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Monday, April 27, 2009

Auto sector

Needs a good NAP. Proton, TCM now
Total industry volume (TIV) still sluggish. Mar ‘09 and 1Q09 TIV
contracted 5% and 9% YoY as expected, reflecting the adverse impact
from the economic slowdown and tighter financing environment. We
expect weaker performance ahead, with 2009’s TIV to contract 15-20%
YoY. We recommend investors to Sell Proton and TCM.
Mar ‘09 TIV grew 21% MoM on low Feb base… Mar 09’s TIV of
44,205 units (+20.5% MoM) was in line, with both the commercial and
passenger segments growing by 24.2% and 20.2% MoM respectively.
All major marques enjoyed higher MoM sales with non-nationals
Honda and Toyota achieving stronger growth (+33-34% MoM)
compared to national models Proton and Perodua (+9-17% MoM).
YoY performance still down. Mar ‘09 TIV fell 4.8% YoY and 1Q09 TIV
fell 9.3%. Market share-wise, the Honda and Perodua marques grew
3.4-ppt YoY and 1.6-ppt YoY in Jan-Mar ‘09 at the expense of Toyota (-
3.9-ppt YoY) and Proton (-1.7-ppt YoY).
2009 is set to be a tough year. We expect TIV to fall by 15-20% YoY
to 438,000-465,000 units, due to fewer new model launches, tougher
economic conditions and tighter financing environment. We understand
that loan applications and approvals have dropped significantly
particularly for Proton cars. A further dampener is the 85-100 bps hike
in Hire Purchase (HP) rates on non-national cars in Apr ‘09.
Downgrade Proton and TCM to Sell. The industry expects a new
National Automotive Policy (NAP) to be revealed soon but we are
doubtful whether it will address Proton’s long term competitiveness. We
downgrade Proton to Sell (from Trading Buy) following the 68% share
price appreciation since our Jan ‘09 upgrade as well as anticipation of a
poor 4Q09 result, to be announced next month. We also downgrade
TCM to Sell (from Hold) as the share price has breached our TP.

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