PETALING JAYA: UMW Holdings Bhd is expected to post another strong sales performance in the second half of 2022 (2H22), backed by the strong outstanding bookings for both Toyota and Perodua vehicles.
UOB Kay Hian (UOBKH) Research, which forecast UMW’s 2H22 performance to mimic the strong performance in 1H22, said the strong order backlog could cushion delivery at least until the first quarter of 2023.
“Note that Perodua has the highest booking numbers in Malaysia and combined with both Perodua and Toyota, we gather that the total bookings stood at 300,000 units as at end-September 2022,” it said in a note.
It is noteworthy that UMW’s sales in 1H22 surged 31.8% year-on-year (y-o-y) to 173,253 units.
UMW, through its 51%-owned subsidiary UMW-Toyota, imports, assembles and distributes Toyota and Lexus vehicles in Malaysia. It also owns a 38% stake in Perodua.
Despite the expiry of the sales and service tax (SST) exemption in June 2022, UOBKH Research expects UMW to record a better car sales volume in 2022 on a y-o-y basis.
“As of the first eight months of 2022, UMW has achieved total sales of 233,367 units, which accounted for 88.8% of 2021’s 262,685 units.
“We previously raised our 2022 forecast for Toyota by 19% to 87,000 units as the launches of new models gain positive traction, supported by a strong order backlog.
“Meanwhile for Perodua, we still maintain a target of 245,000 units and we expect 2022 to beat the previous record high set in 2019 at 240,341 units,” it said.
The research house also noted that UMW’s sales of new models have exceeded expectations.
It said Toyota Veloz, which replaced the Toyota Avanza, has received encouraging bookings, with 5,200 customers making their reservations thus far.
Meanwhile, Perodua has received about 51,000 bookings for the new Perodua Alza since it started taking orders at end-June 2022.
“Based on Perodua’s initial sales target of 3,500 units per month, this implies up to a year waiting period.
“However, Perodua is looking to shift more production towards Alza to cater to the strong demand.
“Sales of Perodua Alza are partially reflected in August 2022 sales, with UMW-related brands reporting total sales of 35,130 units, up 40.6% y-o-y,” it said.
UOBKH Research projects UMW’s earnings for financial year 2022 (FY22) to rebound from last year’s low base.
It said that backlogs orders – with buyers frontloading their purchases during the SST holiday period – will spur the growth for UMW.
The bottom-line performance will also be backed by the economic recovery and the fact that the whole supply chain has resumed operations.
The introduction of several new models such as Toyota Veloz and new Perodua Alza might also help to bolster 2022 sales, according to UOBKH Research.
Nevertheless, the research house pointed out that the weakening ringgit poses a risk of margin compression for UMW in 2022 and potentially 2023.
The ringgit has weakened against the US dollar in 1H22, averaging RM4.26 per US dollar
“Assuming the ringgit would average RM4.40 per US dollar in 2H22, UMW’s cost of sales could increase and thereby pressure margins.
“Our sensitivity analysis shows that every 1% strengthening or weakening of the ringgit against the US dollar could increase or decrease UMW’s FY22-FY24 earnings and cost by 3%,” it said.
The research house expects car sales to be supported by the group’s first locally-assembled hybrid electric vehicle (Toyota Corolla Cross) and the Toyota Camry’s new facelift.
“Meanwhile, volume in 2023 would be supported by the newly-launched Toyota Veloz, which replaces the now-discontinued Toyota Avanza, and the introduction of the all-new Perodua Alza which is gaining traction at a faster-than-expected rate,” it added.
