OSK Automotive Sector Stock Picks, Jul 2011

June TIV continued to fall although OSK had earlier anticipated it to have hit bottom in May, largely due to amendments to the HP Act. TIV for June dived 22.6% y-o-y, 12.4% q-o-q and 9.2% m-o-m, dragging the cumulative numbers into negative territory for the first time this year, for a 1.3% contraction YTD.

OSK expect to see poor earnings q-o-q and y-o-y across the board, notably for UMW, Tan Chong and MBM Resources as margins would be pressured by plant underutilization. OSK reiterate our NEUTRAL stance on the AUTOMOTIVE sector.

Below are the target price/fair value and rating for selected stocks in automotive sector.

Stock Price (RM) Target (RM) Market Cap (RM million) Rating
TCHONG 4.80 4.27 3,232.3 Sell
EPMB 0.885 1.38 149.3 Buy
NHFATT 2.32 2.85 174.3 Buy
PROTON 3.15 3.89 1,724.5 Tr Buy
UMW 7.40 6.60 8,680.4 Sell
MBM 3.18 3.80 789.0 Buy
DELLOYD 3.59 3.88 361.2 Buy

Source : OSK Research

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