Company
Update:
Astra International (ASII IJ; BUY; TP: IDR9,850)
Robust 4W Vehicle Sales Boost Earnings
Astra International (ASII IJ; BUY; TP: IDR9,850)
Robust 4W Vehicle Sales Boost Earnings
We
revise Astra’s earnings upward, driven by the robust 4W vehicles wholesale,
which increased much faster than national car growth and was above our
expectations. We see Astra continuing to dominate the domestic vehicle market
since it is the most ready to comply with the proposed LCEV programme, likely
to be implemented in 2020. We maintain BUY with a higher SOP-based TP of IDR9,850
(from IDR9,100, 15% upside), implying 20x/17x FY17F/FY18F P/Es.
¨
Astra’s
stronger position, both 4W and 2W markets. We see Astra International (Astra)
continuing to the dominate domestic vehicle market thanks to its strong
dealership and good after sales service. Astra’s 4W (four wheel) vehicle market
share rose to 57% in 1Q17 (1Q16: 48%). Astra’s 1Q17 car wholesale grew 26.8%
YoY (to 161,000 units) – driven by strong low-cost green cars (LCGC) sales,
while national 4W vehicle wholesale grew a mere 5.7% YoY (to 283,000 units).
Astra’s 2W (two wheel) vehicle market share also increased to 77% in 1Q17
(1Q16: 73%), despite its 1Q17 motorcylce wholesale declining 1.6% YoY (to
1,073,000 units). During same period, national 2W vehicle wholesale declined
6.8% YoY (to 1,402,000 units).
¨
The
most ready to deal with new LCEV programme. Astra is the most likely beneficiary
of the Government’s new low carbon emission vehicles (LCEV) programme, which
ought to be implemented in 2020. Notably, the Ministry of Industry has proposed
a plan to tax vehicles according to their pollution levels. This would compel
vehicles to be locally manufactured with high local spare-part content. Astra,
via its subsidiaries Astra Daihatsu Motors (31.9%-owned) and Astra Otoparts
(80%-owned), has extensive manufacturing facilities and thus making it the most
ready to comply with the new programme.
¨
The
carbon tax would be regulated through the LCEV programme, which is a
continuation from the low-cost green car (LCGC) programme. From this carbon tax
policy, three types of cars would be promoted – hybrid, gas-powered and
electric. However, the LCEV timeline is still uncertain since this is currently
being discussed, particularly on LCEV’s scope and incentivised models.
¨
Upgraded
earnings estimates and TP. We see that Astra’s strong 4W vehicle earnings are more
than enough to offset its projected lower agribusiness earnings as we expect
lower CPO prices. Further, the company’s 44.6%-owned Bank Permata earnings have
started to recover since its gross NPL ratio declined to 6.4% as at end-March
(from 8.8% as at end Dec 2016). Hence, we raise FY17F and FY18F earnings to
IDR20trn (+4%) and IDR24trn (+5%) respectively on the back of higher equity
income from the automotive and financing units.
¨ Maintain BUY with a higher SOP-based of IDR9,850 TP implying 20x/17x FY17F/FY18F P/Es. Main risks to our call are the weakened consumer spending and IDR depreciating against USD
Kindly click the following link for the full report: Astra International : Robust 4W Vehicle Sales Boost Earnings
Best regards,
¨ Maintain BUY with a higher SOP-based of IDR9,850 TP implying 20x/17x FY17F/FY18F P/Es. Main risks to our call are the weakened consumer spending and IDR depreciating against USD
Kindly click the following link for the full report: Astra International : Robust 4W Vehicle Sales Boost Earnings
Best regards,
Andrey
Wijaya
Senior
Vice President
Research
Analyst – Auto, Consumer, Cement
PT.
RHB Securities Indonesia
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