Local analysts remain neutral on the auto and auto parts sector as the Goods and Services Tax (GST) implementation and other macroeconomic headwinds will pose challenges for automotive sales in 2015.
RHB Research said it remained neutral with Berjaya Auto and MBM Resources as its top picks at target price of RM4.50 and RM3.55, respectively, while Kenanga Research House picked Berjaya Auto and DRB-Hicom at a target price of RM4.29 and RM2.30, respectively.
It expected Malaysia’s total industry volume (TIV) for the sector to slip to 650,000 units this year after three consecutive years of growth.
“The GST implementation and macroeconomic headwinds combined with rising living costs would likely put pressure on consumer spending.
“Factors supporting sales includes a strong product pipeline and a competitive market place with distributors offering discounts,” it said in a research note.
Meanwhile, Kenanga Research said for 2015, it expected TIV to stay flat at 667,000 units underpinned by the normal vehicle replacement with the current five million cars on the road aged between 10 and 15 years.
On stock selections, it said it preferred to stick with auto players which are less vulnerable to the weakening ringgit.
“Our top pick remains Berjaya Auto for investment merits backed by its superior growth prospects from a low base on the back of strong pipeline of exciting models.
“It also has potential for margin’s expansion on the back of favourable exchange rate (with huge exposure in Yen) and lower import duties and, potential dividend payout of 40 per cent” it added.