Malaysia's car industry is set for a smoother drive.
KUALA LUMPUR: Maybank Investment Bank Research expects the automotive total industry volume (TIV) to hover at similar levels in May before picking up in June, leading up to the Hari Raya festivity where sales are commonly made.
The research house said second half of 2017 would likely see better sales especially for marques with scheduled new launches.
“We remain positive from a bottom-up stock pick with buys on MBM Resources and Pecca Group for Perodua exposure, and Tan Chong Motor
Holdings on trough valuations,” Maybank said.
It describe the volume contraction in April 2017 TIV as a “temporary blip”. It added that the key month-on-month volume contraction was mainly from Perodua and Honda whereby the former was affected by the phasing out its pre-facelift models (Axia and Bezza) while the latter saw a month-on-month sales hangover after a strong push in March 2017 to close its financial year.
Overall, the month-on-month contraction in TIV was almost across the board except outliers such as Mazda (+21% MoM) and BMW (+6% MoM).
“Despite stronger year-on-year TIV sales in first quarter 2017, auto players would likely continue to report weaker quarterly earnings if not losses, mainly coming from higher imported component costs impacted by still a weak ringgit.
“Nonetheless, with the recent strength in ringgit against US dollar and Japanese yen coupled with stronger TIV, we take the view that the sector has bottomed and is en route for an earnings recovery 6-9 months from now,” Maybank said.
The research house believes that TIV should improve half-on-half in second half of 2017, on the back of popular mass-market launches (Perodua Myvi, Mazda CX-5, Honda Jazz FL), with highlights on Perodua’s new Myvi which could bring back some excitement to the industry.
“We prefer MBM as a proxy to Perodua’s growth as a shareholder, auto-parts supplier, and dealer. Within our coverage, we also like Pecca as the sole supplier of leather car seat covers to
Perodua. Elsewhere, TCM is attractive from a valuation perspective.
“We also see earnings recovery coming from an on-going purchase cost adjustment with Nissan, potential breakeven of its Indo-China operations, stronger contract assembly volumes from Mitsubishi and Subaru at its Segambut plant,” Maybank said.
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