Kenanga maintains 'overweight' with TIV target of 585,000 units in 2021

By BERNAMA | 4 April 2021

KUALA LUMPUR: Kenanga Investment Bank Bhd has maintained its "overweight" call on the automotive sector with total industry volume (TIV) target of 585,000 units this year, an increase of 11 per cent year-on-year.

The investment bank believes the new volume-driven launches such as Perodua Ativa, Proton X50, Honda City and Nissan Almera could help spur sales along with the overflowing back-logged bookings.

It said this will also be further boosted by the extension of sales and service tax exemption until June 30, 2021, seasonal promotions and more new launches expected in the second half of the year.

Overall, 2021 could potentially be a better year along with a better incentive programme under the National Automotive Plan (NAP) 2020, positive impact from Bank Negara Malaysia's overnight policy rate (OPR) cut and pre-emptive measures that soften the Covid-19 impact, it said in a research note.

It noted that passenger vehicle loan approval rate remains unexciting at 60.8 per cent as at January 2021, but charting a positive recovery from the lowest of 31 per cent in April 2020 during the enhanced Movement Control Order (MCO).

This is due to stringent loan approval on employment criteria for several economic sectors that still see high-risk impact from Covid-19 restriction such as aviation, it said.

"Our sector pick is MBM Resources Bhd (MBMR) as a pure proxy to the largest national Perodua dealership and deep value in its 22.58 per cent stake in Perodua," it said.

Looking forward to the first quarter of 2021 (Q1 2021), it expects most of the auto players to chart a slower drive with sales growth coming off from a higher fourth quarter 2021.

It said based on pre-emptive buying, driven by exciting year-end promotional campaign, sluggish showroom activity from MCO 2.0 and shortage of components and parts for some players, especially during the temporary closure of automotive factories in the first week of MCO 2.0 that began on Jan 13, 2021.

"Nevertheless, all new model launches in March 2021, especially the highly anticipated Ativa (13,000 units outstanding bookings) should cushion the negative impact," it said.