Investment Highlights

• We retain OVERWEIGHT rating despite the conclusion of sales tax exemption period given robust order books and new  launches underway. Our recommendation is also premised on a stable economy and strong job market conditions that  provide more room for growth in still-resilient domestic spending.

• Malaysian Automotive Association (MAA) April total industry volume (TIV) dropped 41% MoM to 46,583 units.  Passenger vehicles plunged 42% MoM to 41,389 units while the commercial segment was down by 34% MoM to 5,194 units.  This was expected following the end of sales tax exemption period coupled with a shorter working month amid the Hari Raya  holidays. YoY, TIV declined by 19% as compared to 57,606 units a year ago, again due to lower sales for passenger (-19%) and commercial vehicles (-20%). Meanwhile, production volume for the month was also low as carmakers took the  opportunity to conduct periodic plant maintenance. Total production of 41,160 units in April was 29% below the monthly  average of 58,000 in 2022. Looking forward, we think that May 2023 vehicle sales will improve due to a longer working month  coupled with easing supply chain issues.

• Perodua’s cumulative market share remained strong at 40.8% (+0.7%-point YoY) from continued support of resilient sales of its all-new Axia, in our view. Year-to-date (YTD) sales of 97,438 units (+12% YoY) achieved 31% of its 2023 sales  target of 314,000 units and 32% of our forecast (300,000 units). We believe the sustainability of its market share was boosted  by sales including the all-new Axia, Myvi, Bezza Alza and Ativa, which have a collective backlog of more than 200,000 units (7 – 8 months). Nevertheless, April sales still fell 41% MoM and 26% YoY to 18,874 units due to the expiry of sales tax  exemption incentive and shorter working month.

• Toyota’s YTD market share was stable at 13.4%. The Japanese marque is believed to be sitting on a backlog of nearly  20,000 units (3-6 months), in which sales would be mainly fueled by its best-selling models such as all-new Vios, Yaris,  Corolla Cross and Hilux. In April, 6,767 units were delivered (-26% MoM, -3% YoY).

• Honda sold 4,661 units (-41% QoQ, -23% YoY), commanding a slightly lower YTD market share of 9.3% (-2.9%-point  YoY). According to Paul Tan’s Automotive News, a camouflaged test for Honda City facelift was spotted on the roads, which  we think could be one of the 4 models that Honda Malaysia has lined up for new launches in 2023.

• 1,413 Mazda cars were sold during the month (-30% MoM, -23% YoY), translating to a steady YTD market share of 2.5%.  Our channel checks show that the carmaker has close to 7,000 units of order backlogs (3-5 months), which could be attributable to the CKD CX-30, constituting 40% of the total and the rest from CX-5 and CX-8.

• Proton’s cumulative market share grew 4.9%-point to 20.5% as sales grew 10% YoY to 9,228 units, albeit a 36% MoM decline. Proton revealed that the majority of its April sales (80%) were made up by Saga (3,949 units) and the X series (3,400  units). The national automaker has launched its first hybrid model, X90, on 7 May 2023, which we think would be supportive  of its 2H2023 sales prospects. 

• Nissan falling behind. April sales volume declined by 27% MoM and 48% YoY to 809 units, alongside a squeeze in YTD  market share by 1.1%-point to 1.4%. Without the key introduction of new models essential to spur volume growth, we opine  that Nissan has been largely counting on the sales of the ageing facelifted Serena S-Hybrid, Navara and Almera/Turbo.

• Our top picks are Bermaz Auto (FV: RM2.63/share), MBM Resources (FV: RM5.22/share) and UMW Holdings (FV: RM4.70/share) on the back of sizeable order backlogs and strong pipeline of new launches. We also like Sime Darby (FV: RM2.58/share) as a proxy for EV theme play in Malaysia with an attractive dividend yield of 5%

Source: AmInvest Research - 22 May 2023