• Resilient 4W volume sales
The company’s 4W sales showed resilience to the requirement of minimum DP with sales volume until 9M’12 up 24% (YoY) reaching 448k units. Meanwhile, the company’s 2W sales volume (Honda) for 9M’12 decline 3.5% (YoY) to 3.1 mn units, better than our previous estimate for FY2012F of 11% down (YoY). Even tough the company’s 2W sales declined, we note that the company’s market share was up to 58% from 52% in the same period last year. Meanwhile its nearest competitor, Yamaha, saw their market share shrink from 41% to 34%.
• Launch of LCGC
ASII plans to launch its Low Cost Green Car (LCGC) Toyota Agya and Daihatsu Ayla in the beginning of 2013 at the price of around Rp 75-110 mn. We believe Ayla and Agya will boost company’s 4W sales growth as its affordable price will be benefited by the rising middle income class. We understand ASII will face many competitors in LCGC segment with more competitive price i.e. Tata Nano, chinese car Geely Panda, and more to come. However, given its strong brand equity, ASII will become the leader in LCGC segment, in our view. We expect Agya and Ayla sales will reach 60k units in 2013 and up to 80k in 2014.
• Revise up 4W and 2 W sales estimate
Taking into account of strong 4W sales volume and the launch of Agya and Ayla, we revised up our ASII’s 4W car sales estimated from 490k and 512k in 2012 and 2013 respectively to 588k and 695k. Meanwhile, we also revised up company’s our 2W sales estimate from 3.8 mn and 4 mn in 2012 and 2013 respectively to 4.1 mn and 4.2 mn due to its strong market share.
• Upgrade TP and recommendation
We have raised our SOTP based target price from Rp 7,500 to Rp 8,750 following earnings upgrade in automotive sector and some adjustment in our SOTP valuation. Our new Target Price representing 11.5% potential upside, therefore we upgrade our recommendation from HOLD to BUY.