• During the recent 3QCY24 results season, SIME’s earnings fell short of our expectations, while other peers reported results in line with forecasts.

• To recap, we have previously revised our 2024F TIV forecast upwards by 12% to 800k units (from 710k), driven by strong domestic demand and steady economic conditions.

• We believe TIV will remain strong moving forward, supported by sustained consumer demand, civil servant salary increases, aggressive year-end promotions, improved vehicle availability, and the launch of new models across both national and non-national segments

• We maintain our OVERWEIGHT recommendation on the automotive sector, as we believe 2024 TIV are likely to sustain the momentum seen in the previous years. Accordingly, we have a BUY call on BAuto (TP: RM2.80) and SIME Darby (TP: RM2.60), while HOLD call for MBMR (TP: RM5.50).

Mixed Performance

The recent corporate earnings season was positive for automotive companies. Two out of three companies under our coverage including MBM Resources Berhad and Bermaz Auto Berhad meeting expectations, while Sime Darby underperformed. MBMR’s 3Q24 revenue rose 2.8% YoY to RM638mn, driven by better sales and production volumes from Perodua suppliers. Headline profit fell 16.6% YoY to RM87.4mn due to a one-off land sale gain last year, but core profit increased 15.8% on higher JV contributions and a lower tax rate. BAuto's 3QCY24 revenue fell 22.3% YoY to RM846mn, while net profit dropped 29.9% to RM70mn. The decline was driven by lower domestic sales, impacted by new model launches from competitors like Mercedes-Benz, smart, MINI, and Great Wall Motor. Meanwhile, Sime Darby revenue for 3QCY24 declined 2.8% QoQ to RM18,246mn due to weaker industrial and motor sales. However, net profit surged 857% QoQ to RM795mn, driven by one-off gains from disposals. Excluding these, core net profit jumped 276% QoQ, supported by robust EV demand in Singapore and improved profitability in China from government incentives.

TIV Remains Elevated

Moving forward, we anticipate Total Industry Volume (TIV) to sustain its strong performance, driven by the upcoming civil servant salary increment in Dec 2024 and year-end discount campaigns, which are expected to boost affordability and attract more buyers. Until Oct 2024, TIV was at 664k units which was 2.5% YoY higher than 10M24 of 648k units. Note that we have previously revised our 2024F TIV forecast to 800k units (from 710k). Nonetheless, downside risks remain, including (i) rising interest rates, which could increase vehicle financing costs and reduce consumer demand, particularly among loan-dependent buyers, and (ii) ongoing global supply chain disruptions, such as semiconductor shortages and production delays, which may limit vehicle availability and hinder sales performance.

Maintain OVERWEIGHT Call on Automotive Sector

All in, we maintain an OVERWEIGHT stance on the Automotive sector. We have a BUY call on BAuto (TP: RM2.80) and SIME Darby (TP: RM2.60) while HOLD call for MBMR (TP: RM5.50).

Source: BIMB Securities Research - 2 Dec 2024