KUALA LUMPUR (March 27): CGS-CIMB Securities has maintained its “neutral” rating on the Malaysian automotive sector with Bermaz Auto Bhd as its top pick and total industry volume (TIV) grew 27% month-on-month in February due to more working days than in January, amid Chinese New Year festivities.  

In a note on Monday (March 27), the research house said it sees a higher TIV in March as automakers push to fulfill backlog orders but expects a softer TIV in 2Q2023 post-SST exemption grace period expiry.

“We still project a lower year-on-year (y-o-y) TIV delivery of 665,000 in 2023 (versus 720,000 in 2022) mainly due to the expiry of the SST holiday grace period from Aprril 23 onwards and risk of macroeconomic headwinds.

“Nevertheless, we expect national brands to fare better than the non-national segment in 2023.

“For example, Perodua and Proton are targeting 11% and 8% y-o-y sales volume growth in 2023 on the back of high backlog orders from 2022 and new launches, such as Axia and Proton X90.

“Meanwhile, UMW Toyota has set a lower y-o-y sales volume target of 93,000 (-8% y-o-y), while Honda projects a flattish sales volume of 80,000 in 2023,” it said.

CGS-CIMB said  the recent strengthening of the ringgit against the US dollar should help to cushion the impact of the lower sales volume projection for 2023.

“We stay sector neutral. The sector trades at 12.1x CY2023 P/E, which is nearly 2 SD below the sector’s three-year mean of 14.9x.

“Bermaz is our top pick for its attractive 6.7% dividend yield for CY2023-24 and expanding market share, with the addition of Kia and Peugeot marques,” it said.