Proton to develop six versions of engines from 1.0 litres to 1.5 litres
KUALA LUMPUR: CIMB Equities Research expects total industry vehicle (TIV) sales growth to ease in the second half of 2017 (2H17F) due to a high base in 2H16 where total 2H16 TIV grew by 11% half-on-half.
It said on Thursday the sector is also facing headwinds from currency volatility, which has resulted in higher import costs for completely built-up (CBU) models and completely knocked-down (CKD) kit components.
“We expect the market to remain competitive, with prolonged discounting as dealers continue to drive down inventory levels. Overall, we still project 3% TIV growth in 2017F,” it said.
CIMB Research maintained its Underweight call on the sector as it thinks the strong sales growth is not sustainable in 2H17 due to lack of new model launches and on-going margin erosion from higher operating expenditure.
“The sector trades at 1.1 times CY18F price-to-book value (P/BV), in line with its three-year mean. However, disappointing earnings over the next one year could present downside risks.
Key upside risks are the strengthening of RM vs. US$ and JPY and better-than-expected TIV growth. Bermaz remains our top pick due to its attractive earnings recovery outlook.
Total industry volume (TIV) in August 2017 grew 6.5% on-month due to sales recovery following post-Hari Raya holidays and fulfillment of back orders as the e-daftar registration system normalised.
However, August 2017 TIV dropped 1% on-year due to a higher base in July 2016 following multiple new model launches in the middle of 2016.
Malaysian Automotive Association (MAA) expects sales in September 2017 to be flat on-month due to the ongoing promotional campaigns by dealers.
The TIV for January-August 2017 grew 3.9% on-year to reach 384,734 units, driven by higher passenger vehicle sales of both national and foreign brands, which rose 6.4% and 3.8% on-year respectively.
The growth came from various new model launches from both national and foreign brands. In addition, the stronger TIV sales were in line with the higher passenger car hire purchase loan applications and approvals in January-August 2017, which are up 4% and 5% YTD respectively.
Overall, January-August 2017 TIV made up 64% of our full-year TIV forecast of 597,000 units. However, total vehicle production volume in January-August 2017 fell by 1% on-year.
Despite the improving TIV sales, MAA said total vehicle production volume fell by 1% on-year to 342,958 units in January-August 2017.
MAA attributed the production decline to the cautious stance taken by the automakers and inventory adjustments amid the soft market environment.
National brand closing the gap with foreign brands. Perodua maintained its dominant position with 36% market share on the back of 3% volume growth YTD.
Meanwhile, Proton’s market share improved to 13% YTD (vs. 12% in FY16), driven by multiple new model launches.
Overall, the national brand continued to close the gap with 49% market share in 8M17 vs. 48% in 8M16.
Meanwhile, Honda continued to dominate the foreign brands with 18% market share, driven by 27% on-year sales volume growth in January-August 2017 from various new model launches.
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