• Jan-21 Total Industry Volume (TIV) contracted 23.5% yoy to 32.8k units (-52.3% mom) – attributable to sales brought forward and lockdown impact
• Unit sales were weaker across the board, with the exception of Toyota, which posted a mild growth of 4% yoy to 3.8k units
• Looking ahead, we expect the sales tax exemption to continue anchoring sales growth in an otherwise challenging period. Our 2021 TIV projection of 580k (+9.5% yoy) remains below that of 2019 to account for the softer macro backdrop. Maintain sector NEUTRAL rating

Speed Bump in Jan-21 as Unit Sales Fall 23.5% Yoy

Following the strong sales seen in Nov/Dec 2020, Jan 2021 TIV contracted to 32.8k units (-23.5% yoy) on the back of weaker sales across the board, with the exception of Toyota. The yoy decline was in part underpinned by: i) car sales brought forward in Dec-20 (initial expectation of final month of sales tax exemption) and ii) reinstatement of the MCO on 13 Jan 2021. While showrooms were allowed to operate during MCO 2.0, the overall minimal footfall has hampered the sales recovery momentum. Total car sales fell 52.3% mom with double-digit declines across segments, owing to aforementioned factors.

Toyota Shines in An Otherwise Subdued Month

Toyota was the star performer for Jan-21, registering a mild 4.1% yoy growth to 3.8k units. Specifically, the shortfall in passenger cars to 2,450 units (-6%) was positively offset by the increase in commercial pick-up trucks (Toyota Hilux) at 1,378 units (+34%). Elsewhere, Perodua posted a relatively resilient month, seeing a softer-thanaverage decline of 3% yoy to 16.9k units, as interest in its core models (Myvi, Axia, Bezza) remained intact. Meantime, Perodua gave a glimpse of its new compact SUV D55L (believed to be called Perodua Ativa) – now open for booking – with a retail price estimated at RM62,500-RM73,400. Given its attractive entry point, we believe this should further drive volume sales in 2021. All in all, the national carmakers strengthened their foothold on the local auto scene, as their overall market share rose to 69.6% (vs 1M19: 60.5%).

Maintain NEUTRAL

Looking ahead, the coming month will likely see similarly subdued unit sales given a shorter working month in conjunction with the Lunar New Year, as well as the imposition of MCO 2.0. We remain Neutral on the sector with our 2021 TIV forecast at 580k (+9.5% yoy), below that of 2019 to account for the prolonged impact of the pandemic. At this juncture, Bermaz Auto (TP: RM1.53) is our sole BUY recommendation, given its appealing valuation and overall sturdy balance sheet (net cash of RM226m or RM0.19/share). Up/downside risks could come from: i) loosening/tightening of auto financing for car buyers; ii) fluctuation of the RM vs the US$/JPY; and iii) a greater-than-expected pick-up/slowdown in the economy.

Source: Affin Hwang Research - 23 Feb 2021