February 2023 TIV came in at 62,649 units (+27% MoM, +39% YoY), bringing cumulative 2MCY23 TIV to 112,128 units (+29%). This was within our expectation at 16% of our full-year projection of 720k units, underpinned by strong delivery of backlog orders in February on increased working days vs. the month before (due to Chinese New Year holidays). Meanwhile, new bookings remained strong backed by new launches (especially the all-new Axia that racked in 27k units in new bookings). Our projection implies that 2023 TIV will sustain at the record 2022 level of 720k units versus a more conservative forecast of 650k (- 9.8%) by the Malaysian Automotive Association (MAA) underpinned by: (i) a pause in OPR hikes, (ii) stable new car prices, thanks to the deferment of new excise duty regulations (that could have resulted in prices of locally assembled vehicles increasing by 8%-20%), and (iii) a healthy industry booking backlog of 350k units as at end-Feb 2023 (which is nearly half of our 2023 TIV projection of 720k units). Our sector top picks are MBMR (OP; TP: RM4.60) and UMW (OP; TP: RM4.70).

February 2023 TIV came at 62,649 units (+27% MoM, +39% YoY), bringing cumulative 2MCY23 TIV to 112,128 units (+29%). This was within our expectation at 16% of our full-year projection of 720k units underpinned by strong delivery of backlog orders in February on increased working days vs. the month before (due to Chinese New Year holidays). New bookings remained strong backed by new launches (especially the all-new Axia that racked in 27k units in new bookings), keeping the industry booking backlog steady at 350k units as at end-Feb 2023.

A detailed analysis of the passenger vehicle segment in January 2023 (+26% MoM, +38% YoY) are as follows:

Honda (+77% MoM, +2% YoY) was driven by the City, Civic and BR-V with exceptional response seen 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 18k backlogged orders (2-4 months). Toyota’s (+41% MoM, +50% YoY) sales were mostly from its exceptional top models, namely the all-new Vios, Yaris, Corolla Cross and Hilux. Based on sales projection, Toyota currently has 20k backlogged orders (3-6 months). Proton’s (+21% MoM, +54% YoY) sales were mainly driven by the all-new X70 and X50 (4,176 SUV units sold, making up 30% of sales), and supported by the face-lifted Persona, Iriz, Exora and Saga (collectively known as PIES). Based on sales projection, Proton currently has 50k backlogged orders (up to 12 months for the X50 and by 3 months for other models). Mazda (+17% MoM, +209% YoY) delivered all of its Mazda CX-30 CBU volume before switching toward local production (CKD) which was recently rolled out on 8th March 2023. Overall volume continued to be driven by the CX-5 and CX-8. Based on sales projection, Mazda currently has 8k backlogged orders (3-5 months). Perodua’s (+16% MoM, +43% YoY) sales were propelled by the all-new Perodua Alza (massive booking backlogs of 30k units) and all-new Perodua Axia (another newcomer with 27k units in new booking), with equally strong sales of the Bezza, MyVi, Ativa models. Based on sales projection, Perodua currently has more than 220k backlogged orders (by up to 12 months for the Alza, 4 months for the Ativa/Myvi, and up to 3 months for others). Nissan (+12% MoM, +26% YoY) managed to entice buyers as evidenced by its fast moving inventory, but overall is still losing out in the all-new vehicles launching race. Currently, Nissan depends on the face-lifted Nissan Serena S-Hybrid, Navara, and Almera Turbo with 1k backlogged orders (1-2 months).

Looking forward, we project a more upbeat 2023 total industry volume (TIV) target at 720k units (+0%), compared to MAA’s 650k (- 9.8%), premised on strong reception to new models (at higher prices, resulting in better margins for auto players), a pause in the OPR hike and the deferment of new excise duty regulations resulting in stable car prices. In comparison, MAA is more cautious on the industry outlook as a whole, especially for the low-end segment, (we believe) due to the impact of high inflation on the lowincome group especially with the rising cost of basic necessities.

An encouraging sign to note is that the backlogs booking still holding strong at 350k units (as at end-Feb 2023), indicating strong order replenishment especially for attractive new models (see page 4) even in the absence of SST exemption. Additionally, vehicle sales will be supported by new battery electric vehicles (BEVs) which will enjoy SST exemption and other EV facilities incentives up to 2025 for CBU and 2027 for CKD.

Our sector top picks are:

• MBMR for: (i) its strong earnings visibility backed by an order backlog of Perodua vehicles of 220k units, (ii) it being a good proxy to the mass-market Perodua brand given that it is the largest dealer of Perodua vehicles in Malaysia, as well as its 22.58% stake in Perusahaan Otomobil Kedua Sdn Bhd, the producer of Perodua vehicles, and (iii) its Tier-1 OEM auto parts manufacturing certification.
• UMW for: (i) the mass-market marques under its vehicle dealership business, i.e. Toyota and Perodua, but not without high-margin models such as Perodua Alza and Toyota Veloz, (ii) strong earnings visibility at its vehicle dealership business backed by order backlogs of >250k units of vehicles, and (iii) it being a reopening play, given the pick-up seen in its heavy/industrial equipment business and manufacturing of aero-engine fan cases.

Source: Kenanga Research - 23 Mar 2023