March’s total industry volume (TIV) improved 8% YoY to 57,622 units, backed by a longer working month, strong consumer sentiment and the launch of new models. YTD, 3MCY13 TIV increased 14% YoY to 157,664 units, accounting for 25% of both ours and the Malaysian Automotive Association’s (MAA) 2013 forecast of 641,560 and 640,000 units respectively. 1QCY13 saw the launches of new models, which included Perodua’s S-series (Viva S, Myvi1.3 SE, Alza S), i-MiEV (Mitsubishi Innovative Electric Vehicle), Honda’s fourth generation CR-V and Kia Rio. The total industry production (TIP) for March improved 5% YoY and 20% MoM to 49,034 units. YTD, the TIP registered a slight growth of 3% to 146,051 units. Among the non-national makes, Honda and Nissan registered a marked improvement YoY as their sales in March 2012 were affected by supply constraints and production halts due to the Thai flood then. Although there has been a run-up in the share prices of most our auto stocks, we are maintaining our calls and target prices pending the release of their upcoming quarterly results in May and the outcome of the general election. We maintain a Neutral on the sector at this juncture.

Sales improved in March. The total vehicle sales (TIV) in March grew 8% YoY to 57,622 units on the back of a longer working month (compared to February), strong consumer sentiment and a line-up of new launches. Passenger vehicles made up 88% of the sales units in March as its sales rose 7% YoY to 50,562 units. Meanwhile, the remaining balance of March sales came from commercial vehicles (12%), which registered sales of 7,060 units or went up 9% YoY. YTD, the 3MCY13 TIV increased 14% YoY to 157,664 units, accounting for 25% of both ours and the Malaysian Automotive Association’s (MAA) 2013 forecast of 641,560 and 640,000 units respectively. This was in line with our expectations. 1QCY13 saw the launches of new models, which included Perodua’s S-series (Viva S, Myvi1.3 SE, Alza S), i-MiEV (Mitsubishi Innovative Electric Vehicle), Honda’s fourth generation CR-V and Kia Rio.

Monthly production. The total industry production (TIP) for March improved 5% YoY and 20% MoM to 49,034 units. The production volume for passenger vehicles was up 8% YoY to 44,380 units (23% MoM) while the total commercial vehicles produced in March dropped by 30% YoY (2% MoM). YTD, the TIP registered a slight growth of 3% to 146,051 units.

Sales analysis. On a monthly basis, sales of the national makes, Perodua and Proton, improved by 11% and 16% to 16,282 and 11,870 units, respectively. YoY, Perodua’s sales grew 2% whereas Proton’s sales fell by 7%. Among the non-national makes, Honda and Nissan registered a marked improvement YoY, registering a quadruple and double increase in their passenger car sales of 4,931 and 4,645 units respectively. The improvement was due to a low base effect as their sales in March 2012 were affected by supply constraints and production halts brought about by the Thai floods. Honda Malaysia recently (5 Mar 2012) launched its fourth-generation CR-V model, and according to management, the SUV has received close to 3,000 bookings. This model alone has contributed 34% to Honda Malaysia's overall March 2013 sales. Honda Malaysia will launch the 2.4L variant of the CR-V in June this year to cater to those who prefer a higher performance version of the SUV. Meanwhile, the sales growth for Nissan was largely backed by the Nissan Almera and also other new models (e.g. Teana, Livina and Livina X-Gear) as well as attractive packages introduced.

Lower sales in April. According to MAA’s press release, the sales volume for April is expected to be lower MoM due to the uncertainty of the upcoming general election and as consumers adopt a wait-and-see approach as they anticipate a revised policy on car prices.

Neutral on the sector. We are maintaining our Neutral stance on the auto sector and retaining our 2013 TIV forecast of 641,560 units (2.2% growth). Our top pick for the sector is TCHONG (OP, TP: RM5.60) as it has been a laggard to its peers and could play catch-up as the company is stepping up its growth plans. Although there has been a run-up in the share prices of most our auto stocks, we are maintaining our calls and target prices pending the release of their quarterly results in May and the outcome of the general election. Hence, we reiterate our MP-rating on DRBHCOM and UMW as well as an UP-rating on MBMR.

Source: Kenanga