Neutral on auto sector despite Proton’s push

0

KUCHING: Analysts remain neutral on Malaysia’s automotive sector despite encouraging numbers from the launch of Proton’s latest Persona and the new Saga.

The research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) said earnings for auto companies under its coverage have deteriorated as sales have been driven by aggressive campaigns and outright discounting.

This was not aidid by the ringgit remaining relatively weak at circa RM4.20 to the US dollar and circa RM4.10 to the yen (100-folds).

It noted that in September, TIV contraction widened again, registering a six per cent year-on-year (y-o-y) fall while September’s TIV of 48,919 units is also eight per cent month-on-month (m-o-m) lower than the previous month.

“Perodua sales normalised in September at 17,147 units and were the key drag to the industry’s m-o-m performance,” it said.

“Nonetheless, we had highlighted in our previous monthly TIV note that Perodua’s production dropped to just circa 16,000 units despite its August TIV registering at circa 21,000 units, signalling a possible normalisation in sales – hence the weaker m-o-m numbers should not come entirely as a surprise.

“On top of this, key competitor Proton launched its offensive with the Persona replacement in August and has so far garnered pretty good bookings of over 15,000 units (within two months of launch) – this is well ahead of Proton’s internal 3,000 to 4,000 monthly sales target,” it said.

As a result of the Persona launch in late August, the research team noted that Proton TIV improved sequentially registering a 37 per cent m-o-m growth to 6,062 units, well outperforming the industry’s eight per cent m-o-m contraction while market share increased to 13 per cent from eight to nine per cent levels in the prior two months.

MIDF Research opined, “Proton should continue to register improvements in October given an even bigger boost from the new Saga which was launched late September.”

It added, the Saga has managed to generate some 6,000 bookings in less than three weeks of launch and is also Proton’s largest volume driver, historically accounting for half of Proton’s volume.

All in, the research team retained its TIV forecast. It explained, “Year-to-date (YTD) TIV of 418,443 units, if annualised, accounts for 94 per cent of our financial year 2016 forecast (FY16F) TIV of 593,302 units.

“Our forecast implies an 11 per cent y-o-y contraction relative to the 14 per cent YTD, but we note that this is an improvement versus last month’s 15 per cent YTD contraction.

“We stick to our numbers as TIV should improve further in the coming months given the impact of Proton’s new Saga and a rebadged version of the Suzuki Ertiga by year end.”