New vehicle sales in Malaysia are on track for a decline this year as the industry grapples with margin pressures and soft consumer sentiment, analysts said.
While industry volume is widely expected to fall from the post-pandemic surge, recent earnings and monthly sales data suggest more troubles ahead, TA Securities said, and downgraded Malaysian automotive stocks to 'underweight' from 'neutral'.
There is also limited upside across stocks in the sector, the research house said.
Data out on Friday showed a decline of 12% year-on-year and 15% month-on-month to 61,250 units in May amid long festive holidays.
Malaysian automotive companies have been grappling with a deluge of Chinese imports targeting electric vehicle buyers and those more sensitive to prices with steep discounts. Sales have also been under pressure amid rising prices of unsubsidised fuel.
BIMB Securities and MBSB Research, both of which kept their 'neutral' rating on the sector, said there are still bright spots in the industry even as volume continues to normalise after several years of record sales.
National marques are providing support and adoption of electric vehicles retains structural upside while the sector “transitions into a more sustainable, replacement-driven cycle", said BIMB Securities, with Sime Darby Bhd (KL:SIME) as its top pick for the sector.
MBSB Research, meanwhile, prefers MBM Resources Bhd (KL:MBMR) due to exposure to Perodua that remains resilient in the mass-market segment. “Favourable” Japanese yen versus Malaysian ringgit movements are also supporting associate earnings that account for more than 70% of its profit before tax, the house added.
Source: theedgemalaysia