• Top Pick: Bermaz Auto (BAUTO). September TIV came in at 68k units, bringing 9M23 TIV to 572k units – making up 79% of our 2023 TIV forecast of 725k. While another record-breaking year for TIV seems very likely, we maintain our NEUTRAL call as the sector lacks catalysts to keep its sales momentum in 2024, which we think is likely to soften YoY. Our Top Pick is BAUTO for its relatively resilient car sales and 9% yield.

• Still posting solid numbers. September’s TIV of 68k brings YTD TIV to 572k units – up 11.1% YoY vs 9M22. On a MoM basis, September saw weaker performances from the major carmakers, ie Proton (-12.3%), Perodua (-6.8%), Honda (-16.3%), and Toyota (-10.2%). On the production end, total production volume (TPV) saw a slight 2% MoM uptick, mainly contributed by Perodua (+2%), while other major marques showed declines: Honda (-17%), Mazda (-12%), Toyota (-6%), and Proton (-2%).

• EV makes up 1% of total TIV in 9M23, from a meagre 0.4% in 2022. Within the EV sphere, we believe BYD is leading the local EV adoption. It accounted for 36.9% of the total local EV market in 9M23 – just five months since its foray into Malaysia – thanks to its attractive pricing relative to its performance. However, we think the EV market share will continue to hover around the current level and would only meaningfully increase post 2025 after the MYR100k pricing floor on CBU EV expires, and when the local carmakers have its own EV offerings.

• New Proton model soon? We noted that 28 units of a Proton model codenamed “SS11” were assembled at its Tanjung Malim plant in September. We believe it could be the new sedan model slated to be launched by end 2023. The codename is consistent with an article posted by Paultan.org back in July. We think the new model, which seems to be a C-segment design, is likely to be priced above Proton Persona (prices from MYR47.8k) but below Proton X50 (prices from MYR86.3k). Considering that Proton X90 was first assembled in March 2023 but launched in May, we think this new model is likely to be launched in November.

• Budget 2024 – missed opportunities. We think Budget 2024 is unexciting for the automotive sector, considering that the initiatives introduced such as rebates on electric motorcycles and extension of tax deductions of EV charging infrastructure are rather less aggressive to increase EV adoption. We still find it disappointing that there are no incentives to further encourage local assembly CKD EVs and installation of public charging stations. At present, we do not see any positive near-term impacts from these initiatives to the companies under our coverage.

• Maintain NEUTRAL, premised on an uncertain 2024 as the sector’s outlook remains hazy. Our Top Pick is still BAUTO, as we still like its c.9% yield and believe its car sales will remain resilient, relative to other marques.

• Key downside risks include softer-than-expected orders and deliveries, as well as resurgent supply chain issues. The opposite represent upside risks.

Source: RHB Securities Research - 19 Oct 2023