GAUGING from February 2022’s total industry volume (TIV), Malaysia’s automotive sector is poised for a road to recovery with sales for March 2022 expected to overtake February 2022’s shorter working month and with companies with financial year ending March 31, 2022 speeding up sales towards the month-end.
According to the Malaysian Automotive Association (MAA), TIV for February 2022 came in at 43,722 units (+8% month-on-month [mom]; +1% year-on-year [yoy]) with sales performance stronger on both mom and yoy as automakers ramped up production to fulfil back-logged orders before the expiry of sales tax exemption (SST) by end-June 2022.
Against such prospect, Kenanga Research has maintained its “neutral” stance on the automotive sector with 2022 TIV target of 600,000 units (+18%) which is in line with MAA’s 2022 TIV target.
“We expect buoyant recovery in car sales especially as evident from the growing number of back-logged bookings for popular models (up to six months) and stream of new models launches in 2022 (including models launches that were postponed from 2021),” opined analyst Wan Mustaqim Wan Ab Aziz in an automotive sector outlook.
“This comes amid the re-opening of economic activities which are further driven by the 100% sales tax exemption on CKD (completely-knocked-down) passenger vehicles and 50% on CBU (completely-built-up) including SUV (sports utility vehicle) and MPV (multi-purpose vehicle) for six months until end-June 2022.”
Additionally, new launches of battery electric vehicles (BEVs) are expected to be boosted by the full exemption on import & excise duties, sales tax, road tax and individual tax relief of up to RM2,500 for the costs of purchase and installation as well as rental and subscription fees of EV charging facilities up to Dec 31, 2025 (up to 2023 for CKD, CBU) to support development of the local EV industry.
“Nevertheless, for certain models, the recovery of car production could be limited by the ongoing global constraint in semiconductor chips supply,” cautioned Kenanga Research. “Automakers have prioritised usage of such resources by diverting any precious semiconductors they have to their most profitable vehicles such as full-size trucks and SUVs as well as luxury vehicles.”
Besides Perodua’s potential introduction of the all-new Alza, other interesting new model launches in the pipeline are the New Peugeot Landtrek in 3Q 2022, followed by KIA Sportage and Sorento in 3Q/4Q 2022.
“The KIA Carnival CKD programme remains on plan to be released in April and is expected to help improve margin,” projected UOB-Kay Hian Research.
Maintaining a “market weight” on the automotive sector, the research house said at 11.7 times FY2022 price-to-earnings ratio (PE), the sector is trading below its average historical PE of 13 times.
“Based on companies under our coverage, we are forecasting sector earnings growth of 30% in 2022 from a low base in 2021,” noted UOB-Kay Hian Resesarch. “This is on the back of a 9% revenue growth. A stronger-than-expected recovery might lead to an expansion in the sector’s valuation.”
However, the sector is susceptible to supply chain disruption due to the chip crunch and ongoing supply bottleneck, high commodity prices, and the Russia-Ukraine conflict which could hit production growth in 2022. – March 23, 2022
