Kenanga Research maintains its NEUTRAL call for Automotive sector as new vehicles sales in Malaysia, also known as total industry volume (TIV) has eased slightly albeit higher than a year ago in November 2023 with 71,908 units, down by 4% month-on-month (MoM) but up by 10% year-on-year (YoY).
In its Sector update, Kenanga said the slight decrease was due to car buyers were torn between enticing year-end promotions and an attractive line-up of new models in 2024.
“The cumulative 11MCY23 TIV of 718,748 units, up by 12% is also within our expectation. We maintain our CY23F TIV of 770,000 units, which is above 725,000 units projected by Malaysia Automotive Association (MAA).
“For CY24F, we project a TIV of 710,000 units, down 7.8% from an estimated 770k units in CY23),” it said today (Dec 21).
Kenanga said it acknowledge that the impending fuel subsidy rationalisation is likely to hurt the demand for mid-market models.
This while remaining optimistic on vehicle sales in the affordable segment, as the buyers from the B40 group which is its main target
market, will be spared the impact of subsidy rationalisation, and also could potentially benefit from the introduction of the progressive wage model, it added.
“The industry’s earnings visibility is still strong, backed by a booking backlog of 220,000 units that will keep the industry very busy for another 3 to 4 months.
“Looking ahead, we believe December 2023 TIV will hit another speed bump on short production month from extended festive holidays,” it said.
It added: “More than half of the backlog is made up of new models, alluding to how appealing new models are to car buyers. We expect a
similar trend in CY24, given an equally strong line-up of new launches during the year.”
Elaborating further, Kenanga said it sees resilient demand for the affordable segment.
“We believe a new car is still an affordable luxury for most Malaysian households despite the high inflation and a slowing global economy, the affordability of motor vehicle, potentially cheaper hire purchase cost, and attractive new models.”
It said a detailed analysis of the passenger vehicle segment in Nov 2023 at 65,246 units, down by 3% MoM, up by 11% YoY, saw that Honda returned to glory with the all-new Honda WR-V, up by 10% MoM and by 23% YoY
“Overall, sales were driven by the City, Civic and all-new HR-V, although it was still affected by inventory shortages, especially for the newer models. Based on sales projection, Honda currently has 15,000 backlogged orders, that will take around 2−4 months.
Meanwhile, taking the second spot was Nissan, managed to entice buyers as evidenced by its fast-moving inventory, but overall is still losing out in the all-new vehicles race.
Currently, Nissan depends on the face-lifted Nissan Serena S-Hybrid, Navara, and Almera Turbo with 1,000 backlogged orders, that will take around 1−2 months, Kenanga added.
Next is Perodua, with a decline in sales 3% MoM, and upward of 8% YoY saw robust sales, helped by the all-new Perodua Alza and all-new Perodua Axia, with equally strong sales of the Bezza, MyVi, Ativa models.
“Based on sales projection, currently has more than 140,000 backlogged orders, up to 12 months for the Alza and Bezza, 4 months for the Ativa and Myvi, and up to 3 months for others,” it said.
The research house said Proton’s (down by % MoM, up by 8% YoY) sales were mainly driven by the all-new X70, X50 and X90 with 3,048 SUV units sold, making up 26% of sales,
This is supported by the all-new S70, as well as face-lifted Persona, Iriz, Exora and Saga, collectively known as PIES. Based on sales projection, Proton currently has 31,100 backlogged orders (up to 12 months for the X50 and by 3 months for other models).
Toyota’s (down by 7% MoM and 4% YoY) sales were driven by its popular top models, namely the all-new Vios, Yaris, Corolla Cross and Hilux. Based on sales projection, Toyota currently has 20k backlogged orders (3 to 6 months).
The last in the top six spot is Mazda (down by 12% MoM, up by 30% YoY), which was driven by exceptional response for its Mazda CX-30 CKD, the CX-5 and CX-8. Based on sales projection, Mazda currently has 3,000 backlogged orders (3 to 5 months).
Meanwhile, it said excitement is building in the electric vehicle (EV) segment with the recent new launches of BYD Seal and Tesla Model 3 with expected introduction of locally-made first national EV from Perodua and Proton in CY25.
“Additionally, vehicle sales will be supported by new BEVs that enjoy SST exemption and other EV facilities incentives up to CY25 for CBU and CY27 for CKD.
“BEVs’ new registration had leapt significantly for the past two years (from 274 units in CY21 to over 3,400 units in CY22 and 9,000 units by Nov 2023). It is on track to meet national target for EVs and hybrid vehicles which are 15% of total industry volume (TIV) by CY30, and 38% of TIV by CY40.
“Meanwhile, the government’s pledge to enable charge point operators (CPOs) to secure faster approvals for installation provides comfort as currently only 1,434 EV charging stations have been built to-date.
Kenanga’s sector top pick is MBM Resources Bhd (MBMR) (OP; TP: RM5.50) for its strong earnings visibility backed by an order backlog of Perodua vehicles of 140,000 units, which is equivalent to almost half its CY24 sales target of 330k units.
“MBMR is good proxy to the mass-market Perodua brand given that it is the largest dealer of Perodua vehicles in Malaysia, as well as its 22.58% stake in Perusahaan Otomobil Kedua Sdn Bhd, the producer of Perodua vehicles. (It also has attractive dividend yield of about 11%.”
Similarly, RHB Investment Bank (RHB IB) also maintains NEUTRAL call for the sector, premised on an uncertain 2024, as the sector’s
outlook remains hazy.
“We introduce our 2024 TIV forecast of 625,000 units, implying a 14% YoY decline from our 2023 projection of 725,000 units. We are anticipating a softer TIV, as we do not see any compelling factors for 2024 auto sales to book another high.
“While another record-breaking year for TIV is now certain, we maintain our sector call as the industry lacks catalysts to maintain its sales momentum in 2024. We continue to hold the view that it will likely soften YoY,” it said.
RHB IB’s top Pick is still Bermaz Auto Bhd (BAuto), as we still like its 10% dividend yield.
“We also believe its car sales should remain resilient compared to that of other marques.”
