March 2018 Total Industry Volume (TIV) fell by 6.9% yoy to 50.0k units on softer demand, as consumers adopted a “wait-and-see” approach, ahead of Malaysia’s 14th General Election in May 2018. However, TIV was 23% higher sequentially, attributable to a short working month in February and rush deliveres by OEMs who have March financial year-ends. Cumulatively, 3M18 TIV was 4.0% lower yoy at 135.1k units. Perodua continued to lead the pack with a dominant market share of 41.1% in Mar 18 (35.7% Mar 17). We believe this trend should continue to benefit Pecca, MBMR and UMWH.

Perodua Continues to Deliver While Proton Suffers

Perodua registered higher sales of 20.7k units in Mar18 (+21.0% mom, +6.6% yoy), maintaining its dominant position with a market share of 41.1%. Cumulatively, Perodua’s 3M18 sales grew by 10.5% yoy to 55.6k units, accounting for 41.1% of total TIV. At last count, Perodua had more than 60k orders, with c.28k units delivered to date. Elsewhere, Proton’s sales weakness remain pronounced with Mar18 sales at 4.2k units (+9.0% mom, -30.8% yoy) and a market share of 8.4%. We expect Proton sales to remain depressed for most of 2018, until the launch of rebadged Geely Boyue in late-2018.

Foreign Marques Feeling Slightly Shaky, Except for Mazda

Mazda was the top performer in the non-national front, with 1.1k units sold in Mar18 (+10.9% mom, +37.5% yoy) thanks to strong demand for the new CX-5 launched in November 2017. On the contrary, Japan’s Big 3 reported weaker sales in Mar18, partly due to lack of new model launches. Nissan had the steepest decline in Mar18 sales (-23.8% yoy to 2.0k), followed by Honda (9.0k units, -17.7% yoy) and Toyota (5.2k units, -16.0% yoy).

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: RM1.52), the main leather seat supplier for Perodua. In the big cap space, our relative preference is Sime Darby (SIME MK, HOLD: RM3.05).

Source: Affin Hwang Research - 20 Apr 2018