The  TIV for Feb  2012 increased 9%  y-o-y  and 7.5% m-o-m (YTD:  -10.7%) as business activities normalizeafter the steep 25% y-o-y drop in the previous month. Nonetheless,  the numbers came short of our expectationssince we have anticipated sales to pick up as the market gradually adjusts tothe stricter lending requirements for  hire purchase loans. Wemaintain our NEUTRAL call on the Automotive sector, with UMW  (FV: RM7.88) and MBM  (FV: RM5.34)  as our top picks, noting the strongrebound  in  the sales of  these  companies' marques in February.

Rebounding. Afterthe steep 25% y-o-y drop in the previous month, the  TIV for Feb 2012  increased 9%  y-o-y  and 7.5% m-o-m (YTD:  -10.7%) as business activities normalizeafter the festive holidays. Vehicle sales from the passenger segment grew by 5.4%m-o-m  and 6.6%  y-o-y, while the commercial segment grew at amuch stronger pace of 26% m-o-m and 30.9% y-o-y. Sub-segment wise, thestrongest growth was seen for passenger sedans, MPVs, pick-up trucks and vans.

But short of ourexpectations. We had earlier expected a sharper  y-o-y and m-o-m rebound of 20-26%. Theshortfall was likely due to public holidays and the shorter month of February.Since we expect sales to pick-up  further  moving forward  as  themarket adjusts to the stricter lending requirements for hire purchase loans, wetherefore make no changes to our TIV numbers (which assumes a mere 1.1% growth)for 2012 for now.

How the top 5marques  performed. Perodua continuedto maintain its pole position with a higher market share of 33.9% (from 29.1%last year), with Proton coming in second at a lower market share of 26.3% vs28.8% last year, which can be attributed to the impending launch of the ProtonPersona replacement. The strongest vehicle sales growth was seen for both Toyota and Perodua, whichrecorded double-digit gains y-o-y and m-o-m. Honda continued to see lower salesdue to the difficulty in procuring kits and parts from Thailand after thedevastating floods, while sales of Nissan cars continued to remain lacklustre.

Maintain NEUTRAL.  Overall, we are still cautious on the macropicture for autos as we think any demand upside would be marginal since: (i)the replacement cycle for new vehicles, which may boost sales, has peaked, (ii)upcoming models may not create enough excitement to sufficiently spur TIVgrowth, (iii) bankers are tightening lending and becoming more stringent inapproving loans, and (iv)  the  consumer sentiment is deteriorating andbuyers have become more cautious. We maintain our NEUTRAL call on theAutomotive sector, with UMW and MBM remaining our preferred picks.

Source: OSK188