Automotive sector seen to remain challenging in 2020

TheEdge Tue, Dec 24, 2019 11:43am - 4 years View Original


Automotive sector
Maintain neutral:
The total industry volume (TIV) decreased 2.4% month-on-month (m-o-m) to 52,600 units after strong sales in October. However, it was up 8.9% year-on-year (y-o-y).

Year to date (YTD), the TIV of 549,400 units or -0.2% accounted for 91% and 92% of our and the Malaysian Automotive Association’s full-year forecasts respectively. We expect a higher sales volume in December due to aggressive year-end promotional campaigns.

Sales of passenger cars stood at 47,800 units (-2.5% m-o-m; +10.1% y-o-y) in November. Non-national marques registered higher sales volumes in November m-o-m and y-o-y. Non-national marques’ market share improved three percentage points to 37%.

Most major brands registered higher sales volumes in November compared with those in the previous month except for Nissan (-3.4%) and Mazda (-19.6%). Perodua’s sales volume decreased 10.5% m-o-m or 3.3% y-o-y to 20,400 units. Proton saw sales of 9,600 units (+1.5% m-o-m; more than 100% y-o-y).

YTD, the total passenger vehicles increased 2.1% y-o-y to 500,900 units. Higher sales from Perodua (6.3% y-o-y) and Proton (50.6% y-o-y) helped offset lower sales of non-national marques, down 14.8% y-o-y. For the commercial vehicle segment, YTD sales remained low at 48,600 units (-18.7% y-o-y) as all major brands registered lower sales volumes.

We believe Perodua would likely surpass its 2019 sales target of 235,000 units as YTD sales already reached 222,000 units (+6.3% y-o-y). We believe its new 2019 Axia, launched in September, will attract buying interest due to its affordable pricing. The management expects about 27% of its sales forecast of 235,000 units to come from the Axia.

Mazda sold 803 units in November (-19.8% m-o-m; -57.5% y-o-y). As mentioned previously, the sales volume was affected by a delayed delivery for some of the new face-lifted CX-5 and the all-new CX-8 units due to the resolution of certain pricing issues. However, the issue has been settled.

Meanwhile, Toyota and Lexus saw a combined higher sales of 7,100 units in November (7.3% m-o-m, 82.1% y-o-y). According to the management, Vios, Hilux and Yaris were bestsellers in November — about 74% of total sales. YTD, 61,800 units have been sold (-0.5% y-o-y) — 86% of its 2019 target of 72,000 units.

We expect the automotive sector to remain challenging in 2020, with rising competition in the compact sport utility vehicle space.

Our TIV forecast for 2020 is 609,000 units, implying a flattish y-o-y growth.

We maintain our “buy” call on Bermaz Auto Bhd with a target price (TP) of RM2.34, and MBM Resources Bhd (TP: RM4.55).

Our “sell” rating still applies to UMW Holdings Bhd (TP: RM4.37) and Pecca Group Bhd (TP: RM1.14) due to their pricey valuations.

Sime Darby Bhd (TP: RM2.43) is rated as “hold”. — TA Securities, Dec 23

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