Kenanga's forecast TIV target for auto sector is 40,000 lower than MAA's

By THE STAR | 26 July 2021

KUALA LUMPUR: Malaysia's automotive sector is expected to register minimal sales in July given the ongoing shutdown of automotive centres in Kuala Lumpur and Selangor, which make up more than half of total industry volume (TIV).

Kenanga Research lowered its TIV target for 2021 to 460,000 units, which is 13% lower compared to 2020, from its initial projection of 545,000 units.

MAA had earlier slashed its TIV forecast to 500,000 units from 570,000 previously.

However, the research house is expecting a stronger recovery in 2022 with a TIV target of 600,000 units, or 30% higher, in line with MAA's TIV target of 605,000 units.

"Our 2022 TIV growth will be driven by the expected recovery in economy post lockdown and the assumption that herd immunity would be achieved by then, inevitably resulting in relaxation of SOPs toward revitalising local travel which should push demand for passenger vehicles especially the affordable national marques.

"Additionally, a few automakers have assured commitment to absorb SST beyond Dec 2021," said Kenanga.

The research house maintained most of its calls and target prices for the sector, which are based on FY22 earnings per share.

For Tan Chong, it maintained "buy" but cut its target price to RM1 from RM1.10. UMW remained "market perform" with a reduced target price of RM3 from RM3.10 previously.

Sime Darby stayed "outperform" at RM2.35 whle Bermaz Auto was "market perform" at RM1.45.

The automotive sector's TIV for June was 1,921 units, which was a 96% plunge year-on-year ad month-on-month due to the nationwide lockdown that began on June 1 under the National Recovery Plan.

June’s sales were those spilled over from May 2021 that were registered later through the JPJ e-Daftar system for which loans had already been approved with an issued Letter of Undertaking.