MAA reported a strong monthly TIV for Dec at 65.2k units (-5.3% YoY; +8.6% MoM), driven by accelerated deliveries during year end. However, TIV still dropped -3.9% YoY to 508.9k units for CY21, affected by longer strict lockdown measures and supply chain disruptions during the year. We maintain our CY22 TIV expectation at 600.0k units, a growth of +17.9% YoY, driven by the extended SST exemption measures to 30 Jun 2022 and the various new exciting models. We maintained our NEUTRAL call on the automotive sector with BUY recommendations on DRB (BUY; TP: RM2.30), MBMR (BUY; TP: RM4.80) and Sime Darby (BUY; TP: RM2.68).

Malaysian Automotive Association (MAA) continued to report strong TIV for Dec 2021 at 65.2k units. It was a growth of +8.6% MoM, due to accelerated deliveries during year end. However, it was a drop of -5.3% YoY due to high base effect. On full year CY21 basis, TIV was still down by -3.9% YoY to 508.9k units, mainly affected by longer lockdown period and supply disruption during the year. For CY22, we maintain our TIV expectation of 600.0k units, a growth of +17.9% YoY, driven by the extension of SST exemptions (car prices have reduced 2-7%; paultan.org) to 30 Jun 2022 and the various attractive new model launches by major OEMs i.e. Proton, Perodua, Toyota and Honda.

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 ongoing global supply chain 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) continued to record strong monthly sales in Dec at 23.0k units (-8.5% YoY; +13.5% MoM). The overall sales for CY21 dropped -13.6% YoY to 190.3k units, severely affected by strict lockdowns and supply chain issue. Perodua continued to maintain its overall leadership position with a lower 37.4% market share in CY21. Management has previously provided its preliminary CY22 sales target of 240k units (to be reviewed), supported by its healthy back-log orders and exciting new models i.e. Myvi facelift and upcoming Alza replacement model.

Proton (DRB) recorded yet another strong sales month in Dec at 13.7k units (+7.3% YoY; -1.5% MoM), driven by its X series. For CY21, the OEM outperformed the industry with a marginal growth of +2.9% YoY to 111.7k units, staging further growth in market share to 21.9%. Inclusive of its export volume, Proton recorded 114.7k units, a growth of +4.5% YoY. Proton is expected to maintain its growth trajectory in CY22, given the high backlog orders (especially for X series) as well as its acceleration of export program during the year. Proton has also secured a new distributorship agreement with smart to import and distribute smart EVs in Malaysia and Thailand market.

Toyota (UMW) also registered strong sales volume in Dec with 9.2k units (+1.4% YoY; +9.3% MoM). For CY21, Toyota sales outperformed the market with +22.4% to 71.6k units, regained its top spot within foreign marques with 14.1% market share. The growth was mainly driven by stronger demand for Vios, Hilux and newly introduced Corolla Cross during the year. Toyota has indicated a strong orderbook for its recently launched new Corolla Cross Hybrid model.

Honda (DRB) recorded Dec sales at 8.0k units, sustained +5.1% MoM on improving supply chain, but dropped -31.0% YoY due to high base effect. For CY21, Honda sales deteriorated -12.3% to 53.0k units with 10.4% market share, mainly dragged by supply chain issue, strict lockdown measures and late introduction of new/replacement models. For CY22, Honda will continue to leverage onto the strong demand of City, newly launched City Hatchback and Civic, and upcoming new HR-V and BR-V.

Nissan (TCM) sales remained disappointing in Dec, at only 1.7k units (-7.5% YoY; +20.8% MoM), likely due to competition from Proton X50, Honda City, Toyota Vios and Toyota Yaris (similar launching time at similar pricing range). For CY21, Nissan sales deteriorated further -15.1% YoY to 12.3k units, all time low. Nissan sales are expected to remain lacklustre in CY22, given its lack of new model launches and stiff market competitions.

Mazda (BAuto) recorded lower Dec sales at 1.2k units (-31.3% YoY; -10.1% MoM), mainly due to lack of inventory. For CY21, sales dropped by -12.2% to 10.7k units, affected by strict lockdowns and inventory issue. 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 CY22.

BMW (Sime) finished the year on a high note after recording Dec sales at 1.7k units (+62.4% YoY; +50.8% MoM) due to recovery of inventory and supply chain. Nevertheless, CY21 sales were still down by -4.5% YoY to 8.4k units. BMW has recently introduced its EV range – iX and iX3, taking advantage of the tax incentives for EVs. BMW is expected to introduce i4 in CY22.

Source: Hong Leong Investment Bank Research - 24 Jan 2022