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Neutral stance for auto sector amid April’s 18% drop in vehicle sales
Published on: Thursday, May 23, 2024
By: Bernama
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Neutral stance for auto sector amid April’s 18% drop in vehicle sales
Kenanga IB has forecasted a higher total industry volume in May 2024 due to the absence of a long holiday and the Malaysian Autoshow 2024. (File pic)
PETALING JAYA: Research houses have maintained a “neutral” call on the automotive sector after new vehicle sales in Malaysia, known as total industry volume (TIV), dropped 18.4% in April 2024 against the previous month but grew 19.7% on a year-on-year (y-o-y) basis.

Malaysian Automotive Association (MAA) reported April’s TIV at 57,991 units as a result of fewer working days in April due to the Hari Raya festive season and higher deliveries before the sales and service tax exemption dateline.

Year-to-date 2024 TIV amounted to 260,200 units, a growth of 8% year-on-year due to lower inventory levels and more attractive new models launched recently.

Hong Leong Investment Bank Bhd (HLIB) said it will maintain its 2024 TIV expectation of 720,000 units versus MAA’s forecast of 740,000 mainly due to declining order backlogs and easing new order intakes over the coming months.

The automotive industry saw a new record high of 799,600 units of new car sales in 2023.

“Nevertheless, there is still upside potential from exciting new model launches in late 2023 and 2024 with more aggressive sales and marketing activities to sustain sales,” it said.

Meanwhile, Kenanga Investment Bank Bhd (Kenanga IB) said it has projected a TIV of 710,000 units (-11%) in 2024, a tad more conservative than the 740,000 units projected by MAA.

“It will be business as usual for the affordable segment with fuel subsidy rationalisation more likely to hurt demand for mid-market models, giving rise to a two-speed automotive market locally in 2024.

“In general, the industry’s earnings visibility is still good, backed by a booking backlog of 200,000 units as of end-April 2024,” Kenanga IB said.

The research house believes May 2024’s TIV will be higher than April 2024’s with no long festive holiday and boosted by Malaysia’s largest auto promotional campaign, Malaysian Autoshow 2024.

HLIB said its top picks are DRB Hicom Bhd with a target price (TP) of RM2 and MBM Resources Bhd’s TP of RM5.40.

At the same time, Kenanga IB said it has set a TP of RM5.80 for MBM Resources.

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