Monday, November 5, 2012

Astra International

by Mandiri

Lingering risks over the mining division continued to worsen, while the much-anticipated LCGC would only give a mere 2% addition to FY13F sales. UNTR has underperformed JCI by 32%, while ASII by only 5%, thanks to the solid 4W sales. Its auto-division is now trading at 17x PE, becoming the group’s backbone amidst weak UNTR and AALI. Risk-return is not attractive, as any 4W sales dissapointment could de-rate ASII’s valuation. Reiterate Neutral.

Mere upside from LCGC. We factored in only 60k units of LCGC sales in FY13F and 67k in FY14F, as we do not expect the newly installed 100k units annual assembling capacity to be fully-utilized solely for LCGC. Assuming Rp85mn ASP, we expect LCGC sales to only give a mere 6% addition to 4W sales and 2% to ASII’s consolidated sales, much lower than the 9% volume uspide. If the government cancels out the tax incentives, we think that ASII could increase the price by around Rp10mn, which may affect the potential conversion of 2W buyers.

UNTR continues to dissapoint. Despite strong 4W sales, about 20% of ASII’s EPS has been contributed by UNTR, whose outlook is worsening. After yesterday’s downgrade, our heavy equipment analyst expects UNTR’s FY13F EPS to contract by 11.8%, on top of a 5.8% decline in FY12F. Thus, we expect UNTR’s EPS contribution to ASII to decline from 20% in FY11 to 18% in FY12F and 14% in FY13F. Our UNTR’s FY13F EPS are now 22.0% lower than consensus. Further consensus earnings downgrade could be another near-term headwind, we believe.

Forecasts revision. We fine-tuned ASII’s FY12F EPS by +4.8% to incorporate higher 4W volumes and UNTR’s better-than-expected margins in 3Q12. We also revised FY13F EPS by +5.5% to factor in higher 4W sales (partly due to LCGC sales), netted-off with lower contribution from UNTR amidst worsening outlook.

Risk-return not attractive, reiterate Neutral. ASII’s share price has only underperformed the JCI by 5% YTD, despite weakening outlook of UNTR, which has underperformed by 32%. Our EPS upgrade on 4W side has led to higher SOTP-based TP to Rp7,900 (from Rp7,350), but we reiterate our Neutral call on limited upside. ASII’s auto-division is now trading at 17x FY13F PE, becoming the group’s backbone in supporting the falling EPS contribution from UNTR and AALI. At this juncture, we do not see attractive risk-return profile, as any dissapointment in 4W sales could lead to valuation de-rating.

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