Highlights
As expected, MAA reported mom drop in Aug TIV after Raya Festive in end Jul (rushed pre Festive delivery). Aug TIV was 51.1k units (- 15.17% mom; +0.04% yoy) and YTD was 444.5k units (+2.66% yoy), in-line with HLIB projected 2014 TIV of 680k. We expect stronger sales volume in 4Q14, from new launches (Perodua Axia and Proton Iriz ) and continued aggressive campaigns by other OEMs.Comment
After strong Raya Festive sales in July, Perodua (UMW and MBM) reported weaker mom sales in Aug at 14.6k units (+5.2% yoy; -23.8% mom). Newly launched Axia (16 Sep) has received strong pre- bookings of 13. 5k units, due to the attractive pricing at RM24.6k -RM42.5k and high fuel efficiency at 21.6km/L. It is targeting 30k sales in 2014.Similarly, Proton (DRB) reported weaker mom sales in Aug at 8.6k units (-27.0% yoy; -22.0% mom), post Raya Festive. The new GSC model Iriz will be launched on 25 Sep and an open day event will be held on 27-28 Sep at Shah Alam Plant in order to attract visitors and improve consumer sentiments towards Proton, with visitors given a rare opportunity to view its Manufacturing and R& D facilities. The starting price of Iriz is expected to be ~RM40k, slightly below Perodua MyVi. The fuel efficiency is 18.2km/L.
With new models and aggressive campaigns, Toyota (UMW) achieved YTD sales of 67.2k units (+15.1% yoy), on target to achieve its targeted 100k sales in 2014. Toyota is expected to extend its sales campaigns towards year end, in order to achieve its sales target .
Honda (DRB) maintained strong s ales of 6.7k units (+13.1% yoy; +0.1% mom) in Aug and YTD sales at 50.6k units (+11.4% yoy), on track to achieve 2014 target of 76k units, from newly launched City and Jazz.
Nissan (TCM) continued to suffer from stiff competi tion. YTD, sales has dropped 18.8% yoy, due to lack of new volume-driving models.
Other marques were mainly driven by Ford (Sime Darby), Mazda (BAuto) and Mitsubishi (DRB & MBM).
Risks
- Prolonged tightening of banks’ HP rules .
- Slowdown in the Malaysian economy.
- Global automotive supply chain disruption.
- Sudden jump in fuel prices and interest rate.
Rating Neutral
- Positives :– Potential export to regional market, i.e. Malaysia as a hub; I mplementation of Energy Efficient Policy; and Implementation of Annual Car Check Policy .
- Negatives :– Tightening of bank lending rules and rise in inflation; Instability of global automotive supply chain; and Depreciation of RM.
Valuation
- Since our previous downgrade of UMW to Hold (August), w e are downgrading the Automotive sector to Neutral, with BUYs on MBM (TP: RM4.00) and DRB (TP: RM3.00).
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