RHB Investment Bank Bhd (RHB Research) has maintained a NEUTRAL call on the auto and auto parts sector as the research house feels the industry lacks catalysts to maintain its sales momentum in 2025.
In a research note on Dec 26, the research house stated that the Malaysian Automotive Association (MAA) recorded a total industry volume (TIV) of 67,500 units for November bringing the year-to-date (YTD) TIV to 731,000 units.
"Although there's an increase of 1.4% year-on-year (YoY) for the YTD figure compared to 11M23's numbers, the TIV recorded for November has weakened by 3% month-on-month (MoM) with major carmakers charting softer numbers, led by Toyota which saw a 6.7% MoM decline in sales volume.
"This was followed by Perodua (5.7%) and Proton (5%). Honda, however, recorded a 12.7% MoM increase," RHB Research said.
The research house said the total production volume (TPV) fell 14% MoM and 10% YoY to 60,900 units in November, bringing the 11M24 TPV to 724,800.
"The MoM decline was seen across the major marques with Proton leading the way with 21%, followed by Perodua (9%), Toyota (19%) and Honda (7%)," RHB Research added.
Nevertheless, the research house said generally, the performance of the auto sector players in the third quarter of 2024 (3Q24) met the house's expectations as both Sime Darby Motors Bhd (SDM) and MBM Resources Bhd met its forecasts.
"SDM started its FY25 (June) with an 11% YoY rise in 1Q25 earnings, mainly contributed by the consolidation of UMW's numbers into its bottomline. MBM's net profit improved QoQ.
"However, results from Tan Chong Motor Holdings Bhd (TCM) and Bermaz Auto Bhd (BAuto) fell short of its estimates due to TCM concluding its 9M24 with widening losses while BAuto's 1H25 earnings fell 42% YoY due to weak sales delivery," RHB said, adding that for 2025, it is forecasting a TIV of 730,000 units, a drop of 8% YoY from its 2024 projection of 790,000 units.
The decline is due to the research house anticipating a softer TIV as the high base effect kicks in and it does not see any compelling factors for 2025 auto sales to be maintained at the current elevated levels.
"We think the decline will mainly be contributed by the non-national marques, which continue to face intensifying competition due to new names that have entered the fray.
"Additionally, some car buyers may postpone their purchases in anticipation of further price cuts from both existing and new non-national marques which would also destabilise the non-national segment," the research house said.
On that note, RHB Research remains cautious in its outlook for 2025 given the ongoing price competition between non-national marques while softening order backlogs also indicate toned-down expectations.
The research house's top picks are BAuto for its attractive valuation and higher-than-sector-average dividend yield and SDM for its broad electric vehicle line-up which is well positioned for the RON95 rationalisation.