The research house said despite the strong year-to-date (YTD) total industry volume (TIV), it anticipates a decline in TIV in 2024 given the lack of catalysts to bring it to another high.
“Regardless, we keep our view that the sector is seeing a cyclical downturn for sales volumes after two record-breaking years. Hence, we anticipate a meaningful TIV decline in the second half (H2 2024) as backlogs continue to taper off while sales normalise,” it said in a note yesterday.
Malaysia’s TIV hit an all-time high of 799,731 units in 2023 versus 721,177 units sold in 2022, the Malaysia Automotive Association said. YTD to May, TIV rose 8.3% y-o-y to 328,900 units.
RHB retained its “neutral” call on the auto sector, premised on a weaker TIV performance as normalisation of sales volumes takes place.
It said the sector’s performance missed expectations in the first quarter (Q1 2024) as both Sime Darby Bhd and Tan Chong Motor Holdings Bhd (TCM) fell short of expectations.
“Post acquisition of UMW Holdings Bhd, Sime’s earnings were dragged by higher-than-expected interest costs on top of weaker-than-expected associates’ contributions, while TCM started off FY2024 with continuing losses,” it said.
Sime Darby completed its acquisition of a 100% stake in UMW for RM5.8 billion in March this year. Announced last August, it was the country’s biggest-ever automotive deal.
BAuto ends FY2024 on a high
On a brighter note, it said MBM Resources Bhd beat expectations while Bermaz Auto Bhd’s (BAuto’s) FY2024 results were in line.
“BAuto closed its FY2024 books with another year of record-high earnings, thanks to its solid Mazda sales volumes (+18% y-o-y).
“BAuto remains our top pick as we still like its circa 9% dividend yield and believe its car sales should remain resilient versus that of other marques,” said RHB, which has a target price (TP) of RM3.25 on the stock.
It noted that BAuto declared a special dividend per share (DPS) of 7 sen on top of its Q4 FY2024 DPS of 4.75 sen, bringing its full-year DPS to 26 sen, a payout ratio of 86%.
The group closed FY2024 ended April 30 with a record-high net profit of RM351 million while revenue reached an all-time high of RM3.9 billion.
Apart from assembling and distributing Mazda vehicles, BAuto also distributes Kia vehicles, and XPeng electric vehicles from China.
RHB also said MBM’s earnings outperformed expectations, thanks to stronger Perodua sales during the quarter, up 9% y-o-y.
Perodua is eyeing a sales volume of 330,000 units this year, comparable to last year’s 330,325 units, it said.
“Considering that Perodua has achieved volume growth of 20% y-o-y YTD, we believe the target is achievable. We have revised up our 2024 Perodua sales assumption accordingly to 330,000 units from 250,000 units previously,” it added.
RHB said it has revised up its 2024 TIV forecast to 740,000 units from 625,000 units mainly due to a revision of Perodua’s FY2024 forecasted volumes on the back of stronger-than-expected sales.
Meanwhile, TA Research has maintained its “neutral” call on the auto sector with its 2024 TIV forecast at 700,000 units (-12.5% y-o-y).
“Despite the introduction of new models, facelift versions, and new variants, forthcoming car sales might be influenced by declining consumer sentiment amid the implementation of the targeted fuel subsidy scheme,” it said in a note last week.
It noted that YTD, Perodua has achieved a substantial sales growth of 19.6%, reaching 146,100 units while Proton saw a slight decline in sales, down 1.3% y-o-y to 61,400 units.
However, TA maintained its “sell” call on MBM with a TP of RM4.70 while keeping its “buy” calls on BAuto (TP: RM2.66) and Sime Darby (TP: RM3.27).