Despite the rounds of interest rate hike and the gradual cut in petrol subsidy, improving consumer sentiment and a buoyant economic landscape boosted 2010 vehicle sales to end the year with a record 12.7% y-o-y growth. A healthy economic outlook, accommodative lending rates and the slew of new models in the pipeline are expected to fuel TIV growth by 2% in 2011 to 617,569 units.
However, industry margins expected to dip on inflationary pressure due to costlier raw materials and components. Nonetheless, earnings grow at a respectable pace given the favorable demand and strengthening ringgit in 1H. Maintain OVERWEIGHT on the automotive sector, with UMW and Tan Chong as top picks.
Below are target price for selected stocks in Automotive Sector.
| Stocks | Price (RM) | Target price (RM) | Market Cap (RM million) | Rating |
|---|---|---|---|---|
| TChong | 5.12 | 7.29 | 3,440.6 | Buy |
| EPMB | 0.58 | 0.68 | 96.3 | Buy |
| NHFatt | 2.43 | 2.85 | 182.6 | Buy |
| Proton | 4.63 | 6.18 | 2.542.9 | Buy |
| UMW | 7.50 | 8.38 | 8,702.6 | Buy |
| MBM | 3.28 | 5.00 | 796.1 | Buy |
Source : OSK Research