• Top Picks: Bermaz Auto (BAUTO) and Sime Darby (SIME). According to the Malaysian Automotive Association (MAA), November's TIV of 67.5k units (-3% MoM, -8% YoY) brought 11M24 TIV to 731k units. While 2024 TIV growth may be flattish YoY, we maintain our NEUTRAL sector weighting as the industry lacks catalysts to maintain its sales momentum in 2025. We maintain our 2025 TIV forecast at 730k units.
• Monthly TIV continues to weaken. In November, the MAA recorded a TIV of 67.5k units, which took YTD TIV to 731k units - up 1.4% YoY from 11M23's numbers. TIV weakened MoM in November, with the major carmakers charting softer numbers. This was led by Toyota, which saw a 6.7% MoM decline in sales volume, followed by Perodua (-5.7%) and Proton (-5.0%). Honda, meanwhile, recorded a 12.7% MoM rise. YTD, Perodua has sold close to 326k units and is well on course to surpass its 2023 sales level of 330,325 units, which will mark another record-breaking year for the national carmaker. Total production volume or TPV fell 14% MoM and 10% YoY to 60.9k units in November, bringing 11M24 TPV to 724.8k (+2.3% YoY) . The MoM decline was seen across the major marques - Proton (-21%), Perodua (-9%), Toyota (-19%) and Honda (-7%).
• 3Q24 results are in line. Generally, the performances of the auto sector players met expectations, as both SIME and MBM Resources (MBM) met our forecasts. Meanwhile, results from Tan Chong Motor (TCM) and BAUTO fell short of our estimates. SIME started off its FY25 (Jun) with a 11% YoY rise in 1QFY25 earnings, mainly contributed by the consolidation of UMW's numbers into its bottomline. MBM's net profit improved QoQ - as expected - given higher Perodua sales volumes (the national carmaker had two planned factory maintenance shutdowns in 2Q). TCM, on the other hand, concluded its 9M24 with widening losses while BAUTO's 1HFY25 (Apr) earnings fell 42% YoY due to weak sales delivery (-46% YoY).
• For 2025, we forecast a TIV of 730k units, implying a 8% YoY decline from our 2024 projection of 790k. We are anticipating a softer TIV as the high base effect kicks in, and do not see any compelling factors for 2025 auto sales to be maintained at the current elevated levels. We think the decline will mainly be contributed by the non-national marques, which continue to face intensifying competition as a result of new names that have entered the fray, ie mainly the China carmakers. Some car buyers may postpone their purchases in anticipation of further price cuts from both existing and new non-national marques - which would also destabilise the non-national segment.
• We remain NEUTRAL on the sector, as we remain cautious in our outlook for next year - given the ongoing price competition between the non-national marques, while softening order backlogs also indicate toned-down expectations for 2025. Our Top Picks are still BAUTO (attractive valuation, higher-than-sector-average dividend yield) and SIME (well-positioned for the RON95 rationalisation, with its broad EV line-up). SIME's stake in Perodua also helps to insulate the former against earnings risks, amidst intensifying competition between the non-national marques.

Source: RHB Research - 26 Dec 2024