Robust TIV likely for auto sector in first quarter
PETALING JAYA: The automotive sector’s total industry volume (TIV) will remain strong in the first quarter of 2024, with a slowdown expected in the subsequent quarters led by softer consumer sentiment and purchases that were brought forward.
However, a potential recovery towards the end of the year, led by aggressive yearend sales, is expected with several new models slated for launch and this could spark interest in new purchases.
The sector will benefit from the appreciation of the ringgit as it will improve the margins of automotive companies, as they incur lower effective cost of imported inputs while domestic selling prices are fixed in ringgit, said Hong Leong Investment Bank (HLIB) Research.
It projects 2024 TIV at 720,000 units, a drop of 8.9% year-on-year, after registering a potential new record high of 790,000 units in 2023.
HLIB Research expects domestic original equipment manufacturers (OEMS) for Proton (Drb-hicom Bhd) and Perodua (MBM Resources Bhd and UMW Holdings Bhd) to continue to outperform their competitors over the longer term, driven by attractively priced new models and new export programmes.
The research house maintains its “neutral’’ stand on the sector. Its top picks include Drb-hicom, with a target price of RM2, and MBM Resources (target price: RM5.40).
The new models slated for launch this year include Perodua’s new B-segment sport-utility vehicle (SUV), the Aruz facelift and Myvi replacement.
It also includes Proton’s new multi-purpose vehicle and SUV facelifts; Honda City hatchback facelift and Toyota new B-segment SUV and new electric vehicle model.
The sector is also expected to benefit from ringgit appreciation against the US dollar and sustaining low Japanese yen in 2024, addeds HLIB Research.
It said the Malaysian automotive industry has been an importer of vehicle parts and components, completely-knocked-down kits and completely-built-up units.
The pricing of these products are denominated in foreign currencies, which are mainly in US dollar and yen.
OEMS with high exposure towards the dollar include Toyota and Nissan, while towards the yen include Honda and Mazda.
The research house expects Proton sales to remain stable in 2024, mainly due to exciting new launches in 2023 and 2024.
On Sime Darby Bhd, the research house said the group is expected to complete the acquisition of UMW and disposal of Ramsay Sime Darby Healthcare Sdn Bhd in the first quarter of 2024.
This will boost the earnings profile of the motor segment and HLIB Research does not discount further merger and acquisition exercise for Perodua stakes.