2024 TIV expected to stabilize at 650k units
Following another record-breaking year in vehicle sales in 2023 (800k units sold, +11% YoY), Maybank Investment Bank Berhad (Maybak IB) has turned more cautious on the industry’s outlook for 2024, expecting Total Industry Volume (TIV) to stabilize at 650k units (-19% YoY).
Maybank IB’s projection is conservative compared to MAA’s forecast of 740k units for 2024. We maintain a NEUTRAL rating on the automotive sector.
Potential risks that may affect near-term dynamics
Based on Maybank IB’s channel checks, there are signs of demand softening among certain car dealers and automotive parts suppliers, which might soon be reflected in car sales volume. The industry landscape is also undergoing a significant transformation due to the transition towards EV adoption, shifts in policies, and a rise in FDIs, impacting the industry’s near-term dynamics (albeit being long-term positive).
Key watch-outs for 2024
Key watch-outs in terms of trends/policies in 2024 affecting automotive industry players include: 1) the High-Value Goods Tax, to be implemented from 1 May 2024, which could impact premium vehicle sales; 2) targeted subsidy rationalization and higher service tax rates (which covers vehicle repair and maintenance services), which are expected to increase the costs of vehicle ownership and impact new car sales; and 3) rising trend from dealership to the agency model, driven mainly by Western carmakers’ plans to establish a stronger presence in Southeast Asia.
Maybank IB’s top pick for the sector is BAuto
Maybank IB favours BAuto (BUY) for its strong fundamentals and resilient financial standing, robust FCFs, and an attractive dividend yield offering of >8%.
Despite the bank’s expectation of a YoY normalisation in TIV, their projection for BAuto’s earnings growth for FY24E remains well-supported by sustained strong demand for Mazda. Furthermore, BAuto’s earnings would benefit from an increasing CKD mix in its portfolio. Potential addition of a new EV distributorship may further enhance its portfolio.
