PETALING JAYA: According to MIDF research, the government’s economic relaxation measures includes the re-opening of plants and the operations. For distribution and retailing are to be resumed from 16 August. Though delayed but the automotive sector should see a sustainable recovery.
The research unit said that it is a significant positive. And it means that the entire automotive value chain will start working from this week onwards. Laying the first steps towards sustainable recovery in the following months.
MIDF also reported that the completely-knocked-down kits are stocked up well. Despite the lockdown, imports were still coming. It should help increase the production to regain production loss in the past two and a half months.
Large amounts of orders are taken care of that were placed two to four months prior to the lockdown. The suppressed demand is likely to return as well. long with the tax holiday that runs till the 31st December 2021. As the demand and supply increase, it directly helps in increasing the economy.
The research unit added that they are looking to increase room for automotive plants. So that the production shift cycles can be increased once the fully operational capacities requirements are met by end of the month.
One of the key demand centres, Klang Valley, accounts for 41% of total industry volume (TIV). The vaccination rate in the area is over 64% by far and consumers returning to showrooms can be possible in the coming weeks, as per MIDF research. Overall, 53% of Total Industry Volume is accounted for by the States that have achieved over 50% vaccination rate.
MIDF Research conducted a survey with several listed automotive companies and they have found out. That industry’s workforce (inclusive of plant workforce) over 90% have been fully vaccinated. Which is a lot higher than the state level vaccination rates.
Public-Private Partnership industrial Covid-19 Immunisation Programme (Pikas) can be credited for such successful vaccination rates.
However, the workforce still has to face the 14-day post-dose requirement. As a result, the production rate will be a bit slow from now till the end of August. But once the workforce is back no holdbacks are to be expected and the recovery will be on its path. According to the research unit, the country’s 80% vaccination target is by October 2021. Seems achievable after the rapid progress in the recent vaccination rate. Which in turn leads to a sustainable recovery.
The buy calls on Bermaz Auto Bhd at a target price of RM 2.20. MBM Resources Bhd has a target price of RM 4.20 and UMW Holdings Bhd has a target price of RM 4.30. MIDF Research also said that as the automotive retailing is being re-opened should lead to a larger amount of bookings according to them. Along with the ongoing tax holiday till the 31st December 2021. Cash transfers under the fiscal stimulus programmes and a low-interest-rate environment is the idea behind.