Highlights

MAA’s Feb 2013 data reported TIV of 45.0k, still a growth of +2.2% yoy on the back of lower base 2012 year (Thailand flood and implementation of responsible lending guideline), but a significant drop of 18.3% mom due to shorter working month (Chinese New Year holidays). We maintained our growth expectation of 3.5% yoy for 2013, despite ytd growth of 17.8% yoy, due to higher base in 2H12.

Comment

Despite lower sales, the dominant national cars reported stronger combined market share of 55.2% in Feb vs 50.8% in Jan, as foreign marques suffered from weaker mom sales vs. industry TIV. Perodua (UMW and MBMR) Feb sales dropped 3.1% yoy and 7.3% mom. On the other hand, Proton (DRB) Feb sales dropped 5.8% yoy and 16.0% mom.

Toyota (UMW) reported significant drop in Feb sales with 34.0% yoy and 28.5% mom, after moderating promotional campaigns (held last year) and strong competition from Nissan and Honda (as well as other marques). Ytd market share has dropped significantly to 11.8% vs. 16.8% in 2012.

Nissan (TCM) maintained its position after Toyota with market share of 8.4% in Feb and 9.4% ytd. Feb sales dropped by 32.2% mom on shorter working month, but increased by 51.7% yoy due to low base 2012 year. Nissan continued to leverage on strong Almera sales, and expected to launch new Livina (another strong demand model) soon.

Honda (DRB) remained in third place with market share of 7.3% in Feb and 7.1% ytd. Similarly, Feb sales dropped 24.8% yoy, but increased substantially yoy (more than 100%), due to the closure of Alor Gajah manufacturing plant in 1Q12. Honda has just recently launched its 4th generation CRV and new variant City, which is expected to boost coming month sales.

Other foreign marques have reported lower sales in Feb with lower market share at 18.6% vs. 19.2% in Jan-13 and 19.3% in 2012, due to shorter working month and moderating promotional campaigns. Leading the pack is Mitsubishi, Hyundai-Inokom, Ford, Naza-Kia and VW.

Risks

• Prolonged tightening of banks’ HP rules.
• Slowdown in the Malaysian economy.
• Global automotive supply chain disruption.
• Sudden jump in fuel prices and interest rate.

Rating

Overweight

• Positives –
  • Potential export to regional market, i.e. Malaysia as a hub.
  • Implementation of Energy Efficient Policy.
  • Appreciation of RM.
• Negatives –
  • Implementation of responsible lending guideline
  • Instability of global automotive supply chain.

Valuation

• Upgrade the sector to Overweight after upgrading MBM to BUY. Top Pick: DRB (TP: RM3.30) and MBM (TP: RM4.35).

Source: Hong Leong Investment Bank Research - 20 Mar 2013