Mar 2023 TIV came in at an all-time monthly high of 78,849 units (+26% MoM, +8% YoY) due to heavy deliveries ahead of the 31 Mar 2023 registration deadline to enjoy the exemption from the sales and services tax (SST). This brought the cumulative 3MCY23 TIV to 192,474 units (+20%) which is in-line with our expectation. We maintain our CY23F TIV of 720k units, which will match the record level achieved in CY22, backed by: (i) strong consumer confidence supported by a stable economy and healthy job market, (ii) the affordability of motor vehicles underpinned by the recent pause in overnight policy rate (OPR) hikes by Bank Negara Malaysia (BNM), stable new car prices thanks to the deferment of new excise duty regulations and potentially cheaper hire purchase cost with the introduction of the reducing balance method in the calculation of interest charges, and (iii) attractive new car models. The industry’s earnings visibility is strong, backed by a booking backlog of 300k units. Our sector top picks are MBMR (OP; TP: RM4.60) and BAUTO (OP; TP: RM2.90), both with an attractive dividend yield of about 7%.

Mar 2023 TIV came in at an all-time high of 78,849 units (+26% MoM, +8% YoY), bringing cumulative 3MCY23 TIV to 192,474 units (+20%). This is at 27% of our CY23 projection of 720k units but we consider the number in-line with our full-year forecast as Mar 2023 TIV was distorted by heavy deliveries ahead of the 31 Mar 2023 registration deadline to enjoy the exemption from the SST. Looking ahead, Apr 2023 will be a soft month due to fewer working days owing to the Hari Raya celebration (automakers will take the opportunity to shut down their plants for the annual routine maintenance, at least for a week). A detailed analysis of the passenger vehicle segment in March 2023 (+28% MoM, +8% YoY) are as follows:

Mazda (+41% MoM, -10% YoY) delivered all of its Mazda CX-30 CBU stocks before switching to 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 7k backlogged orders (3-5 months). Nissan (+40% MoM, -32% 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). Perodua’s (+29% MoM, +20% YoY) sales were propelled by the all-new Perodua Alza (massive booking backlogs of 25k units) and all-new Perodua Axia (another newcomer with 27k units in new bookings), with equally strong sales of the Bezza, MyVi, Ativa models. Based on sales projection, Perodua currently has more than 200k backlogged orders (by up to 12 months for the Alza, 4 months for the Ativa/Myvi, and up to 3 months for others). Honda (+28% MoM, -25% 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 15k backlogged orders (2-4 months). Proton’s (+4% MoM, +18% YoY) sales were mainly driven by the all-new X70 and X50 (4,678 SUV units sold, making up 32% of sales), and supported by the face-lifted Persona, Iriz, Exora and Saga (collectively known as PIES). Based on sales projection, Proton currently has 45k backlogged orders (up to 12 months for the X50 and by 3 months for other models). Toyota’s (0% MoM, +11% 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 18k backlogged orders (3-6 months).

We maintain our CY23 TIV projection of 720k units that will match the record level achieved in CY22. Our optimism is underpinned by: (i) strong consumer confidence supported by a stable economy and a healthy job market, (ii) the affordability of motor vehicle underpinned by the recent pause in OPR hikes by BNM, 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 potentially cheaper hire purchase cost with the introduction of reducing balance method in the calculation of interest charges, and (iii) attractive new models. Our projection is about 11% higher than the 650k units projected by Malaysian Automotive Association (MAA).

The industry’s total booking backlogs have held up at a fairly strong level of 300k units compared to bookings of 350k units three months ago despite heavy deliveries. This indicates sustained strong buying interest, lured by attractive new model launches by players. We foresee a similar pattern throughout the rest of the year.

Our sector top picks are:

• MBMR for: (i) its strong earnings visibility backed by an order backlog of Perodua vehicles of 220k units (more than half of its CY23 target sales of 314k 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 attractive dividend yield of about 7%.
• BAUTO for: (i) its strong earnings visibility backed by an order backlog of 8k units for Mazda, Kia and Peugeot vehicles (half of its CY23 target sales of 19k units), (ii) its premium mid-market Mazda brand that offers the best of both worlds, i.e. products that appeal to the middle-income group and yet command superior margins than its peers in the mid-market segment, and (iii) its attractive dividend yield of about 7%.

Source: Kenanga Research - 19 Apr 2023