Automotive - 2022 TIV to be Record Year High

Date: 17/11/2022

Source  :  HLG
Stock  :  BAUTO       Price Target  :  2.05      |      Price Call  :  BUY
        Last Price  :  2.16      |      Upside/Downside  :  -0.11 (5.09%)
Source  :  HLG
Stock  :  DRBHCOM       Price Target  :  2.06      |      Price Call  :  BUY
        Last Price  :  1.40      |      Upside/Downside  :  +0.66 (47.14%)
Source  :  HLG
Stock  :  MBMR       Price Target  :  5.00      |      Price Call  :  BUY
        Last Price  :  3.46      |      Upside/Downside  :  +1.54 (44.51%)

Oct 2022 TIV remained high at 61.0k units (not including BMW, Mini, Merc & Scania; amounting to c.2k units). It was a drop of -3.7% MoM, due to lower inventory level. TIV improved +5.7% YoY and +50.7% YTD (577.9k units), mainly due to low base effect. We now expect 2022 TIV to achieve 700k units (+37.6% YoY), given the expected sustaining sales volume till year end, as OEMs accelerate production, imports and deliveries to meet the high order backlogs. However, we remain NEUTRAL on the automotive sector as the accelerated sales in 2022 may lower down sales expectation into 2023. Top picks for the sector: DRB (BUY; RM2.06), MBMR (BUY; TP: RM5.00) and BAuto (BUY; TP: RM2.05).

Malaysian Automotive Association (MAA) reported TIV for Oct 2022 at 61.0k units (not inclusive of BMW, Mini, Mercedes and Scania; amounting c.2k units), a slight drop of -3.7% MoM mainly on lower inventory levels, but still a growth of +5.7% YoY on improved supply chain condition for some OEMs. 10M22 TIV reported a substantial growth of +50.7% YoY to 577.9k units mainly due to low base effect, alongside a somewhat improved chip shortage situation. As highlighted previously, 2022 TIV may achieve a new record high, above our initial estimate of 600k units. We now expect TIV to achieve 700k units for 2022 (+37.6% YoY) given the high order deliveries in coming months as OEMs accelerate production and imports to fulfil the huge order backlogs (driven by ending of SST exemptions which is still applicable for bookings made by 30 Jun 2022 and deliveries done by 31 Mar 2023) and reduce the waiting period. We believe current order backlogs for industry remains strong at over 250k units.

Despite the expected strong TIV recovery until year end (backed by the high order backlogs), we still maintain our NEUTRAL rating on the sector, as we expect TIV to slowdown in 2023. We advise investors to accumulate MBMR (BUY; TP: RM5.00) and DRB (BUY; TP: RM2.06), as we expect the national OEMs to triumph over the longer term with potential growth from new export markets. We also like BAuto (BUY; TP: RM2.05) for its strong balance sheet with high order backlogs lasting for more than 6 months. 


1) April-Oct 2022, no data available for Peugeot and Kia.
2) Oct 2022, no data available for BMW, Mini, Mercedes and Scania. 

Perodua (UMW and MBMR) recorded a sales of 25.8k units in Oct, a growth of +5.0% MoM as the national OEM continued to push production to meet the high order backlogs. However, sales dropped marginally by -3.7% YoY on lower inventory level. YTD growth of +51.2% (vs. industry +50.7% YoY) to 222.2k units, is mainly due to low base effect on lockdown restrictions SPLY. Perodua managed to maintain its top position with market share at 38.4%. CEO Datuk Seri Zainal guided the strong registration momentum to continue upwards until the end of the year. Given the strong momentum, Perodua may record a new record high of 270k units, surpassing its target 247.8k units for 2022.

Proton (DRB) sales further weakened -13.6% MoM to 12.6k units in Oct, affected by lower inventory and production level. Nevertheless, it was still a growth of +14.3% YoY. YTD sales has also increased by +31.6% YoY to 110.6k units, behind market’s growth of +50.7% YoY, affected by supply chain issue during the first 5 months. Proton retained its second position with 19.1% market share. Including export volume, YTD sales was 114.7k units (+33.6% YoY). Given current momentum, Proton is expected to achieve its sales target of 136-150k units (+18.6%-30.8% YoY). Proton is targeting to launch the new X90 SUV 7-seater in 2023 and also introducing its own EV model by 2027.

Toyota (UMW) maintained its top position within the foreign segment with 9.2k units (+0.8% MoM; +43.5% YoY) in Oct. YTD sales was 79.3k units, +46.9% YoY (vs. market’s +50.7%) and the OEM’s market share was 13.7%. Toyota is currently ahead of its sales target of 80k units, potentially achieving 100k units for 2022. Toyota has recently launched its new MPV Veloz (sister to the new Perodua Alza) at RM95k, with over 7k pre-launch bookings by mid Oct. Other upcoming exciting new launches would be a new EV model (likely by end 2022) and new Vios in 2023.

Honda (DRB) sales weakened -18.7% MoM sales to 5.8k units in Oct on deteriorated inventory level. Nevertheless, it was still a growth of +7.3% YoY and +76.3% YTD (to 66.0k units), with 11.4% market share. Honda is targeting sales of 80k units for 2022, staying behind Toyota within the foreign segment. Honda has recently launched its new Honda Civic e: HEV variant and expected to launch new CR-V and BR-V next. Another attractive new model, WR-V (small SUV), may start also enter the market in 2023.

Nissan (TCM) sales remained weak at 1.0k units (+0.2% MoM; -36.6% YoY) in Oct. Nevertheless, YTD sales increased by +30.2% to 12.0k units with a market share of 2.1%. Sales remained relatively weak as Nissan maintained its strategy to avoid stiff market competition, while leveraging onto its core models: Almera, Serena and Navara. Latest model launch was the Serena facelift with price ranging RM150-163k in Jul 2022 and Nissan is expected to launch a new attractive X-Trail SUV and potentially Almera facelift in 2023.

Mazda (BAuto) sales sustained at 1.0k units (+1.3% MoM; -21.9% YoY) in Oct. YTD sales was up by +42.4% YoY to 11.7k units, with a market share of 2.0%. We understand Mazda order backlogs can last more than 6 months, and management is guiding for an improving supply chain situation from Nov onwards. Mazda has recently launched an updated CX-3 at attractive pricing RM107.9-118.2k. Upcoming new model launch include CX-30 CKD by year end/early 2023 with pricing RM127-155k.

Source: Hong Leong Investment Bank Research - 17 Nov 2022

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