KUALA LUMPUR: RHB Research remains cautious about the automotive sector due to the softening of car sales in 2023, given the challenging macroeconomic outlook.

The research house said auto executives are upbeat about the second half of 2022 (2H22) but cautious on 2023, citing potential macroeconomic headwinds and their potential impacts on car sales.

In particular, MBM Resources Bhd has pointed out that macroeconomic headwinds will likely impact lower to middle-income earners the most.

"This will weaken consumer purchasing power—which we think could weigh on new car sales for affordable brands," it said.

RHB Research has raised sector earnings by 5 per cent for one year forward earnings, mainly lifted by the 27 per cent increase for UMW Holdings Bhd.

The firm also lifted two-year forward (FY+2) earnings by 2 per cent, as its higher Perodua sales assumption (fuelled by the popularity of the all-new Alza) boosted UMW's and MBM's earnings forecasts.

"We are expecting earnings for most players to decline in FY+2 due to softening car sales in 2023, except for Bermaz Auto Bhd (BAUTO) and Sime Darby Bhd (SIME), driven by growth in Kia/Peugeot sales and industrial segment, respectively.

"We maintain our Neutral stance, premised on cautious 2023 forecasts," it added.

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