- March TIV staged a sequential rebound, growing by 22% MoMto 53,576 units. The growth was largely led by the non-nationals. Toyota saw a35% MoM growth, while Nissan saw a 24% sequential sales uptick. Meanwhile,Honda, which had its first month of local production since the Thai floods latelast year, saw sales volume more than tripling in March.

- The new Toyota Avanza (launched January 2012) as well asthe Altis and Camry drove the bulk of Toyota's MoM volume growth. The Avanza,in particular, saw March sales more than doubling from 497 units in February to1,314 units in March. Notably, Toyota was the only player among the 5 largestlocal auto makers to have shown volume growth YTD (+7%). The industry incomparison was down by 13% YTD.

- Honda saw the revival of sales of its key model, the HondaCity, in March. However, sales of the other key models, i.e. the Accord and theCivic, have yet to show any recovery. We note that Honda's plants, both inMalaysia and Thailand, only recommenced production in March following 6 monthsof closure. We see room for further volume improvement at Honda in the comingmonths. 

- While March's sequential rebound was expected due to ashorter working month in February, we believe it was a decently strongperformance, considering tighter loan approvals since January. In fact, MarchTIV is 7% higher than the average monthly sales of circa 50,000 units in 2011.While annualised 1Q12 TIV of 554,148 is far weaker than our forecast of 605,981units and MAA's 2011 projection of 615,000 units, bear in mind that 1Q12numbers were dragged by weak Jan-Feb period, given a mix of knee-jerk reaction fromlonger loan approval timeline, CNY festivities in January and supplybottleneck. 

- We believe sales numbers could sustain, if not improvefrom current levels in April primarily driven by a recovery in CKD kit and CBUsupplies from Thailand (which accounts for 70%-80% of local auto players'imports). Furthermore, we expect the rollout of new models such as the ProtonPreve (in April), Toyota Camry (in June) and the revival of Honda sales &production (YTD: -82%) to drive TIV going forward. For the meantime, we leaveour 2012 TIV projection unchanged.

- We maintain our Neutral rating on the sector. APM (BUY,FV: RM6.50/share) and MBM (BUY, FV: RM5.80/share) remain our top sector picks.Indeed, Perodua sales have been hit (-2% YTD) ' albeit a lot less vs. Proton's-22% YTD. However, the consolidation of Hirotako earnings should more thanoffset any potential earnings contraction. Additionally, MBM's stake in Peroduais still deeply undervalued and any corporate exercise to unlock such valueshould more than offset temporary earnings weakness from Perodua.