Based on preliminary indications, the UMW group registered record monthly sales of 41,664 units in December 2022. Perodua registered 31,224 sales (+4.9% year-on-year) in December, bringing full year 2022 sales to 282,019 units or (+42% YoY), while UMW Toyota (UMWT) delivered 10,440 units (+35%yoy), which brought its 2022 sales to 101,035 units (+14%yoy). These numbers are 11% and 12% ahead of MIDF Research’s 2022 projections.
Large order backlog. UMW’s order backlog remains solid. As of December 2022, UMWT had more than 60K of backlog orders, equivalent to 7-8 months of its monthly TIV. Meanwhile, Perodua had more than 200K backlog orders, equivalent to 9 months of its monthly TIV.
Around half of the backlog comprise of post-SST holiday bookings and remained largely unchanged vs. levels in the prior 3-4 months despite a pickup in deliveries, signalling still strong underlying demand. The strong order backlog should provide good revenue visibility moving into FY23.
New models slated for 2023. UMW also indicated of potential 2023 introduction of a second hybrid model after the Corolla Cross hybrid, and a battery electric vehicle (BEV). Hence, MIDF in its coverage on UMW Holdings has stated that it believes this could be the BZ4x crossover BEV.
Another model that is overdue for a replacement is the group’s bread-and-butter Vios model (B-segment sedan), which is one of the group’s largest volume driver accounting for around a third of UMWT TIV, based on the research house’s estimate. The new generation Vios has already been launched in Thailand and Indonesia throughout 2022 and MIDF would expect the local market to follow suit.
Perodua meanwhile, is expected to introduce the second generation of Axia this year – the Axia is Perodua’s third largest volume driver accounting for approximately 20% of Perodua TIV.
MIDF has reiterated BUY call on UMW with unchanged SOP-derived target price (TP) of RM5.00. UMW has been a sector laggard, currently trading at a deep 30% discount to historical mean.
The research house put up such recommendation due to factors such as UMW as a proxy to the sector recovery –52% market share via Perodua and Toyota; the stronger Ringgit provides tailwind for the group, particularly UMWT operations which imports kits and CBUs in USD. For every 1% change in the USD impacts FY23F earnings by 3.7%; a re-acceleration of new launches; strong order backlog underpins 2023 prospects; UMW Aerospace as an indirect play into air travel recovery; a more aggressive stance on dividend payout capitalising on its strong net cash position of RM1.1 billion (26% of market capital).
