According to Kenanga Research, the total industry volume (TIV) is targeted at 545,000 units, which is 3% higher year-on-year (y-o-y).
There was also a mild recovery in the consumer sentiment in the first quarter of this year.
In its latest sector report, the research house said the various government assistance announced under the Penjana and Kita Prihatin packages helped to maintain some consumer confidence for the first quarter, particularly the exemption in sales tax for passenger vehicles in mid-June 2020 to end-2021 and the extended loan moratorium for financially distressed individuals.
“This prevented financial conditions in the first quarter from worsening, and with hopes of better income and job prospects, and consumers expect shopping to return, but not without growing jitters over rising essential item prices, ” it added.
Meanwhile, the passenger vehicles’ loan approval rate remained unexciting at 53.3% as of April 2021 but charted a positive recovery from the lowest of 31% in April 2020 during the enhanced movement control order.
“This is due to stringent loan approval based on employment criteria for several economic sectors that still see high risk impact from Covid-19 restriction such as aviation and hospitality.
“This is further worsened by only a slight reduction in unemployment rate to 4.6% from the start of the year at 4.9%,” said the research house.
For the first quarter reporting season, Kenanga Research noted that the financial results of almost all automotive groups were within expectations including DRB-Hicom Bhd, MBM Resources Bhd, Sime Darby Bhd, Tan Chong Motor Holdings Bhd and UMW Holdings Bhd.
As for the second quarter, Kenanga Research expects most of the auto players to chart a slower drive with the total lockdown in June resulting in all the marques’ show rooms, vehicle productions and deliveries to be temporarily closed, halted and delayed for the phase one of the National Recovery Plan period.
Its economics research team believes that an expected global growth recovery and the impact of the large fiscal stimulus on the domestic economy would result in a projected gross domestic product growth rebound between 5% and 6% in 2021.
Kenanga Research’s auto pick is MBM Resources with a target price of RM3.50 given its status as a pure proxy to the largest national Perodua dealership with deep value in its 22.58% stake in Perodua.
It has upgraded Sime Darby to outperform with unchanged target price of RM2.35 due to the recent weakness in its share price and the continuous improvement in its main China operation, while its Malaysia operation remains clouded by uncertainty of phase one of the National Recovery Plan but offset by SST exemption till end-2021.
Kenanga Research meanwhile has downgraded Tan Chong Motor to underperform with unchanged target price of RM1.10 due to its uncertain direction as its overall unit sales continued to be weak despite the launch of the popular all-new Nissan Almera.
