BAUTO : Downtick bias

Tepid sales outlook. According to the Malaysian Automotive Association, Mazda's sales in Malaysia have continued to normalize, recording 10M24 sales volume of 12.7k units (YTD: -21.1%) with a market share of 1.9%. The order backlog for Mazda has also eased significantly to approximately 1.0k units, a sharp decline compared to the group-level backlog of 4.5k units (mainly driven by Mazda) during the same period last year. In our view, the sales outlook for Mazda and Kia remains uncertain and may stay muted amid intensifying competition, particularly with the influx of new OEMs. Chinese brands, in particular, have intensified rivalry in the >RM100k price segment by offering highly competitive pricing and quality. This trend is evident given the lacklustre YTD sales performance of Proton (-3.6%) and Toyota (-7.4%), diverging from the broader industry’s modest TIV growth of 2.3% YTD.

The competitive landscape is expected to intensify further as more Chinese automakers, such as Changan Auto and Hycan, enter the Malaysian market as part of their strategy to expand sales in Southeast Asia. With TIV growth remaining sluggish and the market becoming increasingly fragmented, existing and new players are set to grapple with a more dispersed sales environment. While BAUTO has proactively secured partnerships with XPENG and DENZA to diversify its offerings, the contribution from these segments is expected to remain minimal in the near term. This is largely due to Malaysia's slow adoption of hybrid and electric vehicles, which accounted for only around 5% of total sales in 1H24.

Downtick Bias. BAUTO is currently trading near its crucial support region of RM1.99–2.00, with indicators showing downtick bias. A breakdown below this support level could further pressure the share price, potentially driving it down toward the RM1.93, RM1.89, and RM1.87 levels. Cut loss at RM2.15.

Short selling range: RM2.09-2.06-2.03

Downside targets: RM1.93-1.89-1.87

Cut loss: RM2.15

Source: Hong Leong Investment Bank Research - 3 Dec 2024