• Still NEUTRAL; Top Pick: Bermaz Auto. According to the MalaysianAutomotive Association (MAA), November posted a TIV of 72k units (-4%MoM, +10% YoY), bringing 11M23 TIV to 719k units. While another recordbreaking year for TIV is now certain, we maintain our sector call as theindustry lacks catalysts to maintain its sales momentum in 2024. Wecontinue to hold the view that it will likely soften YoY. We still like BAUTOfor its relatively resilient car sales and 10% yield.

• Monthly TIV remains strong. November recorded a TIV of 72k units,bringing YTD TIV to 719k units – up 12% YoY vs 11M22’s numbers. On aMoM basis, November saw slightly weaker performances from the majorcarmakers. This was led by Toyota, which saw a 6.1% MoM decline. It wasfollowed by Perodua (-5.3%) and Proton (-2.5%). Honda, meanwhile,recorded a 10% MoM rise. YTD, Perodua has sold close to 300k units andwe believe it is well on course to surpass its sales goal of 325k units for theyear.

• On the production end, total production volume or TPV fell 9% MoM inNovember after a 7% MoM rise in October. The MoM decline was mainlycontributed by the local carmakers – ie Proton (-21%) and Perodua (-8%) –while Honda saw a 2% rise.

• Both local carmakers hit their 2023 records. Perodua and Protondelivered 32k and 12k units in in November, bringing their 11M23 numbersto 299k and 139k, up 19% and 14% YoY. These exceed their previousannual 2022 sales figures of 282k and 136k. Both Perodua and Proton’sbestsellers were their cheapest sedans, ie the Bezza and Saga. Given theelevated interest rate environment, we believe the trend of favouringcheaper models will continue in 2024 across mass-market marques suchas Perodua, Proton, Toyota, and Honda

• Maintain NEUTRAL, premised on an uncertain 2024, as the sector’soutlook remains hazy. We introduce our 2024 TIV forecast of 625k units,implying a 14% YoY decline from our 2023 projection of 725k units. We areanticipating a softer TIV, as we do not see any compelling factors for 2024auto sales to book another high. Our Top Pick is still Bermaz Auto, as westill like its c.10% dividend yield. We also believe its car sales should remainresilient vs that of other marques.

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

Source: RHB Securities Research - 21 Dec 2023