• Top Pick: Bermaz Auto (BAUTO). The Malaysian Automotive Association (MAA) reported a TIV of 58k units (-18% MoM) in April, with total production volume (TPV) reaching 56.9k (-15% MoM). The weaker MoM performances were expected due to the shorter working month. We anticipate auto sales volumes to pick up MoM in May post the Aidil Fitri season. We maintain our NEUTRAL call on the sector.

• April TIV came in at 57,991 units (+21% YoY, -18% MoM), bringing 4M24 TIV to 260,236 units (+8% YoY). The softer MoM performance was anticipated, considering the shorter working month due to the Aidil Fitri festivities as well as March’s high base. All major marques saw MoM declines, with Proton and Perodua falling by 13% and 7% while Toyota/Lexus and Honda fell 24% and 43%.

• April TPV fell 38 % YoY, but fell 15% MoM. Among the major marques, Honda and Perodua saw the largest MoM declines at 20% and 14%, while Proton and Toyota each fell by 10% and 9%. The TPV’s strong MoM decline is likely attributable to the same reasons for the strong MoM decline in TIV. On top of the Aidil Fitri holidays, we expect 2Q TPV to be lower QoQ on the back of scheduled factory maintenance shutdowns by the major marques.

• Perodua eyes for 330k units to be delivered this year. Perodua is targeting to maintain its sales level at 330k units in 2024, on par with last year’s performance of 330,325 units. The national carmaker has been recording stronger sales YTD at 112.8k units (+15.8% YoY), beating the sector’s performance of +8% YoY. Although it does not disclose plans for new model launches for the year, we believe such a target is achievable, considering that there are no signs of sales slowdowns for Perodua despite two recordbreaking years. Therefore, we revise up our 2024 sales assumption for the company to 330k units from 250k units previously to match with Perodua’s own sales target.

• Remain NEUTRAL. As upward revisions to Perodua’s sales assumption calls for a revision of TIV assumption, we are in the midst of reviewing our TIV estimate – hence, we maintain our 2024 TIV forecast of 625k units at this juncture. While 4M24 TIV already makes up 42% of our 2024 TIV estimate, we continue to believe the current TIV levels are not sustainable, given the lack of drivers to boost TIV to new highs after two record-breaking years. We believe normalisation of sales volumes should take place in the coming months, as the backlog is anticipated to continue declining from its peak.

• 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 - 27 May 2024