February Auto Statistics: MY Automotive (NEUTRAL) - CNY break = Poor sales

Auto Stats: Automotive (NEUTRAL) - CNY break = Poor sales

• Feb 2016 TIV took a dive to a 7-year low, falling further to 37.9k units (-15% MoM, -25% YoY) due to a short working month and further exacerbated by suppressed consumer sentiment and higher car prices. We keep our 2016 TIV forecast of 645k units (-3% YoY) unchanged but caution for potential downside.
• Red across the board. MoM contraction was across the board, except for VW (+33% MoM, +7% YoY), led by Mazda (-42% MoM) and Mercedes Benz (-36% MoM). We expect TIV to rebound in March but caution that the sales outlook remains soft.
• A glimpse of hope from a MYR bounce? Recent strength in MYR against USD and JPY is mildly positive for auto players whose imported component cost have escalated from a weaker MYR. Persistent MYR strength is a potential two-fold gain for foreign investors in auto stocks: (i) forex gain and (ii) positive sentiment on auto stocks.
• Stock picks. BAuto is our only BUY in the sector for its exclusive Mazda distributorship in Malaysia and the Philippines which are gaining traction. We see further earnings downside to UMWH (SELL) from its (i) auto (weak sales coupled with negative USD exposure) and (ii) O&G divisions.