Vehicle sales still weighed by consumer sentiment

PETALING JAYA: Cautious consumer sentiment will continue to weigh on vehicle sales and reflect on automotive-related stocks despite measures to boost demand and a range of mostly electric vehicle (EV) choices coming into the market mainly from China.

Analysts have largely kept their recommendation on automotive stocks to “neutral”, following the Malaysian Automotive Association’s (MAA) Tuesday release of September total industry volume (TIV) measuring vehicle sales showing a decline of 20% month-on-month to 58,490 units largely due to shorter working days in the month plus a week-long plant shutdown by Perodua. On a year-on-year basis, TIV was flat.

BIMB Securities Research said tighter consumer spending amid subsidy rationalisation would likely cap any upside to demand despite the rollout of new model launches, including domestic EV models lending support.

The brokerage has maintained hold calls on MBM Resources Bhd (MBMR) with a target price (TP) of RM5.28 and Sime Darby Bhd at RM5.28, with a sell call on Bermaz Auto Bhd at 54 sen.

Hong Leong Investment Bank (HLIB) Research noted order backlogs continued to decline in September and can be expected to soften further in the coming months reflecting weaker consumer sentiment amid a slowing economic outlook.

It projects automotive earnings to contract this year pressured by lower sales volumes and rising operating costs due to intensified promotional efforts, with the impact partially cushioned by a stronger ringgit against the US dollar and yen.

It has “buy” calls for MBMR at a TP of RM7.10 and Sime Darby at a TP of RM2.50 for attractive dividend yields. The research house said MBMR benefits from exposure to Perodua while Sime Darby “is supported by sustained strength in its industrial segment (particularly in Australia), a recovering China motor division, and a stronger contribution from UMW across all sub-segments”.

Kenanga Research said MBMR should benefit from Perodua’s new launches supported by demand for mass-market passenger vehicles and the value-for-money Jaecoo marque. It has an “outperform” call on the stock with a TP of RM7. It added that Hong Leong Industries Bhd “is a strong proxy to the booming gig economy given the critical role of motorised two-wheelers in executing online delivery transactions”. It has an “outperform” call on the stock with a TP of RM17.70.