March 2018 registered sales of 50.0k units (-6.9% YoY; +23.2% MoM) and YTD sales of 135.1k units (-4.0% YoY). We maintain our 2018 TIV assumption at 588.1k units (+2.0% YoY). Perodua (UMW and MBM), Honda (DRB) and Mazda (BAuto) continued to record strong sales at 20.7k units, 9.0k units and 1.1k units respectively. On the other hand, Proton (DRB), Toyota (UMW), and Nissan (TCM) sales remained disappointing. We maintain NEUTRAL and our top picks are PECCA (BUY; TP: RM1.72) and DRB (BUY; TP: RM2.88).

The Malaysian Automotive Association (MAA) reported that March 2018 vehicle sales dropped by 6.9% YoY but increased +23.2% MoM to 50.0k units. This was mostly attributed to longer working month in March vs Feb. YTD, TIV declined by 4.0% to 135.1k units accounting for 22.9% of our 2018 TIV forecast. We maintain our 2018 TIV assumption at 588.1k units (+2.0% YoY) on expectation of high demand for new model launches, uptrend of consumer sentiment and normalization impact of bank tighter lending guidelines.

We Maintain NEUTRAL on the Sector. The Sector Is Expected to be Supported by Recovering TIV Growth in 2018, With Improvement in Consumer Sentiment and Normalizing Impact From Tighten Bank Guideline. While Stronger RM Will Improve the Industry Margins, the Higher Basic Material Costs May Partially Offset the Benefits of RM Appreciation.

Our Top Picks Are PECCA (BUY; TP: RM1.72) and DRB (BUY; TP: RM2.88).

Perodua (UMW and MBM) reported higher sales at 20.7k units (+6.6 YoY; +21.0% MoM) with 41.5% market share in March. YTD, Perodua registered 55.6k sales (+10.6% YoY) led by strong demand for its new Myvi model as well as the current Axia model. Perodua is on track to achieve 209k sales target in 2018, supported by the new Myvi sales and upcoming new SUV model and Alza facelift.

Proton (DRB) sales continued to disappoint at 4.2k units (-30.8% YoY; +9.0% MoM) in March 2018. YTD sales was 12.8k units (-33.7% YoY). Proton sales are expected to remain lacklustre until the launch of Boyue by end 2018. We are optimistic of a successful turnaround at Proton with its recent joint venture between Proton and Geely. Proton will benefit from Geely’s support in terms of platform, skillset and narrowing technology gap.

Honda (DRB) registered sales at 9.0k units (-17.7% YoY; +29.3% MoM). YTD, Honda sales dropped 11.4% YoY to 24.2k units. Despite of the lower YoY sales, Honda remains the market leader among non-national carmaker with 18.1% market share in March. Honda is in line to achieve its 2018 sales target of 109k, boosted by upcoming new launch of facelift HRV model.

Toyota (UMW) reported 5.2k sales (-16.3% YoY; +30.2% MoM). YTD, Toyota sales dropped to 12.7k units (-23.1% YoY) which we believe will make its target of more than 70k units in 2018 an uphill task. In 2018, Toyota’s new launches include new CH-R, facelift Vellfire and Alphard, upgraded Vios and new Camry.

Nissan (TCM) sales improved by +53.6% MoM to 2.0k units but dropped -23.8% YoY. YTD sales was 5.3k units (-11.3% YoY). Nissan is expected to launch Nissan Kick, new Serena hybrid and Leaf EV in 2018. We believe with the introduction of these new models may improve Nissan sales.

Others. We note Mazda (BAuto) recorded impressive sales growth of 37.5% MoM and 10.9% YoY in March and 65.2% YTD.

Source: Hong Leong Investment Bank Research - 20 Apr 2018