Kuala Lumpur: CGS-CIMB forecasts car sales to improve from March 2022 with robust backlog orders, supported by the ongoing sales and services tax (SST) waiver.
In a note, the research house said Proton had over 60,000 bookings registered as of February 2022 while UMW-Toyota had more than 30,000 backlog orders.
“Moreover, we have learned that automakers are optimistic that the SST holiday expiry in June will have minimal impact on industry sales volume for the third-quarter of the 2022 financial year forecast (3Q2022F),” it said.
CGS-CIMB also noted that the Malaysian Automotive Association (MAA) is planning to appeal to the government for an extension of the SST waiver for new vehicles beyond June 30, in view of the higher backlog orders due to the ongoing global semi-conductor chips shortages.
It added that the MAA is projecting a higher total industry volume (TIV) delivery month-on-month in March, backed by automakers pushing for higher sales as well as a longer operating period compared to February.
Nonetheless, the research house is neutral on the automobile sector, while noting that its valuation reflects a stronger earning growth projection in 2022, naming Bermaz Auto Bhd as its top pick with a target price of RM2.10.
“Key upside risks to our neutral call are the strengthening of the ringgit versus the US dollar and the Japanese yen, a reduction in interest rates, and favourable government policies to revive domestic demand.
“The ringgit’s depreciation versus the US dollar and Japanese yen, interest rate hikes, new wave of Covid-19 infections and an extended delay in semiconductor chips shortages are the key downside risks to our call,” it added.
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