MAA reported a strong monthly TIV for Dec at 68.8k units (+25.5% YoY; +19.5% MoM), driven by SST exemptions and exciting new model launches (TIV would have recorded a new high at 70k units if we include the lack of data from Mercedes and Scania). However, TIV still dropped -14.4% YoY to 529.4k units for CY20, affected by MCO1.0 during 1H20. We maintain our CY21 TIV expectation at 585.4k units, a growth of +10.6% YoY, driven by the extended SST exemption measures to 30 Jun 2021 and the various new exciting models (launched late 2020 and early 2021). We reaffirm our OVERWEIGHT call on the automotive sector with a selective stock approach in view of the recovery in 2021. Top picks are DRB (BUY; TP: RM2.77), MBMR (BUY; TP: RM5.70) and Sime Darby (BUY; TP: RM2.68).

Malaysian Automotive Association (MAA) continued to report strong TIV for Dec 2020 at 68.8k units (+25.5 YoY; +19.5% MoM), driven mainly by accelerated deliveries and exciting new models launched during year end. Given the lack of data from Mercedes and Scania, TIV may achieve a new monthly high at 70k units, breaking previous record of 69.4k units in Dec 2015. However, TIV was still down by -14.4% for CY20 to 529.4k units (there are some data still not yet provided by Mercedes and Scania, which we estimate to amount to c.6k units), mainly affected by MCO1.0 and deteriorated consumer sentiment during 1H20. Nevertheless, the overall TIV outperformed our expectations of 513.5k units. For CY21, we maintain our TIV expectation of 585.4k units, a growth of +10.6% YoY, driven by the extension of SST exemptions (car prices have reduced 2-7%; paultan.org) to 30 Jun 2021 and the various attractive new model launches by major OEMs i.e. Proton, Perodua, Honda, Toyota and Nissan. We expect that national marques Proton and Perodua will continue to outshine non-nationals.

With the broader recovery in demand post-MCO1.0 (due to SST exemptions), we maintain our OVERWEIGHT rating on the sector with a stock selective approach with 4 BUY and 3 HOLD recommendations. Our top picks include DRB (BUY; TP: RM2.77) and MBMR (BUY; TP: RM5.70), both leveraging onto national marques as DRB benefits from Proton’s turnaround plan and MBMR benefits from strong cash flow and dividend yield. We also like Sime Darby (BUY; TP: RM2.68) for its strong balance sheet and potential leverage to the China market rebound.

Note that no data was provided for the following:

1. Monthly sales for Mercedes (passenger cars) from April to December 2020; 
2. Monthly sales for Scania for October to December 2020.

Perodua (UMW and MBMR) continued to record strong monthly sales in Dec at 25.2k units (+37.2% YoY; +8.9% MoM), and achieved a new record quarterly sales at 75.2k units. However, the overall sales for CY21 still dropped -8.4% YoY (outperformed industry of -14.4%), due to MCO1.0 in 1H20. Perodua continued to maintain its top position with a new record 41.6% market share in CY20. Perodua is expected to launch the new SUV D55L model (Kembara) in early-2021, along with Myvi facelift model in later part of the year.

Proton (DRB) recorded yet another strong sales month in Dec at 12.8k units (+14.9% YoY; +14.1% MoM), despite being affected by supply constraints during the month. For CY20, the OEM outperformed the industry with a growth of +8.3% YoY to 108.5k units, staging further growth in market share at 20.5% (last achieved in 2013) since the restructuring exercise with Geely in 2017. Proton is expected to maintain its growth trajectory in CY21, given the high backlog orders for the newly launched X50 SUV model in Oct 2020 as well as upcoming introduction of new Geely based sedan model, Iriz facelift model and Persona facelift model in 2021.

Honda (DRB) recorded a strong sales in Dec at 11.6k units (+60.0% YoY; +31.7% MoM) mainly driven by the strong demand for newly launched all new City model. With the strong Dec performance, Honda reclaimed its top position (from Toyota) for CY20 with total sales of 60.5k units (-29.2% YoY, affected by MCO in 1H20) and market share of 11.4%. For CY21, Honda will continue to leverage onto the strong demand of the newly launched City model as well as upcoming introduction of new City Hybrid model and new Jazz/City Hatchback model in 2021.

Toyota (UMW) also registered strong sales volume in Dec with 9.1k units (+12.6% YoY; +45.9% MoM). For CY20, Toyota sales dropped -15.3% to 58.5k units with 11.1% market share. In view of the threat of attractive new launches by close competitors, Toyota had also launched Vios facelift and Yaris facelift in Dec 2020 with strong interest indicated. Toyota is also expected to launch an attractive new SUV entry level model in 2021.

Nissan (TCM) sales remained disappointing in Dec, at only 1.8k units (-14.3% YoY; +7.0% MoM), despite the launch of all new Almera model in Nov, likely due to competition from Proton X50, Honda City, Toyota Vios and Toyota Yaris (similar launching time at similar pricing range). For CY20, Nissan sales dropped -31.9% YoY to 14.5k units, affected by MCO1.0 and its lack of attractive model launches during the period. Nissan is expected to maintain its strategy to avoid stiff pricing competition, while leveraging onto its core models: new Almera, Serena and upcoming Navara facelift.

Mazda (BAuto) continued to record higher year-end sales at 1.7k units (+87.0% YoY; +28.5% MoM), driven by consumers taking advantage of the SST exemptions. For CY20, sales were up by +4.2% to 12.1k units, outperformed the industry. Upcoming attractive models for CY21 include CX-30 CKD, MX-30 and BT-50.

BMW (Sime) sustained its sales volume in Dec at 1.0k units (+122.6% YoY; +3.1% MoM), as the high demand was constrained by limitation of inventory. For CY20, sales were down by -5.0% to 8.8k units, affected by MCO in 1H20. Upcoming attractive model for CY21 include facelifted 5 series and new iX.

Source: Hong Leong Investment Bank Research - 27 Jan 2021