Highlights

As expected, MAA reported new record TIV month in July with 68.4k units (+15.1% yoy; 27.6% mom) on pre-Raya demand, as well as eased consumer anticipation of reduce car price (governments downplayed consumer expectation). However, TIV is expected to drop in Aug on shorter working days (Raya month). YTD, TIV increased by +5.87% yoy (driven mainly by Perodua, Honda and Nissan). Passenger car segment increased by 5.99% yoy, while commercial car segment increased by 5.01% yoy. We maintained our FY13 expectations of +3.5% yoy.

Comment

National cars reported record month sales with Perodua (UMW and MBMR) sales at 19.2k (+12.6% yoy; +21.5% mom) and Proton at 16.6k (+29.6% yoy; +21.5% mom), thanks to the launched value cars i.e. Perodua S-series and Proton Saga SV. Saga SV received more than 20k orders since mid-June, and expected to drive up Proton sales in 2H13, together with newly launched Suprima S.

Toyota (UMW) sales volume retained at 9.7k units (-1.3% yoy; +3.8% mom), and we expect its sales to disappoint the market due to stiff competition from Honda and Nissan, as well as late introduction of new Vios. YTD, its market share has dropped to 14.0% vs. FY12’s 16.8%.

Nissan (TCM) sales improved to 5.2k units (+61.8% yoy; +31.6% mom) on high demand for Almera. Nissan expect sales momentum to continue in 2H13 from Almera, Serena Hybrid and in-coming Livina. YTD, Nissan market share has improved to 8.2% vs. FY12’s 5.8% on its competitively priced Almera.

Honda (DRB) reported historical high monthly sales at 6.0k (+19.7% yoy; +86.8% mom), thanks to newly launched competitively priced Jazz CKD (RM75k) and CRV 2.4l variant (RM170k). Honda’s reclaimed its second position in foreign segment with 8.8% market share in July vs. 1H12’s 7.0% only.

Other marques reported combined sales of 11.7k units (+1.5% yoy; +11.1% yoy), but market share declined to 17.1% level (historically ~19%), due to marked improvements by Perodua, Proton, Nissan and Honda.

Risks

• Slowdown in the Malaysian economy.
• Global automotive supply chain disruption.
• Sudden jump in fuel prices and interest rate.

Rating

Overweight

Positives –

• Potential export to regional market, i.e. Malaysia as a hub.
• Implementation of Energy Efficient Policy.
• Appreciation of RM.

Negatives –

• Implementation of responsible lending guideline
• Instability of global automotive supply chain.

Valuation

BUY: DRB (TP: RM3.36), MBM (TP: RM4.70) and TCM (RM7.30).

Source: Hong Leong Investment Bank Research- 26 Aug 2013