- 4Q12
results season were mixed, but leaned more towards disappointments: TCM saw
earnings meeting expectations for the 1st time since at least the past four
quarters. UMW’s results were in-line, but APM’s and MBM’s numbers disappointed,
specifically dragged by their parts manufacturing divisions.
- Earnings
pressure for auto part players: Auto parts players saw initial/partial impact
from downward price adjustments for key national OEMs. APM saw earnings contract
2% QoQ (-22% YoY) while MBM’s auto manufacturing division saw earnings contract
16% QoQ. Our chat with MBM suggests that its auto parts manufacturing business
has seen the impact from price revisions since December 2012. However, the
impact from downward price adjustments should be partly mitigated by Hirotako’s
efforts to reduce cost, which include finding new sources of raw materials via
Sweden-based airbag partner, Autoliv.
- Aggressive
competition affects margins: UMW autos saw operating margins contract to 14% in
4Q12 from 17% in 3Q12, though we believe the stronger USD booked in the quarter
compounded the impact. TCM had an exceptionally strong quarter in 4Q12 due to
the maiden contributions from the Almera (sales: +38% QoQ) resulting in
improved margins (+1.3pp QoQ to 6.6%), in contrast to the broader industry
trends.
- Outlook
is looking a lot better: FY13F is set to see further earnings improvements:-
(1) A stronger MYR against JPY, and USD to a certain extent; (2) Full-year
impact of the Almera for TCM; (3) More competitive parts pricing from local
vendors for Perodua; (4) Launch of the new Vios in 2H13. However, a key risk is
a more competitive environment, in particular, selling prices.
- Expect
seasonal weakness in upcoming TIV: February TIV is expected to be announced
this week, which we expect to be seasonally weak due to a short working month
and CNY festive holidays. We estimate Feb TIV at 46K-47K units, down 15%-16%
MoM but up 5%-7% YoY. Nissan is likely to remain a key outperformer among the
Big 5 automakers in Malaysia, carrying on the Almera’s strong sales momentum.
On YTD basis, TIV should still stage a strong 20% increase. Perodua and Toyota
Feb sales are estimated to contract by 1%-33% YoY, while Nissan’s Feb TIV is
estimated to increase by 88% YoY. Honda should see exceptionally strong growth
as its Feb 2012 TIV was badly impacted by the Thai floods.
- We remain
OVERWEIGHT on the auto sector: TCM (BUY, FV; RM6.40/share) remains our
high-conviction stock pick. Key catalysts:- (1) A more than doubling of
earnings on the back of a stronger MYR vs. JPY and USD, 40% YoY volume growth and
improved plant economies of scale; (2) Contract assembly wins within the next
12 months riding on its robust regional manufacturing and distribution
capacity; (3) Potential franchise expansion within the region.
- We also
like MBM (BUY, FV: RM4.60/share) for the potential from its comprehensive auto
manufacturing licence which has yet to be utilised. Further clarity on this
should be obtained once incentives for foreign OEM investment are finalised
under the NAP review within the next few months. Meanwhile, Perodua is expected
to see significant earnings improvements from cheaper input cost and a weaker
JPY. An every 1% change in MYR:JPY impacts bottom line by 1%-2%.
Source: AmeSecurities
No comments:
Post a Comment