campaigns.

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

• Underweight

Positives

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

Negatives

• ;
• Tightening of bank lending rules;
• Competitive pressure on margins; and
• Depreciation of RM.

Valuation

• We maintained underweight stance on the Automotive sector, with MBM (TP: RM3.45) as our Top Pick.

Source: Hong Leong Investment Bank Research - 21 Oct 2015