Jul 2019 TIV was at 50.9k units: -25.7% YoY due to high base effect on GST exemption Jul 2018 month; and +19.6% MoM due to long holiday Raya Jun 2019 month. YTD TIV dropped by 3.1% YoY to 347.2k units mainly due to high base effect of GST exemption period. We expect continued strong demand for Proton, Perodua and Toyota new models to sustain TIV for remaining months of the year. For 2019 TIV forecast, we are still maintaining at 596.6k units (-0.35% YoY), as we expect the continued drop in upcoming Aug month to be offset by positive growth in Sep-Dec 2019. We maintain OVERWEIGHT on automotive sector with top picks on DRB (TP: RM4.15) and BAuto (TP: RM3.08).

Malaysian Automotive Association (MAA) reported Jul 2019 TIV at 50.9k units, a rebound of +19.6% MoM due to low base effect of long holiday Raya month in Jun 2019. On the other hand, the TIV saw a drop of 25.7% YoY and 3.1% YTD due high base effect of GST exemption period in Jun-Aug 2018. We maintain our 2019 TIV forecast at 596.6k units (-0.35% YoY) as we expect sustainable monthly sales volume of 50k units for the remaining 2H19, supported by continued strong demand for new model launches by Proton, Perodua and Toyota. We anticipate continued YoY drop in upcoming Aug 2019, before returning to positive growths in Sep-Dec 2019.

We maintain our OVERWEIGHT rating on the sector on a stock selective approach with 5 BUY recommendations and 2 HOLD recommendations. Our top picks include: 1) DRB (TP: RM4.15) and 2) BAuto (TP: RM3.08).

Perodua (UMW and MBMR) sales recovered MoM by 24.2% to 19.9k units in Jul, but dropped YoY by 16.4% due to 2018 high base effect of GST exemption policy. Nevertheless, YTD sales was still strong at 141.7k units, a growth of +0.6% YoY, outperformed the market of -3.1% YoY, driven mainly by new Aruz model launch since Jan 2019. Management is expecting a slower 2H19, with lower sales of 113.2k units in 2H19 (vs. 121.8k units in 1H19), likely due to competitive pressure from new model launches by other OEMS (e.g. Proton and Toyota). Nevertheless, Perodua has just released its brochure on upcoming facelift Axia model with upgraded safety features, expected to be launched in coming month.

Proton (DRB) continued to surprise the market as the only OEM with positive growth of +6.0% YoY to 8.6k units in Jul despite strong sales during GST exemption Jul 2018. Similarly, Proton also registered a positive +12.8% MoM. YTD sales were at 52.1k units, a significant growth of +48.0% YoY (outperformed market of -3.1% YoY), reclaiming second spot in the domestic market with 15.0% market share. We expect Proton to continue its sales momentum, supported by the recent launches of facelift models (Persona, Iriz, Exora and Saga) and upcoming new line up launches i.e. X70 CKD in 2H19 and X50 in 2020. Management indicated that booking for Saga facelift was encouraging at 500 units per day, within the first week of launch.

Honda (DRB) sales recovered +39.9% MoM to 7.5k units in Jul, but dropped 41.2% YoY. YTD sales declined to 51.8k units (-19.3% YoY), with market share lagged slightly behind Proton at 14.9%. Honda sales were affected by new launches by major competitors namely Toyota, Perodua and Proton. Honda is currently behind its target sales of 95k units for 2019. Upcoming new models for the year include Accord and potentially BR-V facelift (recently launched in Indonesia).

Toyota (UMW) sales also recovered +8.4% MoM to 5.7k units in Jul, but dropped 38.0% YoY. YTD sales declined 9.6% to 36.9k units, dragged by production start-up at new Toyota Bukit Raja Plant at the start of the year. Toyota is expected to gain more foothold in 2H19 with continued strong demand for new Vios and Yaris model. However, Toyota is currently behind its sales target of 75k units for 2019.

Nissan (TCM) continued to record weak Jul sales at 2.0k units (-39.4% YoY; +33.0% MoM) and YTD sales at 12.4k units (-18.7% YoY). Nissan will continue to introduce new variant of existing models with stable margin and strategize not to compete aggressively with other competitors. Management has indicated new attractive models line up for 2020, including the all new Kicks, Almera and Sylphy.

Mazda (BAuto) sales in Jul improved +22.5% to MoM to 1.0k units, but dropped 16.5% YoY. YTD sales declined marginally to 7.5k units (-5.1% YoY). Mazda has just launched the new Mazda 3 (CBU) with a price tag of RM140-160k and is expecting few new launches including new CX-8 (Aug), CX-30 (2H19) and CX-5 facelift (2H19).

Others. BMW (Sime) Jul sales was 0.9k units (-26.8% YoY; -1.1% MoM), bringing YTD sales to 5.9k units (-9.5% YoY). Mercedes (DRB & C&C) posted Jul sales at 0.7k units (-54.1% YoY; +9.0% MoM), while YTD sales were 6.4k units (-25.3% YoY).

Source: Hong Leong Investment Bank Research - 22 Aug 2019