Auto sector sees lower TIV on shorter working month

Auto sector
Maintain overweight: September total industry volume (TIV) of 43,443 was marginally down (against 46,100 units in September 2009), but still reflective of the strong TIV numbers recorded since the beginning of the year. The month-on-month (m-o-m) fall in TIV for September was unsurprising, as it was a shorter working month and August TIV was a high base as consumers rushed to purchase cars before the Hari Raya Aidilfitri festivities.

Year-to-date (YTD) TIV of 453,249 achieved 77% of our full-year forecasts of 587,698 and 80% of MAA's forecast of 570,000. YTD, year-on-year (y-o-y) growth was 13.9% (against 398,000 units for YTD FY09), reflective of the general improvement in the local motor sector.

Perodua and Proton remain the undoubted market leaders, while Toyota leads the non-national segment. There were no changes to the ranking of the marques despite a general m-o-m decrease in the industry. Proton and Perodua maintained their grip on around 50% of the domestic market with 26.8% and 28.7% respectively, while Toyota continued with 15.5%.

We make no changes to our 2010/2012 TIV numbers, even though annualised TIV numbers stand at 604,332. We expect the moderation in TIV for 2HFY10 to continue into 4Q. Our expected TIV growth for FY11/12 is 4% and 3.2% respectively.

The key risks to our projections would be: (i) inflationary pressure amid economic recovery; and (ii) weakening of the ringgit against the US dollar and yen.

We make no changes to our "overweight" view on the sector, and the valuations of the stocks under our coverage. We expect the strong TIV numbers to be sustained going into 2011, driven by: (i) strengthened ringgit against US dollar and yen that would help to reduce costs of imported materials; and (ii) positive consumer sentiment with the greater stability of the economy. — RHB Research Institute, Oct 20


This article appeared in The Edge Financial Daily, October 21, 2010.