RHB Research maintains its neutral call on the auto sector.
PETALING JAYA: RHB Research expects the auto sector’s total industry volume (TIV) to be slightly higher year-on-year (y-o-y) in the first quarter of 2024 (1Q24) due to backlog clearance, followed by weaker quarters y-o-y as the normalisation of sales volumes takes place.
“We anticipate March TIV to be lower y-o-y, given last year’s high base due to carmakers making a final push for sales and service tax (SST)-exempt deliveries,” the research house said in a note to clients yesterday.
The Malaysian Automotive Association (MAA) had reported a TIV of 62,800 units, down 1% y-o-y in February.
February TIV came in at 62,833 units –down 1% y-o-y and falling 4% month-on-month (m-o-m) after seven consecutive months of stronger y-o-y TIV. This brought the year-to-date figure to about 128,300 units.
The m-o-m decline was mainly due to Perodua (8% fall) and Honda (12% fall), but was offset by a 4% m-o-m rise from Proton, which is likely supported by the delivery of 2,314 units of its new Proton S70 sedan (versus 1,440 units in January).
However, this is still below Proton’s S70 sales target of 3,000 units a month in the first year, said RHB Research.
Meanwhile, total production volume (TPV) also saw a 14% m-o-m decline, but up 4% y-o-y in February. The m-o-m decline was driven by weaker February production across the major marques, such as Perodua, Proton, Toyota and Honda.
“The m-o-m decline was anticipated due to a shorter working month on the back of the Lunar New Year holidays. Production is likely to pick up in March,” it added.
RHB Research also said, “While the first two months of 2024 TIV already made up 20% of our 2024 TIV forecast of 625,000 units, we believe the current TIV levels are not sustainable, given the lack of drivers to boost sales to a new high after two record-breaking years.
“Hence, we maintain our TIV assumption as well as sector’s ‘neutral’ call.”
Meanwhile, there are more electric vehicles (EVs) entering the local market with several new EV launches over the last few weeks.Among the models introduced were the BYD Seal, Chery Omoda E5 and MG4 EV, whose prices range from RM104,000 to RM200.000.
Furthermore, Bermaz Auto Bhd
(BAuto) was recently awarded the distributorship rights for XPeng-marque EVs in Malaysia, with its first model to be launched in the second-half of 2024.
RHB Research said, “While the arrival of new EV models to the market should be beneficial for the industry, we believe this would not significantly change the TIV thisyear, given the RM100,000 pricing floor currently imposed on completely-built-up or CBU EVs.”
The research house’s top stock pick in the sector is BAuto.
The key downside risks include softer-than-expected orders and deliveries, and resurgent supply chain issues.
