• Top Pick: Bermaz Auto (BAUTO). The Malaysian Automotive Association (MAA) reported a TIV of 62.8k units (-1% YoY) in February. We anticipate TIV in 1Q to be slightly higher YoY due to backlog clearance, followed by weaker YoY quarters as normalisation of sales volumes takes place. We maintain NEUTRAL on the sector.

• February TIV came in at 62,833 units (-1% YoY, -4% MoM), after seven consecutive months of stronger YoY TIV. This brought the YTD TIV to 128.3k units (+12.8% YoY). The MoM decline was mainly due to Perodua (-8%) and Honda (-12%). This was offset by the 4% MoM rise from Proton, likely supported by delivery of 2,314 units of its new Proton S70 sedan (vs 1,440 units in January). However, this is still below Proton’s S70 sales target of 3,000 units a month in the first year.

• Total production volume (TPV) saw a 14% MoM decline (+4% YoY) in February. The MoM drop was driven by weaker February production across the major marques, ie Perodua (-10% YoY), Proton (-10%), Toyota (-18%), and Honda (-18%). The MoM decline was anticipated due to a shorter working month on the back of Lunar New Year holidays. Production is likely to pick up in March.

• More EVs in the market. Over the last few weeks, several new EVs were launched in Malaysia. Among the models introduced were BYD Seal, Chery Omoda E5, and MG4 EV, whose prices ranging from MYR104k to MYR200k. Furthermore, BAUTO was recently awarded the distributorship rights for XPeng marque EVs in Malaysia, with its first model could be launched in 2H24. While the arrival of new EV models to the market should be beneficial for the industry, we believe this would not significantly change the TIV this year, given the MYR100k pricing floor currently imposed on CBU EVs.

• We anticipate March TIV to be lower YoY, given last year’s high base due to carmakers making a final push for SST-exempt deliveries. As January’s TIV was exceptionally strong (+30% YoY), we believe 1Q24 TIV to be slightly higher YoY on the back of order backlog clearance. This will be followed by lower YoY quarters ahead as normalisation of sales volumes post-record high year takes place.

• Remain NEUTRAL. While 2M24 TIV already makes up 20% of our 2024 TIV forecast of 625k units, we believe the current TIV levels are not sustainable given the lack of drivers to boost sales to a new high after two recordbreaking years. Hence, we maintain our TIV assumption as well as sector’s NEUTRAL call.

• Key downside risks include softer-than-expected orders and deliveries, and resurgent supply chain issues. The opposite represents the upside risks.

Source: RHB Securities Research - 21 Mar 2024