Stronger earnings forecast

PETALING JAYA: Carmakers are expected to post stronger year-on-year (y-o-y) earnings in the first quarter of 2024 (1Q24) as many of them have cleared their order backlogs, says RHB Research.

However, weaker quarter-on-quarter (q-o-q) earnings due to seasonality is expected, on top of a softer total industry volume (TIV) y-o-y.

The easing backlog of major marques such as Perodua and Toyota also supports RHB Research expectations that TIV in 2024 would likely soften y-o-y, especially after the two consecutive record-high years of 2022 and 2023.

RHB Research said: “We continue to forecast 2024 TIV of 625,000 despite the strong January TIV, which was expected as we believe the current strong sales merely reflect carmakers catching up on order backlog clearance.”

The current TIV run rate is unlikely to be sustained as Perodua and Toyota have seen declines in their order backlogs from 190,000 and 52,000 units in May 2023 to 128,000 and 28,000 as at end-December 2023, it added.

Its 2024 TIV forecast also implied a 22% y-o-y decline from 2023’s 800,000.

The research house has a “neutral’’ recommendation on the automobile sector and this is on a weaker TIV performance as the normalisation of sales volume takes place.

RHB Research’s top pick for the sector is Bermaz Auto Bhd (BAuto).

It liked the stock for its 10% dividend yield and believes BAuto car sales should remain resilient versus other marques.

The performance of the auto sector was generally in line with expectations.

It said Sime Darby Bhd, MBM Resources Bhd (MBM) and BAuto have met expectations, while Tan Chong Motor Holdings Bhd (TCM) continued to miss after recording a wider loss.

Sime concluded its 1H24 (June) with solid results, backed by stronger y-o-y contributions from the automotive and industrial segments.

Its auto sales volume in Malaysia and China recorded a 54% and a 16% jump y-o-y, offset by lower average selling price (ASP) in China, due to the ongoing stiff price war.

Its industrial segment continued to chart stronger earnings with the Australasia market still being the biggest contributor, thanks to Sime’s recent acquisitions of Onsite Rental and Cavpower Group.

UMW Holdings Bhd’s contribution to Sime’s 2Q24 earnings was negligible, as only two weeks of earnings were recognised post-acquisition.

MBM’s FY23 earnings were also in line, recording a 37% rise, thanks to the stronger contribution from Perodua (up 35% y-o-y) as the national carmaker charted record-high sales volume of 330,000 units (up 17% y-o-y) during the year.

BAuto has also largely met RHB Research’s expectations.

“The group is on track to achieve another record-high earnings this year as we believe a special dividend will likely be declared,” the research house added.

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