Automotive sector to see strong TIV in 2023, say research houses
21 Feb 2023
RHB Investment Bank Bhd (RHB IB) is expecting the automotive industry to see strong earnings growth in the first quarter of 2023 (1Q 2023) and 4Q 2022 as automotive companies are in the final stretch of fulfilling the Sales and Service Tax (SST)-exempted orders before June 30.
The investment bank said some companies may absorb the SST if they fail to deliver the cars to customers before the registration deadline of March 31, 2023.
“Given the surprisingly resilient orders on hand, we are of the view that the subsequent quarters will also remain robust,” it said in a note today, adding that it expects to see strong total industry volume (TIV) in February and March.
Overall, RHB IB anticipates the 2023 TIV to be at 680,000 units, which represents a mere six per cent year-on-year softening against the high 2022 base, supported by existing orders and new launches this year.
The Malaysian automotive Association (MAA) currently forecasts a 2023 TIV of 650,000 units, while Perodua’s internal estimates stand at 705,000 units.
“We maintain our ‘overweight’ call on the industry. Our top picks are UMW Holdings Bhd as well as MBM Resources Bhd, and we also note the attractive yields of MBM, Bermaz Auto Bhd and Sime Darby,” said RHB IB.
Meanwhile, Kenanga Research also projected an upbeat 2023 TIV target of 720,000 units, premised on strong reception to new models, a pause in the overnight policy rate hike and the deferment of new excise duty regulations resulting in stable car prices.
“MAA is more cautious about the industry outlook as a whole, especially for the low-end segment, likely due to the impact of high inflation on the lower income group with the rising cost of basic necessities,” it said.
It also noted that the backlog in bookings rose to 350,000 units as of end-January 2023 –higher than 300,000 units three months ago — indicating strong order replenishments, especially for attractive new models even in the absence of the SST exemption.
“Additionally, vehicle sales will be supported by new electric vehicles (EVs) which will enjoy SST exemption and other EV facility incentives,” it said.