HLIB Research has maintained its 2024 TIV at 760,000 units, down 5% y-o-y versus MAA’s 765,000 units target.
PETALING JAYA: Analysts generally expect Malaysia’s new vehicle sales or total industry volume (TIV) will grow between 730,000 and 765,000 units in 2024, with the second half year (2H24) sales likely to be lower than 1H24.
Malaysia Automotive Association (MAA) in a recent release said TIV for July came in at 71,739 units, rising 23.5% month-on-month (m-o-m) and up 10.7% year-on-year (y-o-y) respectively.
UOB Kay Hian (UOBKH) Research in a report said it maintains a market weight on the automotive sector, while expecting an 8.8% drop in TIV growth or 735,000 units for 2024.
“Despite strong results in 1H24, we expect 2H24 sales to be slightly lower,” it noted.
The research house said Perodua’s sales have remained at a robust level, averaging 28,849 units in 7M24 as compared with last year and the pre-pandemic years (compared with an average of 24,732 units in the first seven months of 2023, 20,813 units in the first seven months of 2022 and 20,244 units in the first seven months of 2019).
“We believe this growth is driven by higher sales of its budget-friendly products, categorised under the A and B car segments, due to their lower price points.
“These could benefit MBM Resources Bhd
and Pecca Group Bhd due to their direct exposure to selling and supplying parts for the brand, coupled with growth prospects for both companies,” said UOBKH Research.
According to Bloomberg, MBM Resources is currently trading at eight times 2024 price-to-earnings (PE), while Pecca is trading at 17.1 times based on management’s guidance 2024 PE.
“We see significant potential upside for MBM Resource compared with its peers’ 12 times PE, while Pecca is trading at a premium given its robust outlook for business division expansion,” the research house added.
Meanwhile, Hong Leong Investment Bank (HLIB) Research has maintained its 2024 TIV at 760,000 units, down 5% y-o-y versus MAA’s 765,000 units target.
“This is given the still high order backlogs for Perodua and more aggressive sales activities by the various original equipment manufacturers (OEMs) in 2H24,” said the brokerage firm.
Its top picks are MBM Resources with a target price (TP) of RM6.50 and DRB-Hicom Bhd (TP:1.65), leveraging onto national OEMs namely Proton and Perodua, which are less subject to competitive pressure for pricing below the RM100,000 segment and potential export growth in the longer term.
The upcoming wage hike for government employees will potentially support TIV especially for the A and B segments.
However, the entrance of several new OEMs into the market may pose threats to non-national OEMs, due to their aggressive launchings with attractive pricing schemes, said UOBKH Research.
The recent strengthening of ringgit also bodes well for the sector, potentially offsetting the higher operating costs environment in 2H24.
Kenanga Research in a note to clients said that its TIV projection is a tad more conservative than the 765,000 units projected by MAA.
“We believe e-invoicing and petrol subsidy rationalisation in 2H24 will weigh down on vehicle sales.
“We also believe while it will be business as usual for the affordable segment, fuel subsidy rationalisation will likely hurt the demand for mid-market models, giving rise to a two-speed automotive market locally in 2024,” it added.
In general, Kenanga Research said the industry’s earnings visibility is still good, backed by a booking backlog of 170,000 units as at end-July 2024.
More than half of the backlog is made up of new models, alluding to the appeal of new models to car buyers.
“This trend is likely to persist throughout 2024 given a strong line-up of new launches,” said the research house.
Also, it expects vehicle sales will be supported by new battery electric vehicles that enjoy sales and service tax exemption and other electric vehicle facilities incentives up until 2025 for completely-built units and 2027 for completely-knocked down units.
