Optimistic outlook for auto sector

PETALING JAYA: The outlook for Malaysia’s automotive industry remains positive, with the sector expected to register strong total industry volume (TIV) numbers for 2022-2023, buoyed by robust deliveries and new bookings.

Despite the absence of tax waiver, demand for car in Malaysia remains strong as automakers continue to roll out new models to woo consumers.

Kenanga Research, which maintained its “overweight” rating for the sector, raised its TIV projection to 680,000 units from its earlier forecast of 650,000 units for 2022.

For 2023, its new TIV projection stood at 690,000 units, compared with 660,000 units previously.

Hong Leong Investment Bank (HLIB) Research, on the other hand, raised its 2022 TIV target to 700,000 units, which is a record high for the sector before moderating in 2023.

HLIB Research remained “neutral” on the sector, citing the accelerated sales in 2022 might lower down sales expectation into 2023.

The official TIV forecast by the Malaysian Automotive Association (MAA) was 630,000 units for 2022 and 636,000 units for 2023.

Data from MAA showed TIV for October 2022 stood at 61,002 units, a decline of 10% month-on-month (m-o-m) from 67,698 units sold in September 2022 and down 6% year-on-year (y-o-y) from 64,762 units sold in October 2021.

For the first 10 months of 2022, TIV rose about 6% y-o-y to 577,902 units.

Kenanga Research said the October 2022 TIV came in above its expectation at 89% of its full-year forecast as the delivery of selected models, namely, Perodua and Toyota, picked up momentum on the easing of parts shortages.

“Nonetheless, the production of most other models remained sub-optimum as the shortages of chips and components persisted on continued disruptions to the supply chain due to intermittent lockdowns in China.

“Having said that, the October 2022 TIV already surpassed that of October 2019 (pre-pandemic) by 13%,” it said in a report.

“An encouraging sign to note is that despite the strong TIV in October 2022, the industry order backlogs remained unchanged at 350,000 units, indicating strong new bookings despite the absence of any tax waiver.”

Kenanga Research’s sector top picks are MBM Resources Bhd, given the company’s market leader position in national marques, and Bermaz Auto Bhd (BAuto) for its positioning in the premium mid-market segment.

It pegged its target prices at RM4.45 for MBM Resources and RM2.30 for BAuto.

Meanwhile, HLIB Research’s sector top picks included MBM Resources and BAuto as well as DRB-Hicom Bhd.

“We advise investors to accumulate MBM Resources and DRB-Hicom, as we expect the national original equipment manufacturers (OEMs) to triumph over the longer term with potential growth from new export markets.

“We also like BAuto for its strong balance sheet with high order backlogs lasting for more than six months,” it added.

HLIB Research pegged its target prices at RM5 for MBM Resources, RM2.05 for BAuto and RM2.06 for DRB-Hicom.

“We now expect TIV to achieve 700,000 units for 2022, given the high order deliveries in the coming months as OEMs accelerate production and imports to fulfill the huge order backlogs and reduce the waiting period,” it said.

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