RHB Research has made a “Neutral call” on the Automotive sector with Bermaz Auto and Sime Darby as it top picks.
It said that as the 2023 headwinds could weigh on sector sentiment, including Softer orders from purchases brought forward to June, rising OPR lowering auto loan approval rates, rising car prices, and inflation continuing to erode consumer purchasing power.
The stockbroking firm said that while 2H22 earnings may be strong from the fulfillment of backlog orders, we advise investors to look beyond that and position for said headwinds.
RHB said that it likes e SIME as a beneficiary of China’s car sales recovery and potential special dividend from the sale of its non-core ports and healthcare assets.
RHB said that it believes that new orders have likely weakened in July and will stay subsided in the following months, as months’ worth of orders have been brought forward to June, given it was the last window of opportunity to take advantage of the Sales & Services Tax (SST) exemption.
“Orders should gradually recover towards the end of the year, mainly driven by new car launches, facelifts, and seasonal discount,” RHB said.
The stockbroking firm said that the higher overnight policy rate (OPR) would translate to higher fixed rates on new hire purchase (HP) loans, raising the cost of financing car purchases. Consequently, banks will likely turn more cautious and auto loan approval rates may fall. We found that historically, a higher OPR coincided with lower loan approval rates
