These MIDF Research Factors Remain A Recommendation For The Automotive Sector - Kakiforex.com - Financial Market Media No. 1 in the World These MIDF Research Factors Remain A Recommendation For The Automotive Sector These MIDF Research Factors Remain A Recommendation For The Automotive Sector

March 25, 2021

These MIDF Research Factors Remain A Recommendation For The Automotive Sector

 MIDF Research maintained a ‘positive’ recommendation on the automotive sector following positive developments involving its recovery from a weak performance in January.


In a research note today, the firm said the sector's performance in January was affected by factors involving inventory constraints after recording a stronger fourth quarter of 2020 as well as a lack of supply of components and chips globally.


“The first two factors have been addressed following the decision to allow manufacturing activities to operate again, including in areas under the Movement Control Order (PKP).


“However, the problem of chip shortage is still significant until the middle of this year although the impact is limited to certain models in the market. In addition, the number of customer attendance in showrooms also showed an increase after PKP in certain states was terminated, "said the firm as reported by Bernama.


According to MIDF Research, so far this year, the total industry volume (TIV) has dropped 10% to 75,621 units.



However, TIV for March and April is expected to increase following the end of the 10-kilometer movement restriction, the full operation of the Road Transport Department (JPJ) and pre-Hari Raya Aidilfitri purchases.


Most importantly, TIV for March and April overcame weaker figures in the same period last year, with only 165 units sold in April 2020, which was severely affected by PKP.


Meanwhile, CGS-CIMB in its research note, maintained a ‘neutral’ recommendation on the automotive sector and targeted TIV this year to hit 580,000 or 10% higher year-on-year and Perodua by 13% year-on-year driven by several new model launches.


“We think that demand for the X50 and X70 remains strong with Proton management stating at the DRB-HICOM fourth quarter 2020 financial results briefing session that the models involved are experiencing local delays of about 3-4 months.


“Perodua has received more than 8,000 orders for its latest Sports Utility Vehicle (SUV), the Ativa. Overall, we anticipate that this positive development will stimulate TIV growth for the second quarter of 2021 and beyond, ”explained CGS-CIMB.