9M19: A plain ride

Sep19 Total Industry Volume (TIV) of 44.7k units was a sharp yoy improvement (+43% yoy) due to a low base effect in Sep18 when sales were affected by a steep correction post the tax holiday boost. Sequentially, Sep19 TIV was lower by 13% mom, affected by weaker sales across the board (ex. BMW/Mini). All in, the 9M19 TIV was down by 3% yoy to 443k units. Given the lacklustre performance of the non-nationals, we lower our 2019 TIV forecast to 596k units (previous forecast: 603k units); this is in line with our recent sales volume revisions for UMW and BAUTO. Maintain NEUTRAL.

Continued strong demand for national carmakers

Proton chalked up sales volume of 8.9k units in Sep19 (+92% yoy, -5% mom), supported by the popular demand for its facelifted model lineup, particularly the 2019 Saga. Notably, Proton’s Sep19 market share climbed to a 66-month high of 19.4% (Mar14 market share: 20.9%). In addition, Proton’s cumulative 9M19 sales volume of 70k units (+42% yoy) has already exceeded the total 2018 sales volume of 64.7k units. The renewed interest in Proton models gives us the comfort that it could achieve its 2019 sales target of 100k units. Elsewhere, Perodua sold 17.0k cars in Sep19 (+79% yoy, -15% mom), maintaining its dominant position with 9M19 market share of 40.4% (9M18: 37%). With 9M19 sales volume of 178.8k units (+6% yoy), we believe that Perodua is on track to hit its 2019 sales target of 235k units.

Lacklustre sales for non-nationals in 9M19

Non-national carmaker’s 9M19 sales volume declined by 18% yoy to 194.3k units, capturing only 43.9% of Malaysia’s automotive market share (9M18: 52.2%). Demand for Japanese cars remained lacklustre in 9M19 (-18% yoy) – Toyota (-10% yoy), Honda (-19% yoy), Nissan (-35% yoy) and Mazda (-19% yoy) respectively. The luxury brand’s 9M19 sales also declined by 21% yoy – BMW/Mini (-17% yoy) and Mercedes-Benz (-26% yoy).

Maintain NEUTRAL; Top buys / risks

We lower our 2019 TIV forecast to 596k units (-0.5% yoy), incorporating a lower non-national sales volume projection. Reaffirm NEUTRAL on the auto sector. For exposure, we like MBM Resources for its appealing valuation. Key risks to our sector call include: 1) higher-/lower-thanexpected car sales volumes, 2) looser/tighter bank lending policies, 3) intensifying/lessening price competition; 4) fluctuations of the RM vs. US$/JPY, 4) delays on new car pricing approvals, and 5) better-/worsethan-expected economic conditions that affect market sentiment.

Source: Affin Hwang Research - 23 Oct 2019