KUALA LUMPUR (Sept 10): Hong Leong IB Research has downgraded the automotive sectotr to “Underweight” and said year-to-date sales had been disappointing at 380,800 units (down 3.2% year-on-year), on weakened consumer sentiments, tightened lending guidelines and GST implementation.

In a note today, the research house said the sitiuation was further exacerbated by the ringgit weakening, adding the ringgit weakening also had direct negative impact on the whole Automotive industry value chain.

HLIB Research said the whole Automotive industry (except MBM Reources Bhd) had been reporting deteriorating margins.

The research house said MBM was leveraged to strong Perodua sales.

“Expect sustaining earnings for MBM in 2H15 and 2016 from robust sales of Perodua and turnaround of alloy wheel plant.

“Expect 2015 total industry volume to drop by 2.5% y-o-y to 649,800 units (previously 663,000 units) with stronger demand for A-B segments offsets by weaker demand for mid-high end segments.

“Downgrade to Underweight on Automotive sector – Top Pick – MBM (target price: RM3.45),” it said.