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Auto sector TIV projections revised on MCO 2.0 impact

24 Feb 2021 / 09:30 H.

PETALING JAYA: AmInvestment Bank Research (AmResearch) has revised the Malaysian auto sector’s total industry volume (TIV) projection to 575,000 units from 600,000 units due to the implementation of the movement control order 2.0 (MCO 2.0).

Nonetheless, it remains overweight on the sector and expects the strong sales momentum to be sustained throughout the first half of 2021, supported by the sales and service tax (SST) exemption from Jan 1 to June 30, 2021.

“We believe that the SST exemption will continue to spur buying interest for passenger vehicles, especially the national brands Proton and Perodua,” said the research house in a report.

For January, it said, the sector reported a lower TIV of 32,800 units, which translates into a decline of 52% month on month and -24% year on year, given the lower footfalls in showrooms due to the implementation of MCO 2.0, as well as disruption in component supply as some parts suppliers were closed during the restriction.

In February, AmResearch anticipates the TIV to remain flat on a monthly basis due to the Lunar New Year holidays, which resulted in a shorter working month.

It also noted that the loan approval rate for passenger cars came in at 57.1% in December, a decline of 2.4% from the previous month and was lower than the average of 61.4% in 2019.

CGS-CIMB Research, however, believes that in spite of the sluggish delivery in January, sales volume will improve in March given the reopening of economic activities, coupled with the start of the nation’s Covid-19 vaccination programme.

It noted that the Malaysian Automotive Association attributed the lower TIV delivery to consumers bringing forward their car purchases to December 2020, aside from the effects of MCO 2.0.

With that, CGS-CIMB is sticking to its projection of 580,000 units TIV in 2021, on the back of higher sales at Proton (+20% on-year) and Perodua (+13% on-year), driven by multiple new launches.

On the whole, the research house remains neutral on autos, as the sector remains on track for earnings recovery in 2021 with a projected 60% net profit growth against a 39% decline in 2020F.

“Although the implementation of MCO 2.0 could lead to lower TIV in 1Q21 due to lower showroom footfalls, we still expect TIV to pick up from 2Q’21F as we are cautiously optimistic of a stronger recovery in economy activities once Covid-19 vaccines become more widely available,” said CGS-CIMB.

It said DRB-Hicom and UMW are its preferred picks for the sector.

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