• Sept-20 Total Industry Volume (TIV) rose by 26% yoy to 56.4k units (+7% mom), thanks to cheaper car prices from the Sales & Service tax (SST) exemption as well as on-going promotional campaigns by carmakers.
• 9M20 TIV of 341.5k units (-23% yoy) was within our expectation, accounting for 73% of our full-year forecast.
• Maintain Overweight. Our Sector and Country Top Pick Is Sime Darby.

National Brands Still in Flavour

Proton’s Sept20 sales volume rose by 37% yoy to 11.9k units (+4% mom). Its 9M20 cumulative TIV was the only one among peers to show growth on a yoy basis, up 5% yoy to 73.5k units. The Proton X50 is still slated for launch in the coming weeks through a virtual event, and it targets to sell c.4k units in 2020, while the all-new Bsegment SUV has received >20k bookings. Notably, Perodua’s Sept20 sales rose by 48% yoy to 25k units (+11% mom), its record monthly sales, led by healthy demand for its existing Perodua line-up. With 9M20 sales volume of 145k units (-19% yoy), we believe Perodua will likely achieve its 2020 sales target of 210k units. Overall, the national carmakers’ combined 9M20 market share rose to 64.0% (vs 9M19: 56.1%).

A Steady Recovery for Non-national Carmakers

The cheaper SST exempted car prices and year-end promotional campaigns also led to yoy improvement for most Japanese automakers, except Nissan with only 1.1k units sold in Sept20 (-30% yoy, +12% mom). Since the all-new Nissan Almera will arrive on Malaysian shores, we think Nissan should see better sales volume in the coming months. The other Japanese brands registered better sales in Sept 20: Toyota at 5.5k units (+3% yoy), Honda at 5.9k units (+2% yoy) and Mazda at 1.2k units (+168% yoy, due to low base effect as it was affected by the car pricing approval issue). We are unable to ascertain the sales performance for BMW/Mini, MercedesBenz and Scania as the premium brands did not disclose their sales volumes.

Maintain OVERWEIGHT

Our 2020 TIV forecast remains unchanged at 465k units (-23% yoy), as we expect cheaper SST exempted car prices and new model launches to support sales in the coming months. Sime Darby (SIME MK, RM2.38, BUY) is our preferred sector and country pick, and a good proxy to regional recovery. We anticipate higher equipment deliveries and parts sales from Australasia and China as well as catch-up spending from affluent consumers to boost luxury car sales in China and Malaysia. Given our BUY rating for large-cap Sime Darby, we keep our Overweight stance on the sector. Downside risks could come from: i) a prolonged tightening of auto financing hindering the borrowing ability of car buyers; ii) exchange rate risk; and iii) a slowdown in the economy.

Source: Affin Hwang Research - 21 Oct 2020