According to the Malaysian Automotive Association (MAA), TIV for June 2021 registered 1,921 units (-96% MoM, -96% YoY), practically down the ditch, due to nationwide lockdown starting 1st June 2021 under the National Recovery Plan Phase 1. June’s sales were those spilled over from May 2021, that were registered later through JPJ e-Daftar system for which loans have already been approved with an issued Letter of Undertaking (LoU) to ensure no lapse in the agreement. While some parts of the nation transitioned to National Recovery Plan Phase 2, Selangor and Kuala Lumpur which make up more than 50% of TIV are still closed for business with no end in sight for now given the rising Covid-19 cases. Thus, we expect July sales to still register minimal sales depending on ready-stocks in hand of respective showrooms operating under National Recovery Plan Phase 2. Maintain NEUTRAL with a lower 2021 TIV target to 460k units (-13%) from 545k units (+3%), but we expect a stronger recovery next year with 2022 TIV target of 600k units (+30%). Our 2022 TIV growth will be driven by the expected recovery in economy post lockdown and the assumption that herd immunity would be achieved by then, inevitably resulting in relaxation of SOPs toward revitalising local travel which should push demand for passenger vehicles especially for the affordable national marques. Additionally, a few automakers have assured commitment to absorb SST beyond Dec 2021.

TIV for June 2021 registered 1,921 units (-96% MoM, -96% YoY). Both YoY and MoM performances plunged, practically down the ditch, due to a nationwide lockdown starting 1st June 2021 under the National Recovery Plan Phase 1. June’s sales were those spilled over from May 2021, that were registered later through JPJ e-Daftar system for which loans have already been approved with an issued Letter of Undertaking (LoU), to ensure no lapse in the agreement, without which would entail going through the whole process again. While some parts of the nation transitioned to National Recovery Plan Phase 2, Selangor and Kuala Lumpur which make up more than 50% of TIV are still closed for business with no end in sight for now given the rising Covid-19 cases. Thus, we expect July sales to still register minimal sales depending on readystocks in hand of respective showrooms operating under National Recovery Plan Phase 2.

A detailed look at the passenger vehicles segment (-96% MoM, -96% YoY). Perodua (-94% MoM, -95% YoY) sales was driven by the all-new Axia, Myvi, Bezza, and ARUZ and Ativa (311 units sold at 31% of sales). Proton saes (-94% MoM, 95% YoY) were due to the all-new X70 and X50 (113 units sold at 23% of sales), and supported by the face-lifted Persona, Iriz, Exora and Saga (collective known as PIES). Honda’s (-100% MoM, -99% YoY) sales mostly came from City, Civic and BR-V with exceptional response for the allnew City. Toyota’s (-99% MoM, -97% YoY) sales mostly came from its top models namely all-new Toyota Vios, Yaris, and Toyota Hilux. Nissan’s (-99% MoM, -98% YoY) all-new Almera has started to propel positive growth for the brand, but overall growth still lagged behind other marques from the dearth of all-new model launches. Mazda’s (-96% MoM, 94% YoY) sales were mostly contributed by face-lifted CX-5 and all-new CX-8.

Maintain NEUTRAL with a lower 2021 TIV target to 460k units (-13%) from 545k units (+3%), but we expect a stronger recovery next year with 2022 TIV target of 600k units (+30%). With no end in sight for the nationwide lockdown especially enhanced lockdown in Selangor and Kuala Lumpur, we cut our 2021 TIV target to 460k units (-13%) from 545k units (+3%), coinciding with the forecast TIV cut by MAA to 500k units (from 570k units, previously). Nevertheless, we expect a stronger recovery next year with 2022 TIV target of 600k units (+30%), closely in line with MAA’s TIV target of 605k units (+21%). Our 2022 TIV growth will be driven by the expected recovery in economy post lockdown and the assumption that herd immunity would be achieved by then, inevitably resulting in relaxation of SOPs toward revitalising local travel which should push demand for passenger vehicles especially the affordable national marques. Additionally, a few automakers have assured commitment to absorb SST beyond Dec 2021. Following our earnings revision, we maintain most of our calls and TPs which are based on FY22E EPS, but make a minor change for TCHONG (UP; TP to RM1.00 from RM1.10), and UMW (MP; TP to 3.00 from RM3.10). There are relatively no changes for SIME (OP; TP: RM2.35) with continuous improvement in its main China operation, and BAUTO (MP; TP: RM1.45) given its FYE April providing ample time to recover post lockdown.

Source: Kenanga Research - 26 Jul 2021