• UMW reported strong unit sales for Dec-20, bringing 2020 sales to 59.3k (-15.3% yoy) and 220.2k (-8.4% yoy) for Toyota/Lexus and Perodua respectively – ahead of expectations.
• Correspondingly, we raise our UMWT and Perodua unit sales to 65k (+9.6% yoy) and 230k (+4.5% yoy) for 2021, pencilling in a modest rebound spurred on by sales tax exemption and new model launches.
• That said, our forecast 2021 unit sales remains below that of 2019. Post earnings revision of +12-18% for 2020-22E, we are keeping our HOLD rating, with a higher TP of RM3.20. This note marks a change in analyst coverage.

Toyota and Perodua Sales Exceeded 2020 Expectations

UMW registered 9.2k units for Dec-20, bringing total Toyota/Lexus unit sales to 59.3k (-15.3% yoy) for 2020. Its 38% associate Perodua similarly ended the year strongly, recording 25.2k and totalling 220.1k (-8.4% yoy) for 2020. Both marques exceeded initial management targets and ours by 12% / 9% (UMWT) and 5% / 10% (Perodua).

Modest Rebound for 2021E, But Caution Remains

We foresee a relatively better 2021 for UMWT aided by extension of the sales tax exemption and new launches. Meantime, we expect Perodua to remain in vogue given the attractive and affordable pricing nature of the national marque. In total, we expect a +6% volume rebound to 295k units (65k Toyota/Lexus; 230k Perodua), but still falling short of 2019 levels, in view of: i) high element of car sales brought forward in 2020, ii) MCO reinstatement and iii) challenging macro backdrop.

Likewise a Palpable Low-base Recovery for Equipment and M&E

Post 2020’s low base, the equipment segment should see palpable improvement, underpinned by: i) business sectors gradually returning to optimal capacity and ii) pick-up in infrastructure projects. Meanwhile, the manufacturing segment should improve slightly, leveraging on sturdy car sales amid the sales tax exemption period.

Reaffirm HOLD With Higher TP of RM3.20

We lift our earnings estimates by 12-18% for 2020-22E, largely to reflect the better uptake of both Toyota/Lexus and Perodua marques amid the sales tax exemption period and new model launches. At 17x 2021 PER, UMW looks to be trading in a fair range, considering the macro backdrop remains fragile given the prolonged pandemic impact. Maintain HOLD with a higher revised TP of RM3.20.

Source: Affin Hwang Research - 13 Jan 2021