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Still NEUTRAL with Top Pick: Bermaz Auto (BAUTO). June TIV came in at 63k units, bringing 1H23 TIV to 366k. With this, the Malaysian Automotive Association (MAA) revised its 2023 TIV forecast up to 725k, from 650k. The MAA's new estimate suggests a historic high, narrowly beating 2022's 721k TIV. Given slowing orders and shortening wait times, we prefer to be conservative and maintain our 2023F 680k TIV. We are still NEUTRAL on the sector, given that an uncertain 2024 could weigh on a likely-stellar 2023. Our Top Pick is still BAUTO for its continued volume growth and 9% yield.
Still posting strong numbers. June TIV of 63k brings 1H23 TIV to 366k, which is up 10% vs 1H22. On a MoM basis, June saw mixed results across the board. Proton and Toyota/Lexus rose by 6% and 8%, while Perodua and Honda fell by 9% and 23%. On the production end, total production volume (TPV) softened 11% MoM, with major marques showing declines: Perodua (-17%), Toyota (-20%), Honda (-37%), and Mazda (-6%). Historically, June production tended to be seasonally softer thus, the MoM softening in TPV aligns with historical trends.
Tesla turning up the EV competition. On 20 July, Model Y was officially launched in Malaysia, starting at an attractive MYR199k. While not confirmed yet, online auto news sources suggested that Tesla could launch Model 3 with a starting price of MYR160k. In our view, these competitive prices could make existing EVs less attractive and may force other brands to lower their prices, potentially expediting the EV adoption rate in Malaysia.
MAA forecasting a record-breaking 2023 TIV. With the release of June TIV, the MAA revised its 2023 TIV forecast to 725k (from 650k) which would be a historic high, just beating 2022's 721k TIV. With 366k 1H23 TIV, the MAA's 725k estimate implies a 2H23 TIV of 360k, or a monthly TIV of 59.8k. Our 2023F TIV of 680k implies 2H23 TIV of 314k units, or a monthly TIV of 52.3k. While we do not think that MAA's estimate is far-fetched (given strong order backlog for major marques) with a minor boost from new brands (eg BYD and Chery), we prefer to be conservative and keep our 2023F 680k TIV estimate. We note that if the monthly TIV in 2H23 remains stronger than our expectations, then there is an upside risk to our 680k estimate.
Still NEUTRAL. Despite the potentially record-breaking 2023F TIV, we maintain that 2024F TIV will likely soften YoY. According to industry participants, anecdotally, they currently have little visibility on 2024's potential TIV. Based on our thesis of a normalization in car sales in 2024, we maintain our NEUTRAL view on the sector. We also think that currently share prices incorporate a strong 2023 and are only beginning to price in an uncertain 2024. Our Top Pick is still BAUTO. Its recent sharp share price correction (partially attributable to the stock going ex-dividend) presents an attractive opportunity to accumulate. We still like BAUTO, as we think its various marques will continue to see volume growth in FY24F (Apr). BAUTO also delivers an attractive yield of 9%.
Key risks on the downside include softer-than-expected orders and deliveries, as well as resurgent supply chain issues. The opposite represent upside risks.
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