Competition Set To Intensify In the B-Segment

The Malaysian automotive industry’s total volume is expected to reach 740k units in CY24, aligning with projections from the Malaysia Automotive Association (MAA), as cited by Kenanga Investment Bank (Kenanga) in their report today (Tuesday). They anticipate bifurcated market dynamics with robust demand in the affordable segment, shielded from fuel subsidy rationalisation, while the mid-market may face subdued consumer sentiment due to potential cost concerns.

Kenanga maintains a NEUTRAL stance while highlighting trends and opportunities for investors.

The sector’s earnings visibility remains strong, supported by a substantial booking backlog of 200k units, predominantly comprising new models, which are expected to drive sales throughout CY24.

The analyst’s sector top pick is MBMR (OP; TP: RM6.30), favoured for its close association with the popular and fuel-efficient Perodua brand, offering investors an attractive dividend yield of approximately 7%.

The automotive market’s two-speed trajectory in CY24 underscores both challenges and opportunities, particularly as the industry navigates through policy changes and consumer preferences amid economic shifts.

The introduction of new battery electric vehicles (BEVs) enjoying SST exemptions and other incentives until CY25 (CBU) and CY27 (CKD) is expected to bolster vehicle sales significantly. The government’s ambitious targets for EV adoption further underscore growth potential, with plans to enhance infrastructure such as charging stations.

Kenanga notes the competitive edge of domestic brands like Perodua and Proton, which have expanded their offerings with advanced features and upcoming EV models. These developments are poised to intensify competition within the B-segment, challenging non-national brands.

While Kenanga maintains a neutral outlook on the sector, the investment in MBMR stands out for its robust fundamentals and strategic positioning in the evolving automotive landscape.

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