Automotive - Apr 2022: Affected by Supply Chain Woes

Date: 
2022-05-24
Firm: 
HLG
Stock: 
Price Target: 
2.60
Price Call: 
BUY
Last Price: 
2.17
Upside/Downside: 
+0.43 (19.82%)
Firm: 
HLG
Stock: 
Price Target: 
2.30
Price Call: 
BUY
Last Price: 
1.17
Upside/Downside: 
+1.13 (96.58%)
Firm: 
HLG
Stock: 
Price Target: 
4.80
Price Call: 
BUY
Last Price: 
3.20
Upside/Downside: 
+1.60 (50.00%)

Apr 2022 TIV slowed down to 56.2k units, indicating a drop of -3.6% YoY and -21.9% MoM due to on-going supply chain issues. Nevertheless, YTD TIV still registered a growth of +8.0% to 216.0k units, mainly due to low base effect. We maintain our 2022 TIV expectation at 600k units (+17.9% YoY), as we expect continued momentum of high sales volume till Jun 2022, driven by the extended SST exemption measures and the various newly launched exciting models (launched in 2021 and early 2022). We reaffirm our NEUTRAL call on the automotive sector with top picks: DRB (BUY; RM2.30), MBMR (BUY; TP: RM4.80) and Sime Darby (BUY; TP: RM2.60).

Malaysian Automotive Association (MAA) reported TIV for April 2022 at 56.2k units (-3.6% YoY; -21.9% MoM), affected by on-going supply chain disruption (including chip shortage). Overall TIV increased by +8.0% YTD to 216.0k units, mainly due to low base effect. At current juncture, we are maintaining our TIV expectation of 600k units for 2022, a growth of +17.9% YoY, as we expect continued high order deliveries in coming months prior to the ending of SST exemptions (car prices have reduced 2- 7%; paultan.org) until 30 Jun 2022 and the large order backlogs for the key OEMs i.e. Proton, Perodua, Honda, Toyota etc.

Despite the expected strong TIV recovery until mid-2022, we still maintain our NEUTRAL rating on the sector, as we expect TIV to drop post SST exemption expiry alongside the current ongoing global supply chain issues. Nevertheless, industry players are requesting for the government to consider further extend SST exemption until end 2022, in order to allow industry players and consumers to fully benefit from it. We advise investors to accumulate MBMR (BUY; TP: RM4.80) and DRB (BUY; TP: RM2.30), as we expect national OEMs to triumph over the longer term with potential growth from new export markets. We also like Sime Darby (BUY; TP: RM2.60) for its strong balance sheet and earnings sustainability on Australia industrial segment and robust demand for automotive across the group’s geographical operations.

For the month of April 2022, there was no data available for BMW, Mini, Mercedes, Peugeot and Kia.

Perodua (UMW and MBMR) recorded a sales of 25.7k units (+25.8% YoY; -4.1% MoM) in Apr 2022. We believe the OEM has discontinued the production of the current Alza model during the month (resulting to lower sales MoM), in order to prepare for upcoming new replacement model. YTD sales stood at 87.3k units (+11.5% YoY), relatively in line to achieve its targeted 247.8k units for 2022 as they manoeuvre through the on-going global shortage of semiconductors. The new Alza replacement is now open for booking with starting price of RM69k. Management has also guided for two updated models in later part of the year.

Proton (DRB) maintained its second spot in Apr with 8.4k units, despite a drop of -42.9% YoY and -31.5% MoM, affected by on-going supply chain disruption, especially on new generation SUV models. YTD, sales was at 34.0k units (-27.9% YoY), with a domestic market share of 15.7%. Including export volume of 1.6k units, total Proton sales was 35.5k units, which is relatively behind its 2022 sales target of 136-150k units (indicating a growth of +18.6%-30.8% YoY). Proton CEO has guided 3 new model launchings in the coming next 2 years 2023-2024. Proton has recently launched Saga MC2 facelift model.

Toyota (UMW) reclaimed its top position within foreign segment with 6.9k units (-24.8% YoY; -18.1% MoM) in Apr 2022. Similarly, Toyota was also affected by supply chain issues. YTD sales was 29.1k units (+11.5% YoY), which sustained its top foreign position with 12.3% market share. Toyota is relatively ahead of its sales target of 73k units for 2022. Upcoming exciting new launch would be a new EV model (likely by year end).

Honda (DRB) recorded Apr sales of 6.0k units (+18.5% YoY; -42.8% MoM), affected by supply chain woes (resulting inconsistent production output at its Melaka Pant). YTD sales was 26.5k units (+33.3% YoY), still below Toyota. Honda is targeting sales of 80k units for 2022, which will enable the marque to reclaim back its top position within the foreign segment. Honda is expected to launch the new HR-V model soon, and followed by the new BR-V model in coming months.

Mazda (BAuto) sales remained strong in Apr with 1.8k units (+14.2% YoY; -17.6% MoM), stayed ahead of Nissan, mainly driven by continued high delivery to clients during the month. YTD sales was up by +35.1% YoY to 5.4k units, overtaking Nissan. We expect Mazda to launch new MX-30 EV (recently previewed to the media), CX-30 CKD and CX-8 facelift in 2022.

Nissan (TCM) sales was 1.6k units (-0.9% YoY; -12.7% MoM) in Apr, increased YTD to 5.3k units (+23.9% YoY). The sales remained relatively low as Nissan maintained its strategy to avoid stiff market competition, while leveraging onto its core models: Almera, Serena and Navara.

 

Source: Hong Leong Investment Bank Research - 24 May 2022

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