Feb 2021 TIV rebounded +30.3% MoM and +2.8% YoY to 42.8k units, as OEMs ramped up productions to replenish inventory during the month. However, YTD TIV still dropped -11.2% YoY due to lower inventory available at the start of the year (post accelerated deliveries in Dec 2020). Note that Jan 2021 statistics lacks data from Mercedes, BMW, Mini, Peugeot and Scania. We maintain our 2021 TIV expectation at 585.4k units (+10.6% YoY), as we expect continued sales growth till Jun 2021, 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 (national marque bias) in view of the recovery in 2021. Top picks are MBMR (BUY; TP: RM5.70), DRB (BUY; TP: RM2.77) and Sime Darby (BUY; TP: RM2.68).

Malaysian Automotive Association (MAA) reported a strong +30.3% MoM rebound in Feb to 42.8k units, as the industry replenished inventory during the month (post accelerated deliveries in Dec 2020, resulting lower inventory for Jan 2021). There was slight growth of +2.8% YoY. However, TIV dropped by -11.2% YTD, mainly due to depleted inventory level in Jan 2021. At current juncture, we are maintaining our TIV expectation of 585.4k units for 2021, a growth of +10.6% YoY, as we expect continued sales growth towards Jun 2021 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 as well as the commencement of vaccination program in place. We expect that national marques Proton and Perodua will continue to outperform non-nationals.

With the broader recovery in demand as consumer sentiment improves with the progress of vaccination program and transition to CMCO/RMCO, we maintain our progress of vaccination program and transition to CMCO/RMCO, we maintain our OVERWEIGHT rating on the sector with a stock selective approach with 4 BUY and 3 HOLD recommendations. Our top picks include MBMR (BUY; TP: RM5.70), DRB (BUY; TP: RM2.77) and Sime Darby (BUY; TP: RM2.68). MBMR continues to leverage onto the strong performance of Perodua and benefits from strong cash flow and dividend yield, while DRB leverages onto Proton’s strong growth. We also like Sime Darby for its strong balance sheet and exposure to the China market rebound.

Note that no data was provided for the following: 1) Mercedes Malaysia has ceased to provide data. 2) Monthly sales for BMW, Mini and Peugeot for Jan-Feb 2021 3) Monthly sales for Scania for Oct 2020 to Feb 2021.

Perodua (UMW and MBMR) sales declined to 16.6k units in Feb (-12.2% YoY; -1.8% MoM) and 33.5k units YTD (-8.0% YoY), mainly dragged by depleted inventory at the start of the year and the supply disruption of chips, which is expected to last till March. Perodua has received over 6k units order for new SUV Ativa model (priced at RM62.5-73.4k) within 2 weeks of official launching (end Feb). We also expect the Myvi facelift model in later part of the year. Management has set a new sales target of 240k units for 2021, indicating a targeted growth of 9% YoY.

Proton (DRB) recorded a strong rebound sales rebound in Feb at 11.7k units (+17.2% YoY; +95.9% MoM) as the national OEM ramped up productions to meet the high sales demand. Nevertheless, YTD sales still dropped -4.5% YoY to 17.7k units, due to low inventory as well as supply constraints in Jan 2021. CEO of Proton Edar has indicated a further sales growth is expected in 2021 (after recording a growth in 2020 despite Malaysia being affected by Covid-19 pandemic), given the high backlog orders for X50 SUV model and further supported by the upcoming introduction of new Geely based sedan model and facelift models – Iris and Persona.

Honda (DRB) sales recovered to 4.4k units in Feb (+149.5% YoY; +201.2% MoM) as the OEM ramped up production during the month. YTD sales was 5.8k units, a drop of -25.2% YoY due to low inventory at the start of the year, post accelerated deliveries for Dec 2020. Honda has recently launched City HEV model at RM106k, complementing its existing City model range. Honda will continue to leverage onto the strong demand of the new City model as well as upcoming anticipated new Jazz/City Hatchback model in 2021.

Toyota (UMW) registered 5.0k units in Feb (+26.0% YoY; +31.3% YoY), as the OEM normalised its production and inventory level during the month. YTD sales also improved by +16.0% YoY to 8.9k units due low base effect and stronger demand with SST exemptions boost. Worth-noting that Toyota has again overtook Honda for the start of the year. Toyota will continue to leverage onto its Vios facelift and Yaris facelift (both launched end 2020) as well as upcoming new SUV Corolla Cross.

Nissan (TCM) has again disappointed in Feb 2021, at only 0.7k units (-33.9% YoY; -9.1% MoM) with YTD sales at 1.5k units (-39.2% YoY), despite the launch of all new Almera model in Nov 2020. 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) recorded +57.6% MoM rebound to 0.7k units, as Mazda ramped up production during the month, but dropped 35.9% YoY on low inventory level. Similarly, YTD sales dropped -47.6% YoY due to low inventory during the start of the year. Upcoming attractive models for 2021 include CX-30 CKD, MX-30 and BT-50.

Source: Hong Leong Investment Bank Research - 25 Mar 2021