MCE: Time to escalate

Riding on Proton and Perodua sales. Malaysia ended 2023 with a record high TIV of 799k units, with Perodua leading with 330k units followed by Proton’s 150k units. Looking ahead to 2024, we anticipate Perodua and Proton's sales to remain strong, driven by its appealing pricing factor and exciting pipeline of new models. In line with Perodua’s launching strategy of one FMC and one facelift per year, it is poised to launch the D66B and Bezza facelift models in 1Q24 and 4Q24, respectively. Given the Bezza's status as Perodua's bestselling model and the increasing popularity of B-segment SUVs, we anticipate significant interest in these models upon launch, contributing positively to Perodua’s overall sales volume. As for Proton, its Geely-based models, equipped with advanced features and competitive pricing, are expected to excel in the market. Moreover, Proton's planned launches of the highly sought-after X50 and X70 facelift models in 2024, along with the newly launched S70 that has garnered strong interest (set to deliver in 2024), are poised to further strengthen its market position. As a tier one supplier with a proven track record in supplying components for all Perodua and Proton models, we see MCE as a proxy to the anticipated strong sales performance in the automotive sector.

More opportunities in Proton and Perodua new models. As cars are becoming increasingly sophisticated, with a heightened emphasis on enhancing both the cabin experience and technology for manufacturers, the trend will bode well for auto-part suppliers and contribute to the growth in ASP per vehicle. This is evident with each new model launch or introduction of facelifts by Proton and Perodua, as they incorporate advanced functions and technologies, which is driving the demand for additional auto parts. In anticipation of the launch of new/facelift models by Perodua and Proton in 2024, we expect this to either elevate the group’s ASP per vehicle or introduce new income streams. We also emphasise that the recently launched Proton S70 and X90 will gradually open more tenders to local tier-one players like MCE to increase its localization rate.

Higher high in the making. MCE is poised to establish a higher high formation, reinforced by a white long bullish candlestick formed yesterday and heightened trading volume. A successful breakout above RM1.68 will spur the price toward RM1.78-1.85-1.94. Cut lost at RM1.39.

Collection range: RM1.45-1.55-1.61

Upside targets: RM1.78-1.85-1.94

Cut loss: RM1.39

Source: Hong Leong Investment Bank Research - 31 Jan 2024