PETALING JAYA: Automotive companies are expected to stage a solid earnings recovery in the third quarter.
According to MIDF Research, this anticipation is based on the strong total industry volumes (TIV) for July to September, which is the strongest quarter seen in at least the past three years. The third quarter had registered TIV of 167,131 units, which is a 14% year-on-year (y-o-y) growth and a big 147% jump from the previous quarter.
“With the exception of Honda and Nissan which registered contraction of 16% and 10% yoy, all the other key marques registered double digit TIV growth of between 14% and 47% year-on-year (y-o-y) in the period, ” MIDF Research said.
Nevertheless, it said that with the launch of City and Almera by Honda and Nissan, respectively, in Oct, this should drive a recovery in the final quarter of the year.
“The City is understood to have garnered bookings of around 5,000 units compared to a monthly target of 3,000 units. Meanwhile, Proton’s X50 has garnered over 27,400 bookings versus management’s initial target of 4,000 units by the year-end, ” it said.
The research house affirmed its positive call on the industry, due to the strong TIV recovery driven by the tax holiday incentive, a low interest rate environment and the probable shift to private car usage from mass transportation on social distancing practices.
Its top picks are: Bermaz Auto Bhd with a buy rating and a target price of RM1.75; and UMW Holdings Bhd with a buy rating and a target price of RM3.10.
Meanwhile, Maybank Research said it expects vehicle sales in the fourth quarter to average 55,000-58,000 units per month, being supported by the various launches and the ongoing zero sales and service tax (SST) incentives. “We have raised this year’s TIV by 6%-9% to 508,000-515,000 units, on expectation of a stronger fourth quarter vehicle sales outlook, ” it said.
“The market will be hoping for an extension of the zero-SST policy beyond Dec 2020. This policy has proven to be popular with the price-conscious consumers in driving sales, ” Maybank Research added.
It also said any unveiling of an electric vehicle roadmap framework will be a positive surprise for the industry.
“Malaysia is admittedly lagging behind its regional peers such as Singapore and Thailand on this aspect, ” it said.
Its key stock picks are Bermaz Auto due to its management strength, undemanding valuations and dividend yields.
Maybank Research also said Sime Darby Bhd could positively surprise the market on its initial public offering and divestment plans; and completely knocked down opportunities for their new marques.
