CGS-CIMB sees strong vehicle sales in December, raises 2018 TIV growth forecast

CGS-CIMB expects vehicle sales to be stronger in December and has raised its 2018 total industry volume (TIV) growth forecast from 2.5% to 4% on the back of stronger-than-expected TIV year-to-date. “We expect stronger sales in December in view of year-end promotions and multiple new models that were recently launched. For example, Proton launched its first SUV, the X70 on Dec 12 and we learned that it has started delivery to showrooms. Proton has so far received encouraging bookings of over 12,000 units since the end of November,” it said in its sector note today.

On Wednesday, the Malaysian Automotive Association (MAA) announced that TIV grew 2.1% month-on-month to 48,282 units in November due to higher passenger vehicles (PV) sold. Perodua and Mazda recorded 8% and 14% month-on-month growth respectively.

For the 11 months ended November, TIV rose 5.5% year-on-year to 550,526 units due to stronger PV and commercial vehicles (CV) demand on the back of the tax holiday period. PV and CV recorded healthy 5% and 8% year-on-year sales growth respectively during the period.

For 2019, it expects resilient sales in PV on the back of new model launches in the passenger car and SUV segments from Perodua, Proton, Honda and Toyota but overall, TIV delivery is expected to be flat next year.

“We project a 10% sector net profit growth in 2019, driven by positive earnings growth from all companies, led by Sime Darby. However, we see downside risk to earnings from the depreciation in ringgit versus US dollar and Japanese yen, as this will increase the distributors’ costs of imported complete knocked-down kits and complete built units,” it said.

Bermaz Auto Bhd (BAuto) is CGS-CIMB’s top pick, in view of the company’s undemanding valuation, attractive yield and proxy to export sales growth. It has an “add” rating on the stock with a target price of RM2.65.

“We expect BAuto to deliver robust sales volume in FY19-20, driven by the popular Mazda CX-5 and upcoming new model launches of Mazda 3 and CX-8,” it added.