Overall Nov TIV was 58.7k units, a -7.5% MoM retracement affected by supply related issue s, but a marginal +1.9% YoY growth. YTD TIV still dropped -4.2% to 441.1k units due to 2.5 months inactivity during the Phase 1 lockdown from Jun to mid-Aug. We expect TIV to remain robust in coming months as supply chain normalises and OEMs maintain productions to fulfil the strong demand, driven by the further extension of SST exemption to mid-2022, but sales are likely to weaken in 2H22. We expect TIV to reach 500-510k units in 2021, but maintain our NEUTRAL sector call with top picks on MBMR (BUY; TP: RM4.80), DRB (BUY; TP: RM2.30) and Sime Darby (BUY; TP: RM2.68).

Malaysian Automotive Association (MAA) reported MoM retracement of -7.5% to 58.7k units in Nov 2021 TIV mainly due to supply chain shortages for certain models. On a YoY basis, it was a marginal growth of +1.9%. Note that Oct-Nov 2021 data lacks BMW and Mini volume (around 1k units/month). YTD TIV still declined slightly by -4.2% YoY to 441.1k units, due to two and half months of almost nil sales during strict lockdown measures (Phase 1) from Jun to mid-Aug 2021 period. We expect TIV to achieve another high level in Dec as OEMs accelerate their production levels to meet the current order backlog and year-end sales. Nevertheless, the extension of SST exemption to 30 Jun 2022 has provided the industry some leeway to better plan their production line over a longer period as demand remains robust while supply is constrained by the on-going global microchip supply shortage in the near term. TIV for 2021 is expected to achieve 500-510k units.

Despite the expected strong TIV recovery until mid-2022, we still maintain our NEUTRAL rating on the sector, as we expect TIV to drop post SST exemption expiry alongside the current on-going global microchip supply issue. Nevertheless, we advise investors to accumulate MBMR (BUY; TP: RM4.80) and DRB (BUY; TP: RM2.30), as we expect national OEMs to triumph in the longer term with potential growth from new export markets. We also like Sime Darby (BUY; TP: RM2.68) for its strong balance sheet and leverage to the China market rebound.

Perodua (UMW and MBMR) sales dropped to 20.3k units (-12.2% MoM; -27.1% YoY) mainly due to lower production volume at 20.8k units, affected by supply chain issue during the month. YTD sales was down by -14.2% YoY to 167.3k units due to loss of production for Jun-Aug. Management indicated it would be content if Perodua able to achieve 200k units for 2021, indicating potential of over 33k units for Dec. Management has also revealed its 2023 sales target of 240k units, supported by its healthy back-log orders and exciting new models.

Proton (DRB) recorded another uptrend to 13.9k units (+8.3% MoM; +24.3% YoY), mainly driven by its X series, while its passenger models supply chain issue eased during the month. YTD sales were relatively flattish +2.3% YoY at 98.0k units. Inclusive of its export volume, Proton recorded 100.6k units (+4.3% YoY). There are still long back-log orders for its X series (up to 6 months waiting period). We expect continued growth for Proton sales as the OEM introduces attractive new models and accelerate its export program into regional markets as well as CKD program in Pakistan in coming years.

Toyota (UMW) also outperformed the market with 8.4k units in Nov (0.0% MoM; +35.4% YoY) and 62.4k units YTD (+26.2% YoY), mainly driven by its newly launched Corolla Cross model. There is indicative strong demand for its new CKD Corolla Cross (including hybrid). Management has indicated the outstanding orderbook was around 23k units. Toyota is expected to achieve 70k units sales for the year, above its target of 62k units.

Honda (DRB) sales also continued its MoM recovery trend of +18.1% to 7.6k units in Nov due to improved supply chain. However, the sales was still down by -13.6% YoY and -7.9% YTD (to 45.0k units). Management has indicated a few new model line ups to be launched in order to take advantage of the SST exemptions. New City hatchback (including hybrid) has recently been launched, while we can potentially expect other model line-ups – new Civic, new HRV (including hybrid) and new BRV – in coming months.

Nissan (TCM) sales remained weak at 1.4k units in Nov (-9.1% MoM; -18.0% YoY) and 10.6k units YTD (-16.2% YoY), mainly due to less attractive available models and less aggressive marketing efforts. Nissan is expected to maintain its strategy to avoid stiff pricing competition, while leveraging onto its core models – new Almera, Serena and Navara facelift. Upcoming new models include all new X-trail.

Mazda (BAuto) recorded 1.3k units in Nov (+16.8% MoM; -1.8% YoY) and 9.5k units YTD (-9.1% YoY), a step behind Nissan. Management remains upbeat on the sales volume for the remaining months. The OEM has recently launched the long awaited BT-50 truck (based on Isuzu D-Max). We expect launching of the anticipated attractive new models CX-30 CKD and MX-30 into 2022.

Source: Hong Leong Investment Bank Research - 22 Dec 2021