Green light for vehicle assembly plants a positive

Better showing: A Proton showroom in Shah Alam. The company reported higher vehicle sales for 2020 than its initial target.

PETALING JAYA: The green light given by the government for all automotive assembly plants covering vehicle and component manufacturing to continue operations, with the activity restored to the essential services list as at Jan 16,2021 is positive for the automotive industry.

Kenanga Research is expecting a stronger recovery in 2021 with a total industry volume (TIV) target of 585,000 units (14% increase year-on-year) even after factoring in cautious consumer sentiment under the second movement control order (MCO 2.0).

“The new volume-driven launches in the fourth quarter of 2020 such as Proton X50, Honda City and Nissan Almera could help improve sales with back-logged booking overflowing into 2021.

“Vehicle sales will also be boosted by the extension of the sales and service tax (SST) exemption to June 30,2021, seasonal promotions and new launches in the second half of 2021, ” said Kenanga Research.

Meanwhile, Maybank Investment Bank (IB) Research is keeping its 2021 TIV of 580,000 to 600,000 units unchanged.

“While we do not rule out the possibility of MCO 2.0 extending beyond Jan 26,2021, which may affect sales during this trying period, the SST holiday should provide a good counter-effect to vehicle sales in subsequent months, ” said Maybank IB Research.

Kenanga Research said overall, 2021 could potentially be a better year supported by new launches such as the Perodua D55L along with a better incentive programme under the National Automotive Policy (NAP) 2020, positive impact from the central bank’s overnight policy rate cut and pre-emptive measures to assist those whom might be financially challenged by Covid-19 impact.

The research unit also upgraded its 2020 TIV target higher to 515,000 units (17% drop year-on-year) from 500,000 units previously after Perodua, Toyota and Proton reported higher vehicle sales for 2020 than their initial target numbers.

For the 2020 full-year TIV, Perodua sold 220,154 units, Toyota 59,320 units and Proton, 109,716 units.

Kenanga Research has an “outperform” call on Bermaz Auto Bhd (target price: RM1.70), DRB-Hicom Bhd (target price: RM2.50), and UMW Holdings Bhd (target price: RM3.85) with MBM Resources Bhd (target price: RM4.10) as its top pick for the sector for its pure proxy to national carmakers as the largest Perodua dealership and deep value in its 22.58% stake in Perodua.

Maybank IB Research has a “buy” call on Bermaz Auto (target price: RM2.10), MBM (target price: RM4.00), UMW (target price: RM3.95) and Sime Darby Bhd (target price: RM2.70).

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