Investment Highlights

• We maintain a NEUTRAL rating on the automotive sector mainly attributed by fewer new model launches with a projection of 670k units in 2024F. Our conservative outlook stems from the normalisation of vehicle sales post-expiration of the sales & service tax (SST) exemption and the anticipated implementation of targeted subsidies, both of which are expected to have adverse effects on consumers' disposable income and lead to a reduction in car demand. The absence of new model launches in 2024 may dampen the optimistic outlook for vehicle sales this year. We anticipate that 2024F total industry volume (TIV) may not surpass the previous year’s record. The sector is expected to experience a slowdown due to less new model launches this year.

• Malaysian Automotive Association’s (MAA) January total industry volume (TIV) dropped by 16.5% MoM to 65,499 units. This reduction was primarily attributed to companies accelerating delivery to fulfill backlog orders in December. Nonetheless, January TIV marked a significant 30.5% increase compared to the 50,168 units recorded in the previous year. With one month accounted for, the sector's performance is expected to remain in line with the TIV projection of 670k units.
  
  The slight dip in TIV was dragged by the weaker commercial vehicle sales, which declined by 18.5% MoM to 6,105 units, while the passenger segment inched downwards by 16.2% MoM to 59,394 units. Also, national marque sales recorded a mixed performance of +5.6% for Proton and -4.9% for Perodua. On a YoY basis, TIV increased by 30.7%, underpinned by growth across most models, particularly for Honda (+103%) and Perodua (+38.4%). Given that January 2024 TIV performance is slightly lower to match November 2023 sales, we still believe that our 2024F TIV forecast of 670,000 is achievable.
   
• Rise in Perodua’s Jan market share to 45.3% (2.3%-point YoY) with sales of 29,682 units. Perodua maintained its lead ahead of Proton with a 38% YoY growth to 29,682 units vs. Proton’s 12,775 units. However, sequentially, Perodua’s sales slid 4.9% while Proton gained 5.6%. With that, we expect Perodua to maintain its strong performance going forward.
   
• Toyota cumulative market share marginally decreased to 9.6% (-0.5%-point YoY) with Jan sales declining by 7.5% YoY to 6,276 units. On a MoM comparison, Toyota’s sales dropped by a more substantive 40% due to the ramp-up in deliveries in the previous month. Even so, Toyota captured the largest 32% share of the non-national passenger vehicle market.

• Honda’s Jan market share inched upwards to 10.8% (-1.2%-point YoY). Honda aims to stimulate booking rates through the CNY promotion "Ride Into Prosperity", offering up to RM30,000 off on CKD models, excluding the new CR-V. Notably, Honda's City sedan is the best-selling model currently, contributing 30% to Honda’s total Malaysian sales with over 80,000 units sold in 2023.

• Mazda recorded a TIV of 1,308 units (-10.4% MoM, 7.6% YoY) with a slight decline in market share to 2% (+0.4%- point YoY). Bermaz Auto recently launched the facelifted Mazda CX-5 in Malaysia and expects increased booking rates for Mazda Sports Utility Vehicles (SUVs).

• Proton’s cumulative market share up by 0.5%-point to 19.5%, marking 12,775 units of Jan TIV sales. In the beginning of January 2024, Proton initiated deliveries of the recently launched S70, introduced at the end of 2023, with over 5,000 units booked. This launch is anticipated to significantly bolster the company's FY24F sales. Notably, sedans and hatchbacks dominated sales figures, diverging from the usual preference for SUVs and signaling a potential shift in consumer demand trends.

• Nissan's performance experienced a rebound, with a slight increase in MoM TIV of 0.4% to 812 units from 809 units. Additionally, Jan sales surged by 23% YoY, albeit with a slightly decreased cumulative market share of 1.2% (-0.1%-point). Meanwhile, Nissan unveiled the Almera Kuro Edition for 2024, showcasing the new Glacier Grey exterior color.

• Sector top pick. We continue to like BAuto, given its compelling model rollouts and CKD model coupled with an attractive dividend yield at 7%.

Source: AmInvest Research - 22 Feb 2024