KUALA LUMPUR: RHB Investment Bank Bhd (RHB IB) has maintained its “overweight” rating on the automotive sector despite the softer total industry volume (TIV) and total production volume (TPV) recorded in April.

In a note, the investment bank remained positive on the sector, noting that the recently launched models should continue to drive customer orders and corporate earnings.

“We think the healthy wait times for the major marques provide earnings visibility, especially for UMW and MBM Resources (MBM).

“The sector also offers attractive yields of 4.0%-10%, with MBM offering a 10% financial year 2023 forecast (FY23F) yield,“ RHB IB said, adding that it has maintained its FY23F TIV at 680,000 units.

Recently, Malaysian Automotive Association (MAA) announced that April 2023’s TIV declined by 41% month-on-month (m-o-m) and decreased 19% year-on-year (y-o-y) to 46,583 units, while TPV was at 41,160 units (-46% m-o-m, -25% y-o-y).

“The softer April figures were largely expected, given the lack of sales and service tax (SST) exempt deliveries and shorter working month.

“Despite the soft April numbers, we remain positive on the sector as our recent ground checks show a healthy waiting period across major marques, suggesting resilient underlying demand,“ it said.

It noted that the recent ground checks at the Malaysia Auto Show 2023 showed that despite the absence of the SST exemption, car dealerships are still receiving a healthy amount of orders, especially for newly launched models.

“This is reflected in the waiting periods across the key marques (two to six months for Perodua, three to six months for Toyota and one to six months for Honda).

“While there is generally no waiting period for most Proton models, the X90’s recent launch could help boost Proton’s numbers as some dealers had started taking the X90 orders even before its launch,“ said RHB IB.

The investment bank named UMW and Bermaz Auto Bhd (BAuto) as its top picks, citing that UMW remains a favourite for being the prime beneficiary of the strong orders of Toyota Vios and Perodua Axia, among others.

“We also like BAuto for its continued volume growth of Mazda cars (driven by the local assembly of the CX-30), Kia, and Peugeot,” it added. – Bernama