Jun 2019 TIV was weak at 42.5k units: -34.1% YoY due to high base effect on GST free Jun 2018 month; and -30.0% MoM due to Raya May 2019 month. However, YTD TIV still registered positive growth of +2.3% YoY to 296.3k units driven mainly by strong demand for Proton (on X70) and Perodua (Aruz). We note that Proton and Toyota has been gaining market shares while Perodua has declined in recent months. For 2019 TIV forecast, we are still maintaining at 596.6k units (-0.35% YoY), as we expect a drop in 2H19 due to high base effect in 2H18 during the tax holiday period. We maintain Overweight on automotive sector with top picks on DRB (TP: RM3.03) and BAuto (TP: RM3.08).

As expected, Malaysian Automotive Association (MAA) reported a sharp drop in Jun 2019 TIV to 42.5k units (-34.1% YoY; -30.0% MoM) due to high base effect from the tax holiday period in Jun 2018 as well as strong Raya festive sales in previous month, May 2019. YTD 2019 TIV stood at 296.3k units, a growth of +2.3% YoY, driven by higher sales of Proton (+60.5% YoY) and Perodua (+4.0% YoY) on the strong demand for X70 and Aruz respectively. We maintain our 2019 TIV forecast at 596.6k units (-0.35% YoY) as we expect lower sales growth by in 2H19 due to high base effect from 2H18 on front-loaded purchases during the tax holiday period.

We maintain our Overweight rating on the sector on a stock selective approach with 4 BUY recommendations, 2 HOLDs and 1 SELL. Our top picks include: 1) DRB (TP: RM3.03) and 2) BAuto (TP: RM3.08).

Source: Hong Leong Investment Bank Research - 19 Jul 2019