Maintain OVERWEIGHT with 2022 TIV target of 650k units (+28%) and 2023 TIV target of 660k units (+2%). 9MCY22 TIV of 514,868 units (+61%), as compiled by Malaysian Automotive Association (MAA), came in within our expectation at 79% of our full-year forecast. The September 2022 TIV of 67,659 units almost doubled from the pandemic-stricken same period a year ago, as automakers continued to fulfil orders, cutting the booking backlogs to 350k units from 400k units a month ago. However, the number only inched up 2% MoM from already a relatively high base a month ago coupled with the persistent shortages of chips and components. Our sector top picks are MBMR (OP; TP: RM4.30) given its market leader position in national marques and BAUTO (OP; TP: RM2.30) for its positioning in the premium mid-market segment.

September 2022 TIV at 67,659 units (+2% MoM, +53% YoY). The September 2022 TIV almost doubled from the pandemic-stricken same period a year ago, as automakers continued to fulfil orders, cutting the booking backlogs to 350k units from 400k units a month ago. However, the September 2022 TIV only inched up 2% MoM from already a relatively high base a month ago coupled with the supply constraints of passenger vehicles amidst persistent shortages of chips and components. Commercial vehicles (+11% MoM, +27% YoY), particularly, pickup trucks, came to fill the gap as businesses resumed spending on new motor vehicles on the back of the recovery in the economy.

A detailed analysis on the passenger vehicles segment (+0% MoM, +57% YoY):

Proton (-2% MoM, +42% YoY)’s sales were mainly driven by the all-new X70 and X50 (5,348 SUV units sold making up 37% of sales), and supported by the face-lifted Persona, Iriz, Exora and Saga (collectively known as PIES). Based on sales projection, Proton currently has 75k backlog orders (by up to 12 months for X50 and by 4 months for other models).

Toyota (-4% MoM, -2% YoY)’s sales were mostly from its exceptional top models namely all-new Toyota Vios, Yaris, Corolla Cross and Toyota Hilux. Overall, it is still affected by inventory shortages especially for the newer models. Based on sales projection, Toyota currently has 30k backlog orders (by 3-6 months).

Perodua (-5% MoM, +74% YoY) was driven by the all-new Perodua Alza which gathered massive booking backlogs of 30k units with waiting time of more than 12 months and with equally strong sales of MyVi and Ativa, and supported by Axia, Myvi, and Bezza. Based on sales projection, Perodua currently has more than 170k backlog orders (by up to 12 months for Alza, 6 months for Ativa/Myvi, and up to 3 months for others).

Honda (-10% MoM, +78% YoY) was driven by City, Civic and BR-V with exceptional response for the all-new HR-V which was launched on 14 July 2022. Overall, it is still affected by inventory shortages especially for the newer models. Based on sales projection, Honda currently has 25k backlog orders (by 2-4 months).

Nissan (-10% MoM, -16% YoY) is losing out on the fresh all-new vehicles launching race. Currently, Nissan depends on the face-lifted version of Nissan Serena S-Hybrid, Navara, and Almera Turbo and has 2k backlog orders (by 1-2 months).

Mazda (-27% MoM, +21% YoY) came short on delivery of its Mazda CX-30 CBU volume, but was cushioned by the sustained volume from CX-5 and CX-8. Mazda CX-30 local production (CKD) is expected to be rolled out within 4QCY22. Based on sales projection, Mazda currently have 8k backlog orders (by 3-5 months).

Maintain OVERWEIGHT with 2022 TIV target of 650k units (+28%) and 2023 TIV target of 660k units (+2%). Our 2022 and 2023 TIV forecasts are 650k units (+28%) and 660k units (+2%), compared to Malaysian Automotive Association (MAA)’s target of 630k units (+24%) and 636k units (+1%), respectively. To ensure consumers keep coming back to their showrooms, automakers are putting onto the market newer models that also command better margins (see page 4). Currently, vehicles order backlogs are reaching to the tune of some 350k units. Not all of these, particularly new models with a waiting period of beyond 12 months (such as Perodua Alza), will be delivered and registered before end-March 2023 to enjoy the Sales & Service Tax exemption (despite the bookings being made prior to end-June 2022). This means TIV will not fall off the cliff after March 2023. Additionally, there will be launches of new battery electric vehicles (BEVs) that will still enjoy SST exemption and other EV facilities incentives up to 2024 for CBU and 2025 for CKD, underpinning the TIV.

Our sector top picks are MBMR (OP; TP: RM4.30) and BAUTO (OP; TP: RM2.30). We like MBMR for its: (i) strategy to focus on affordably priced Perodua vehicles amidst the high inflationary environment with more than 200k units of booking backlogs, (ii) highly sought-after Tier-1 OEM auto parts manufacturing line, and (iii) position in capitalising on both front for Perodua through its 22.58% stake and role as the largest Perodua dealership. On the other hand, we like BAUTO for: (i) its premium mid-market Mazda brand that offers the best of both worlds, i.e. targeting the mass middle-income group and yet commanding better margins than its peers in the mid-market segment, and (ii) its attractive dividend yield of 5%.

Source: Kenanga Research - 20 Oct 2022