MIDF reaffirms ‘positive’ simply call on car market, BAuto and MBM top rated picks

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KUALA LUMPUR (Jan 27): MIDF Exploration has reaffirmed its “favourable” contact on automotive industry underpinned by a sturdy full business volume (TIV) recovery pushed by the tax holiday break extension, a reduced fascination price environment, a shift to personal vehicle utilization from mass transportation on concerns above social distancing and an fundamental macro restoration.

In a be aware now, the study household claimed the automotive field made a solid end to 2020 with a 26% calendar year-on-yr development and a 22% month-around-thirty day period increase to December’s TIV of 68,836 models, which nears a document month-to-month high.

“The strong December TIV was pushed by calendar year-conclude product sales campaigns and far more importantly, as customers rushed to benefit from the tax getaway which was before scheduled to close on Dec 31, 2020,” reported the study property.

MIDF also observed that TIV for the 12 months 2020 arrived in at 529,434 models, a bit forward of even MIDF’s intense FY20F of 523,000 models and the Malaysian Automotive Association’s (MAA) FY20F TIV of 470,000, pushed mostly by extremely constructive buyer reaction towards tax holiday break incentive since June 2020.

In accordance to MIDF, in spite of the rigid lockdowns in March to April 2020, FY20 TIV only fell by 12% yr-on-12 months, considerably narrower when compared to the 41% yr-on-year contraction witnessed all through the first fifty percent of 2020 (1H20).

Also, through the fourth quarter of 2020 (4Q20), non-national automobiles built a comeback subsequent intense launches this sort of as the new Almera (released in November 2020), new Metropolis (released in October 2020) as well as the all-new Hyundai Kona and Mitsubishi Xpander.

“While the national cars and trucks drove most of the recovery during June-November 2020, non-nationals staged a robust rebound in December, up by 22% year-on-year and expanding its share to 45% of TIV (relative to 2H20 regular non-countrywide market place share of 37%),” claimed MIDF.

MIDF pressured that it stored its conservative FY21F TIV of 550,000 (+4% 12 months-on-yr) unchanged with prospective upside than downside at this issue, specially looking at that next motion command buy (MCO 2.) is much more accommodative to the financial state, allowing a huge pool of sectors to work contrary to the former just one, adopted by a sustained low curiosity price environment as properly as the visibility of a vaccine rollout this time about.

“As a end result of the international chip scarcity circumstance at present, we see increasing concern on the possible affect on automobile manufacturing. The latest newsflows suggest that selective gamers these kinds of as Proton may well be looking to scale down manufacturing, but we would bear in head that for Proton’s Geely-based SUV models (X70 and X50), localization fee is continue to reduced at about 40%, suggesting it is even now pretty reliant on the Chinese automotive provide chain which is strike tricky by the chip lack difficulty,” MIDF mentioned.  

“While the affect may well not be uniform across the board, e.g. our channel checks with selective non-national gamers a short while ago suggest manufacturing is nevertheless functioning as for every typical devoid of any supply constraint so much, we remain cautious must the impact of the chip shortage catch up with manufacturing right here,” it extra. 

MIDF shared that its top sector picks are Bermaz Automobile Bhd (BAuto) and MBM Sources Bhd.

It has a “get” call and target value of RM1.70 for BAuto as MIDF believes the auto business is a engage in into a opportunity manufacturer growth top to structural industry share growth. 

Getting recently acquired franchise rights for the Peugeot brand name, MIDF explained BAuto is eyeing a different mass market place manufacturer in the close to long run, positioned primarily to plug gaps in the reduced cost details in its design combine.

MIDF also recommends a “buy” for MBM with a goal cost of RM3.90 as the community research household believes the automobile company is a “cheap proxy” to an anticipated potent restoration in Perodua earnings.

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