Affin Hwang Capital Research Highlights

Auto & Autoparts - Holding up decently

kltrader
Publish date: Mon, 28 Dec 2020, 05:15 PM
kltrader
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This blog publishes research highlights from Affin Hwang Capital Research.
  • Nov-20 Total Industry Volume (TIV) rose 7.4% yoy to 56.5k units (-0.3% mom), underpinned by the Sales & Service Tax (SST) exemption as well as on-going promotional campaigns by carmakers.
  • 11M20 TIV of 454.8k units (-17.2% yoy) accounted for 91% of our full-year forecast, broadly within our expectations.
  • We forecast full year TIV at 495k units (- 18.1% yoy) while 2021 should see a modest 5% rebound from 2020’s low base to 520k units. Maintain sector NEUTRAL rating.

Continued sturdy performance by national carmakers

Both national carmakers Perodua and Proton continued to notch double-digit sales growth, up +13% and +16% yoy to 23.1k and 11.2k units respectively. Perodua continued to see strong unit sales for its existing line-ups, and on track to reach its year-end target of 210k units. Meanwhile, Proton’s 11M20 car sales totaled 95.7k units (vs 11M19 of 89.1k units), amid the newly launched Proton X50 which reportedly delivered 1,756 units in November (total 2,203 units delivered since its launch in October 2020). Overall, the national brands combined 11M20 market share remained strong at 63.9% (vs 11M19: 56.6%).

Sequentially a better month for non-nationals

Honda was a notable strong performer for the month of November, registering a strong sequential sales of 8.8k units (+61.2% mom, +31.3% yoy), propelled by the launch of the new Honda City in mid-October which saw deliveries of 5,100 units as at end-November. Meanwhile, Nissan also saw its best month for 2020 at 1.4k units (+31.1% mom, -18.6% yoy) as the all-new Nissan Almera came to shore in Nov 2020. Mazda continued its decent run recording, 10.5k units for 11M20 (-2.7% yoy) - almost reverting to 11M19 levels of 10.8k units, which was previously affected by delays in car pricing approvals. Overall non-national car sales were higher by +18% mom.

Maintain NEUTRAL

We expect December sales to remain brisk, going into the final month of the SST exemption period, coupled with year-end promotional campaigns. Going into 2021, we project TIV to see a modest rebound of 5% yoy to 520k units. Our 2021 forecast is still below the TIV recorded for the past 13 years, as we believe demand for cars could subside if the sales & service tax exemption is not extended. We remain Neutral on the sector with MBM Resources as our relative preference in the sector, riding on 22.6%-owned Perodua’s leadership and having a strong balance sheet (net cash of RM157m; or RM0.40 sen/share) to withstand any potential downturn. Up/downside risks could come from: i) loosening/tightening of auto financing for car buyers; ii) fluctuation of RM vs US$/JPY; and iii) a greater-than-expected pickup/slowdown in the economy.

Source: Affin Hwang Research - 28 Dec 2020

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