KUALA LUMPUR: CIMB Securities has raised its new vehicle sales, or also known as total industry volume (TIV), forecast upward by 3.3 per cent to 751,000 units for 2024, up from 727,000 units previously.
This is bolstered by favourable interest rates and stronger deliveries in the first half of 2024 (1H24).
According to Bank Negara Malaysia (BNM), the banking industry approved RM35.9 billion out of RM60.8 billion in hire purchase loan applications during the first four months of 2024.
"Our economists do not anticipate any interest rate hikes for the remainder of 2024, as the central bank maintains its focus on supporting economic growth.
"This supportive monetary policy is expected to bolster new vehicle sales in the coming months," said the research house in a note today.
However, CIMB Securities still anticipates a 7.0 per cent quarter-on-quarter and 16 per cent year-on-year decline in new vehicle sales in the second half of 2024, primarily due to the potential removal of petrol subsidies later in the year.
"Overall, we project a 6.0 per cent year-on-year decrease in 2024 TIV, influenced by factors such as the reinstatement of sales tax, higher fuel costs in the latter half of the year, and increased competition from premium segment EV models,"said CIMB Securities in a note today.
CIMB Securities expects the introduction of the Employees Provident Fund (EPF) Account 3 and the upcoming civil servants' salary hike to support new vehicle sales in 2H24.
"Partial offsets include new model launches, the introduction of the EPF Flexible Account in May 2024, and an anticipated salary increase for civil servants in December 2024, which will help mitigate inflationary pressures," said the research house.
Meanwhile, national automotive brands are expected to perform relatively better with a projected 1.3 per cent decline compared to a steeper 13 per cent year-on-year drop for non-national segments, benefiting from their affordability and broader market presence.
Hence, CIMB Securities maintained an "Overweight" rating on the Malaysian automotive sector and favoured Sime Darby Bhd and Bermaz Auto Bhd (BAuto) as its preferred picks.
It anticipates stronger earnings from companies like Sime Darby with overseas exposure offsetting weaker domestic market performance, amidst projecting an 18 per cent year-on-year decline in sector net profit for 2024, mainly due to lower sales volumes and margin pressures from inflation.
"Sime Darby stands out due to its strategic acquisitions, its role in the national electric vehicle rollout through Perodua, and potential asset monetisation, particularly in non-core and landbank assets.
The recent 13 per cent decline in Sime Darby's stock price since May 24 likely reflects sector-wide sentiment following the government's decision to remove the diesel subsidy on June 10, 2024.
On the other hand, the research house said BAuto presents compelling value with attractive dividend yields of 9.2 per cent for CY24-25, supported by a strong net cash position of RM438 million as of April 30.
BAuto's position is bolstered by its participation in Kia's Asia Pacific expansion through domestic assembly and Asean export initiatives.
"Key catalysts for sector growth include a strengthening ringgit against major currencies, potential interest rate cuts, and favourable government policies to stimulate domestic demand," it added.
CIMB Securities said the risks include currency depreciation, interest rate increases, and reduced consumer sentiment due to subsidy reductions and new tax policies.