This article first appeared in The Edge Financial Daily on March 21, 2019
Auto and auto parts sector
Maintain overweight: Total industry volume (TIV) for February 2019 dipped marginally by 1.8% year-on-year (y-o-y) to 39,800 units, dragged by weaker sales from foreign carmakers (except Toyota and BMW). Meanwhile, the 17.8% month-on-month (m-o-m) decline was expected, attributed to a shorter working month, in conjunction with the Chinese New Year festive holidays. All in, the cumulative two months of 2019 (2M19) TIV of 88,300 units (+3.7% y-o-y) is broadly within our 2019 full-year estimates of 603,000 units (+0.7% y-o-y).
Proton registered sales of 5,300 units (-23% m-o-m, +37% y-o-y) in February with 2M19 market share up by 12.1% (2M18 at 8.6%). We expect Proton sales to remain robust in the coming months, spurred by the deliveries of its maiden sports utility vehicle (SUV) X70 and refreshed models in the pipeline such as facelifted Iriz and facelifted Persona. Elsewhere, Perodua’s February sales came in at 17,200 units (-14.3% m-o-m,+0.7% y-o-y), bringing cumulative 2M19 sales to 37,400 units (+7.3% y-o-y); maintaining its dominant position with 2M19 market share of 42.3% (2M18 at 40.9%). Both local carmakers continued to receive favourable response to their maiden SUVs, with bookings climbing up to 20,000 units (Proton X70) and 14,000 units (Perodua Aruz) respectively.
On the flip side, non-national carmakers’ 2M19 market share slumped 43.9% (2M18: 49%). The y-o-y weakness was experienced across most foreign brands except Toyota (+18% y-o-y) and BMW (+6.2% y-o-y), driven by new model line-ups — the Toyota Vios, Toyota Camry, Toyota Rush, BMW X5 and BMW 7 Series. We believe the expected launch of the all-new Toyota Yaris (second quarter of 2019 [2Q19]) and the all-new BMW 3 series (third quarter of 2019 [3Q19]) will invigorate 2019 sales for these two brands.
We maintain our “overweight” rating. Our sector top picks include Bermaz Auto Bhd and MBM Resources Bhd (MBMR). Downside risks could come from: i) a prolonged tightening of auto financing hindering the borrowing ability of car buyers; ii) exchange rate risk; and iii) a slowdown in the economy. — AffinHwang Capital, March 20