AUTOMOTIVE
$MBMR / 5983 (MBM RESOURCES BHD) $HLIND / 3301 (HONG LEONG INDUSTRIES BERHAD) $HIL / 8443 (HIL INDUSTRIES BERHAD) $SIME / 4197 (SIME DARBY BERHAD) $BAUTO / 5248 (BERMAZ AUTO BERHAD)
Research by Kenanga
Neutral

“4QCY23 Report Card: Cruising Ahead”

The sector’s earnings delivery (against our expectations) was better sequentially as 3 out of 7 companies surpassed our expectations. Their CY23 earnings growth was mainly driven by the record automotive industry sales led by Perodua, as well as strong margins from new models. We maintain our CY24 forecast of new vehicle sales in Malaysia, also known as total industry volume (TIV), at 710k units which is a tad lower than the 740k units projected by Malaysia Automotive Association (MAA). We hold the view that the impending fuel subsidy rationalisation will likely hurt demand for mid-market models, while remaining optimistic on the sales of affordable vehicles. The industry’s earnings visibility will be backed by a booking backlog of 200k units. Our sector top pick is MBMR (OP; TP: RM5.80), which focuses on the affordable segment. It also offers an attractive dividend yield of about 9%.

Analyst(s):
Wan Mustaqim Bin Wan Ab Aziz
wanmustaqim@kenanga.com.my