Total Industry Volume (TIV) in Jan18 was at 44.6k units, flat yoy (-0.2%) but down 18.6% mom from the seasonally stronger month of December, when the car companies run their year-end promotions. Perodua’s market share increased by 4.2ppt mom to a record high of 39.7%, driven by strong demand for its new Myvi and other models. Key beneficiaries from the stronger Myvi demand are Pecca, MBMR and UMWH. Overall, we expect automotive sales to recover gradually amidst an improvement in consumer spending and strengthening of the Malaysian Ringgit. We maintain our NEUTRAL rating on the sector.

Perodua Continues to Lead the Pack

Perodua chalked up sales of 17.7k units (-12.3% mom, +24.6% yoy), driven by strong demand for its new Perodua Myvi (launched in November 2017) and robust sales of its other models. Perodua’s market share increased to a record high of 39.7% in Jan18 (from 35.5% in Dec17). Overall, we expect Perodua to achieve higher sales in 2018, in view of the favourable response for Myvi. The new Myvi has garnered over 48k bookings to date, with c.20k units delivered by end-Jan18. Elsewhere, Proton’s market share has recovered to 10.7% (8.8% in Dec17), but is still lower yoy due to a 33.6% decline in sales (its market share was 16.1% in Jan17). We expect Proton sales to remain depressed for most of 2018, until the rebadged Boyue comes into play, likely in late 2018.

Mazda Makes a Comeback, Other Foreign Marques Falter

Mazda’s sales expanded to 1.3k units in Jan18 (+82.8% mom, +61.7% yoy), its highest since Mar16, given the strong demand for the new Mazda CX5 launched in Nov17. Honda took a breather with sales at 8.1k (-27.5% mom, -5.4% yoy), after enjoying a strong 2017. Nissan’s sales remained weak at 2.0k units (-11.3% mom, +29.1% yoy) due to the lack of product line-ups while Toyota had a bad start, as sales of 3.6k units were sharply lower on both a sequential and yoy basis (-51.2% mom, -39.0% yoy), largely due to strong year-end promotions in December which led to higher-than-expected units sold.

Maintain NEUTRAL; We Like Pecca, a Beneficiary of Higher Myvi Sales

We maintain our 2018 TIV forecast of 603.8k units (+4.7% yoy), expecting a recovery in TIV driven by: 1) improvement in consumer sentiment, 2) pent-up demand following weak sales in 2016-17, and 3) a string of new model launches in 2018. Perodua Myvi, especially the premium model, should remain the star performer for 2018. For exposure, we like Pecca (Pecca MK, BUY, RM1.38), the main leather seat supplier for Perodua. In the big cap space, our relative preference is Sime Darby (SIME MK, HOLD, RM2.80).

Source: Affin Hwang Research - 26 Feb 2018