THE automotive sector has been upgraded to ‘overweight’ from ‘neutral’ at Kenanga Research, with Bermaz Auto Bhd and DRB-Hicom Bhd getting the same bump up for their stocks.

In a sector report released yesterday (Oct 2), the research house noted that while its core thesis on the sector has not changed, it said sales volumes were likely to continually surprise, and value has emerged in selected names.

It has raised its projection for industry-wide sales volume, with the total industry volume

(TIV) by 8% to 800,000 units (flat YoY), which looked set to surpass forecast of 765,000 by

the Malaysia Automotive Association (MAA).

“This is backed by strong sustained demand in the affordable segment, attractive new launches, softer-than-expected impact from e-invoicing, and a downtrading trend by mid-market buyers.

It said Bermaz and and DRB-Hicom were upgraded to ‘Outperform’ due to their share price action.

It has also reiterated ‘Outperform’ for MBM Resources Bhd and Hong Leong Industries Bhd (HLI), but raised the 52-week target price (TP) for MBM by 3% to RM6.50 and HLI by 7% to RM14.50.

The report noted that the affordable segment was enjoying strong demand, while strong demand in the affordable segment would continue to boost sales volume for both MBM and HLI.

“Amidst the intensified competition in the local space, Bermaz has added Xpeng brand into its dealership business to counter the influx of Chinese automakers and DRB-Hicom has started to implement aggressive promotion to retain market share.

“Apart from affordability, Perodua and Proton models have outsold non-national brands as they have also caught up in terms of specifications and features such as digital speedometer, fuel-efficient engine, highly-responsive gearbox, advanced driver assistance system, the number of airbags (4 to 6) and anti-theft auto-locking system,” it said. – TMR