Auto Sector - 2012 record TIV, MAA’s 2013 forecast in-line OVERWEIGHT

- December 2012 TIV hit a record high of 60,470 units (vs. our earlier estimates of 57K-58K units). Overall, the 2012 TIV of 627,591 units accounted for 100.1% of our estimate of 625K, and slightly ahead of MAA’s forecast of 615K. 

- Perodua was a key growth driver (+27% MoM) supported by year end promotions. Perodua hit record high sales of 189,137 units for 2012, surpassing 2010 record of 188,641 units.  Management has set a target of 194K for 2013, higher than our existing forecast of 191K units – suggesting room for upside to our projections.

- On YTD basis, Toyota strongly outperformed the industry (+21% YoY) driven by new model launches since late 2011 (new Avanza, and new Innova, Hilux) and aggressive discounting towards end 2012, particularly for the Vios. Note that Vios is an end-of-life model where bulk of depreciation has been taken. As such, Toyota should still be well profitable despite the aggressive discounting. We understand management is attempting to continue promotions ahead of Chinese New Year in February. 

- MAA is forecasting 2013 TIV to grow 2% to 640K units, a tad higher versus our forecast of 637K units (See report dated 13^th Jan 2013). Nissan should strongly outperform the industry this year and we see room for further upside to our numbers. We also think Toyota could register stronger numbers, pending launch of the new Vios and on the back of a replacement cycle off a strong base in 2008.  

- Perodua is a key beneficiary of the massive depreciation in JPY – MBM is well positioned to capitalise on this given its 20% direct stake in the former. 4Q12 production was 1% higher QoQ (+2% YoY), while 4Q12 Perodua sales were 7% higher sequentially – suggesting improvements in MBM’s earnings from 4Q12 onwards. 

- For 1Q13, we expect an earnings gap up for Perodua from: (1) Significantly stronger Ringgit against JPY; (2) Cheaper input cost given Perodua’s cost down efforts with vendors. MBM is best leveraged to Perodua’s earnings (accounts for 60% of bottomline). For UMW (BUY, FV; RM13.20/share) which has a 38% stake, Perodua accounts for 16% of bottomline.

- TCM (BUY, FV: RM6.30/share) remains our high conviction BUY for 1H13. Nissan succumbed to aggressive discounting in December specifically, but is likely to make a strong comeback in January 2013 given huge backlog orders. At 10x (FY13), stock trades at steep 23% discount to UMW, despite >80% earnings growth (FY13F) and its elevation to become 2^nd  largest nonnational (from 3^rd  position). TCM also entails highest earnings sensitivity to the stronger Ringgit. 

- APM (BUY, FV: RM6.50) is a beneficiary of the industry’s record volumes. Supplies to the Almera will see a gap-up in revenue per car set, being its maiden module supply. A key catalyst however, is a step-up in year end dividends (FY12F yield: 7%, FY13F: 9%).   

Source: AmeSecurities