MIDF reports the August TIV rose 36% to 66,614 units reflecting a recovery in chip and component supply, deliveries of strong orders placed prior to the tax-holiday expiry on 30th June. Malaysian Automotive Association expects September TIV to sustain at August levels. On a year-on-year basis, growth was significantly stronger off a low base last year given the lockdowns from June till August 2022.
On a year-to-date basis, August TIV comes up to 447,209 units (+63%yoy) still slightly ahead of expectation says MIDF making up 74% of its full-year 607K forecast. But it expects Nov-Dec sales could weaken as buyers opt for the new year 2023 registrations. As for brands, Honda and Perodua led the sequential growth, up by 51% and +42% respectively. Other than supply recovery, Honda also benefitted from the launch of the new HRV in mid-July. For Perodua, production improved to its highest this year, delivering on its promise to raise production to 26K/month – Perodua produced 27.2K units in Aug22’.
Overall, players are sitting on an implied 7-12 months waiting list. The strong order bank provides good revenue visibility for the sector moving into 2023. Furthermore, new bookings post-tax holiday have been holding up pretty well, with an average 20%-30% reduction vs. average monthly bookings during the tax holiday – new bookings from Jul22 onwards will likely feed into TIV from Apr23’ onwards further cementing this revenue visibility from strong forward bookings.
MIDF remains positive on the auto sector as a play into a recovery in domestic consumption. Notwithstanding
normalization in OPR and higher inflation (which in the Malaysian context is much better contained) prospects are
underpinned by strong order banks and an improving labor market & household income condition, while valuations are 25%-
40% below the historical mean.
Stocks to consider, BAuto (BUY, TP: RM2.36), MBM Resources (BUY, TP: RM4.28), and UMW (BUY, TP: RM4.78) remain top sector picks. Beyond the reopening theme, BAuto is a play into brand expansion from the acquisition of Kia and Peugeot franchise, leading to structural expansion in market share and above-industry growth. MBM Resources and UMW are both key proxies to the sector recovery given exposure to Perodua (and Toyota for UMW).
