RHB IB Remains Overweight Call On Automotive Sector

"We believe that the major marques' healthy wait times provide earnings visibility, particularly for UMW (Group) and MBM Resources (Bhd)."  "The sector also offers attractive yields of 4.0%-10%, with MBM offering a 10% financial year 2023 forecast (FY2023F) yield," RHB IB said, adding that its FY2023F TIV remains at 680,000 units.

The Malaysian Automotive Association (MAA) recently announced that TIV in April 2023 decreased by 41% month on month (m-o-m) and 19% year on year (y-o-y) to 46,583 units, while TPV was at 41,160 units (-46% m-o-m, -25% y-o-y).  "The lower April figures were widely anticipated, given the lack of SST-exempt deliveries and the shorter working month." 

"Despite the low April numbers, we remain optimistic about the sector," the company said. "Our recent ground checks show a healthy waiting period across major marques, indicating resilient underlying demand."  It was noted that recent ground checks at the Malaysia Auto Show 2023 revealed that, despite the lack of an SST exemption, car dealerships continue to receive a healthy amount of orders, particularly for newly launched models. 

"This is reflected in the wait times for the major brands (two to six months for Perodua, three to six months for Toyota, and one to six months for Honda)."  "While most Proton models have no waiting period, the X90's recent launch could help Proton's numbers, as some dealers began taking X90 orders even before its launch," said RHB IB.

The investment bank named UMW and Bermaz Auto Bhd as its top picks, citing UMW as a favourite to benefit from the strong orders of Toyota Vios and Perodua Axia, among others. "We also like BAUTO (Bermaz Auto) for its continued volume growth of Mazda cars (driven by local assembly of the CX-30), Kia, and Peugeot," the company said.