Bermaz Auto Berhad ADD, TP RM2.40, RM1.79 close
We see robust sales from Mazda, Peugeot and Kia on the back of multiple new model launches and new localisation programmes. We expect the group to deliver 18k/20k/21k units combined for the three marques in FY23F/24F/25F. Bermaz Auto offers decent CY22-23F dividend yields of 5.4-6.0%.
Jun 22 TIV rose 25% mom
Total industry volume (TIV) in Jun 22 rose 25% mom to 63,366 units, driven by stronger sales from both passenger vehicle (PV) and commercial vehicle (CV) segments, which grew by 27.5% and 7% mom, respectively. We attribute the higher TIV to companies rushing for deliveries ahead of the sales and service tax (SST) holiday expiry on 30 Jun 2022, prior to the government’s decision to allow a grace period of nine months until 31 Mar 2023 for buyers who made bookings before 30 Jun 2022. The Malaysian Automotive Association (MAA) sees flattish mom sales in Jul 2022 as car companies continue to fulfil order backlog in the coming months.
2Q22 and 1H22 TIV grew by 7% qoq and 33% yoy
2Q22 TIV grew 7.3% qoq to 171,545 units, driven by higher sales from Perodua and Proton, which increased 7% and 24% qoq, respectively, in 2Q22 on the back of a recovery in production volume for vendors hit by floods and severe parts shortages partially due to China’s lockdown. 1H22 TIV jumped 33% yoy to 331,397 units, thanks to higher sales in the non-national segment (+54.7% yoy), led by Japanese marques, while both Perodua and Proton delivered 20% yoy TIV growth in 1H22. Overall, national brands’ market share fell 5.9% pts yoy to 55.8% in 1H22. Toyota retained its position as the leading non-national brand with 13.7% market share in 1H22 (up 0.2% pt yoy). However, Honda is narrowing the gap with 12% market share on the back of 59% yoy sales volume growth in 1H22.
Projecting softer sales in 2H22F due to ongoing chips constraints
1H22 TIV made up 57% of our full-year projection of 580k (+14% yoy). However, we project softer 2H22F TIV in view of 1) delays in components deliveries as MAA highlighted that ongoing chip and component shortages would continue to impact vehicle deliveries in the near term, 2) the government’s plans to introduce a targeted fuel subsidy programme and 3) higher interest rate environment dampening sentiment in the domestic auto sector. Nevertheless, we believe the government’s decision to allow a nine-month grace period will provide healthy demand visibility for the domestic auto sector in the next three quarters.
Stay Neutral on Malaysian Auto
We expect the sector to announce stronger yoy and qoq sales growth for 2Q22, driven by higher TIV delivery, but automakers’ earnings performance could be partially offset by higher opex given the unfavourable forex movement and inflationary cost pressures from rising raw material and labour costs. Average ringgit/US$ rate fell by 3.8% qoq and 5.4% yoy in 2Q22. We stay sector Neutral on Malaysian autos. We like Bermaz as our sector top pick due to its attractive 5.4-6.0% CY22-23F dividend yields and expanding market share with the addition of Kia and Peugeot marques to its stable.
