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Thursday, October 11, 2012

Primed for a rebound

by DBS

Indomobil Sukses Internasional : BUY; Rp5,350;

Price Target : Rp7,500 (previous: Rp8,500); IMAS IJ

Primed for a rebound

· Management less sanguine on prospects for FY12

· Yet, despite cutting FY12/13F earnings to Rp1,121/1,387bn, share still offers compelling value. Growth to rebound from 2H12

· Maintain Buy with a revised TP of Rp7,500

Management’s latest guidance paints less rosy outlook. Management has cut its FY12 target on Nissan car sales to 75-80K units from 90-100K units. A continued supply constraint (i.e. frame parts) for the production of ‘Evalia’ is a principal concern. Slower sales of ‘Juke’ (following the fire incident) and sales of ‘March’ (as a result of intensifying competition in the compact car segment) also contributed to the downward revision to management targets.

Cut FY12/13F earnings to Rp1,121/1,387bn. Still compelling value. Following management’s new guidance, we have also lowered FY12/13F net profit estimates by 19/21% to Rp1,121/1,387bn, mainly on  lingering supply concerns over ‘Evalia’, a moderate downward revision to ‘March’ sales, and lower OP margin assumptions. However, we still expect IMAS earnings to rebound in 2H12 and to sustain a solid growth in FY13, fuelled by growing unit sales of its new launch ‘Evalia’ and operating margin improvements.

Maintain BUY but TP lowered to Rp7,500. Even after our downward revisions, the share price is still attractively valued at 13.2/10.7 FY12/13F PE (vs. a 2 year net profit CAGR of 31%). In terms of FY13F earnings, we believe the counter offers compelling value as it is currently traded at a 25% discount to the broader market, in spite of its higher growth prospects. We believe most negatives have already been priced in relative to the earnings downgrade and have thus lowered our TP only moderately to Rp7,500, as we roll-over our valuation base to FY13F. Looking ahead, we expect stronger 2H12 and FY13 results to drive share price higher. Reiterate our BUY call.


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