KUALA LUMPUR (Oct 20): Analysts expect the total industry volume (TIV) for the automotive sector to pick-up going forward, after posting a 7% month-on-month (m-o-m) drop in September, based on data by the Malaysian Automotive Association (MAA).

MAA reported TIV of 47,771 units in September, plunging 7% from 51,125 units in August.

Analysts attributed the decline mainly to buyers holding off their purchases in anticipation of new launches and the announcement of the Budget 2015.

In a note today, Maybank Investment Bank Bhd (Maybank IB) said it expects strong recovery in TIV in October, due to the launches of both the Perodua Axia and the Proton Iriz.

“To date, the Perodua Axia has received more than 32,000 orders (about 7,000 units delivered, of which about 1,500 were delivered in Sep), while the Proton Iriz registered more than 17,000 orders.

“Against this backdrop, we believe the weakness in September was only temporary and we expect a strong recovery from October onwards,” said the research house.

Maybank IB remained “overweight” on the sector, maintaining its 2014 TIV forecast of 675,000 units. Its top pick is MBM Resources Bhd due to its exposure to the small-car segment via Perodua.

MIDF Amanah Investment Bank Bhd said the decline in TIV in September was “nothing extraordinary”, and that national marques could see some recovery in the fourth quarter of 2014, driven by delivery of Perodua Axia and Proton Iriz in September.

“Against our year-end TIV target of 668,000, the 4Q14 TIV would need to grow 4.7% y-o-y. This translates to 175,695 units, averaging at more than 58,000 units per month. MAA’s forecast of 680,000 translates to 187,695 units in 4Q14, an +11.8% y-o-y increase at more than 62,000 per month,” it said.

However, MIDF mentioned that the tighter hire purchase loan approval, coupled with rising living costs following the fuel subsidy rationalisation could affect sales.

“We are currently neutral on the automotive sector. While the TIV outlook is expected to be buoyant given the sound domestic economy, we believe earnings could be impacted by the aggressive competition which may led to margin pressures for some of the companies that we cover,” the research house said.

Meanwhile, Kenanga Investment Bank Bhd expects TIV to rise 3% y-o-y to 175,000 in 4Q14 on new sales of Proton Iriz and Perodua Axia and aggressive sales campaign by auto distributors, as 4Q14 is typically a period for carmakers to meet their year-end targets.

“Sector remains neutral with Berjaya Auto Bhd as our top pick,” said Kenanga.