February auto sales were slightly better than expected despite a shorter working month due to the Lunar New Year holidays. Total industry volume (TIV) in February was flat m-o-m but 12.6% higher y-o-y. We believe sales should continue to pick up in the months ahead, helped by new model launches from major marques. Berjaya Auto is our Top Pick. Maintain NEUTRAL on the sector.

Flat February auto sales. According to data from the Malaysian Automotive Association (MAA), TIV in February rose 0.9% m-o-m and 12.6% y-o-y to 50,718 units. YTD TIV rose 0.9% to 100,991 units. This was better than expected despite a shorter working month due to the Lunar New Year holidays. Despite concerns that rising cost of living would result in weaker consumer discretionary spending on big-ticket items, we expect consumption spending to remain resilient, helped by a pickup in economic activity going forward. We expect auto sales to improve in the months ahead, boosted by important new model launches from major marques.

Mixed performance from major marques. Proton sales recovered slightly in February, growing by 9.7% m-o-m to 10,684 units. Sales at Perodua bounced back strongly, up 29.1% m-o-m and 6.7% y-o-y, mainly driven by a spillover of Alza vehicle registrations arising from unspecified vehicle registration problems in January. Toyota sales also rebounded strongly in February – the only one among the big three non-national players to do so. Toyota sales improved 18.2% m-o-m and 59.3% y-o-y due to strong deliveries of its newly-launched Vios and Altis models. Meanwhile, Nissan sales eased 9% y-o-y in February, reflecting rising competition in the B-segment with Toyota’s Vios regaining market share from Nissan’s Almera. Honda sales were up 42.1% y-o-y, helped by an improved product range. Incidentally, the all-new City was launched yesterday. Mazda vehicle deliveries were somewhat weak given its reliance on imported supplies for the time being (only the CX-5 SUV is locally-assembled).

NEUTRAL. The MAA expects sales to improve in March, helped by the introduction of important new models and a normalised working month. Berjaya Auto (BAUTO MK, BUY, FV: MYR2.20) is our top sector pick given its strong sales and earnings growth (49.5% 3-year EPS CAGR), driven by the group’s attractive product offerings and increased localisation initiatives.

Source: RHB