Company Update:
Astra International (ASII IJ, BUY, TP: IDR7,350),
Robust Auto Sales, But Bumpy On Finance Services
Astra International (ASII IJ, BUY, TP: IDR7,350),
Robust Auto Sales, But Bumpy On Finance Services
May
sales numbers indicate that Astra’s car wholesale would continue improving MoM.
2W vehicles also maintained its robust sales. Maintain BUY with a lower
SOP-based TP of IDR7,350 (from IDR7,400, 11% upside). The reduced TP is
triggered by its lower financial services unit value while our lower forecast
is due to a drop in our CPO price estimate. Agri and its financial services
unit accounts for c.17% of Astra’s value. A majority of Astra’s earnings and fair
value are still driven by its auto business.
¨
Improved
vehicle wholesale.
We expect Astra International (Astra) vehicle sales recovery – which started in
March – to continue to improve in 2H16. Astra’s car monthly wholesale increased
to 3.6% MoM. Motorcycle wholesale also showed robust growth on a YoY basis,
despite declining MoM. Its vehicle wholesale were better than national sales
volume, which was lower.
¨
In our
calculation, Astra’s car market share increased to 50.8% in 5M16 (vs 50.3% in
5M15), while its motorcycle market share rose to 72.7% (from 68.1% in 5M15).
The low-cost-green car (LCGC) and medium-SUV Toyota Fortuner were the
main drivers of car sales growth. Astra has reduced its inventory days to a
lower level at its distributors (currently one month, from two months), hence
the company can now better manage its sales.
¨
However,
Astra Agro Lestari (Agri) earnings were lower. Given the lower CPO
price assumption, we revise down our FY16 and FY17 earnings estimates to IDR17trn
(-6%) and IDR19trn (-4%). While we continue to expect some price support for
CPO in the near term (on the back of the current low inventory levels), we
believe the impact of the El Nino on CPO prices has already been fully
reflected. The catalyst required to move prices upward in a significant manner
would be a turnaround in demand growth. Its agribusiness accounted for 14% of
Astra’s 1Q16 earnings.
¨
Reduced
TP on lower financial services unit value. We lower our SOP-based TP to
IDR7,350, driven by its lower financial services unit value. While its vehicle
finance unit’s credit quality has been improving, non-performing loans (NPLs)
from Bank Permata (Astra holds a 44.6% stake) is likely to increase in 2Q. In
the latest monthly financial report, the bank continue to book high asset
impairment allocation. Bank Permata’s loan loss coverage (LLC) ratio was ~130%,
still low compared to other local banks which have LLC ratios averaging at
140-150%.
¨
Maintain
BUY.
Although Agri and its financial services unit were a drag, we maintain BUY on
Astra. Both units account for only c.17% of Astra’s fair value, while 75% of
Astra’s fair value is still related to its auto business. Auto and its related
financing accounted for c.70% of the company’s consolidated earnings. We see
auto sales improving significantly in the near future. Main risks in our call
are weaker consumer spending and the depreciation of IDR against USD.
Kindly click the following link for the full report: Astra International : Robust Auto Sales, But Bumpy On Finance Services
Best regards,
Andrey Wijaya
Senior Vice President
Research Analyst – Auto,
Consumer, Cement
PT. RHB Securities Indonesia
