Automotive Sector

July Domestic Auto Sales

Seasonally higher car sales on Ramadan celebration. Domestic car sales grew 7.6% MoM in July to 112k units on seasonally higher demand prior to the Ramadan. The July sales volume translates to 7M13 car sales volume growth of 12% YoY, on track to reach our fullyear forecast of 11.3% YoY. Astra International (ASII) booked total sales volume growth of 8.2% MoM, stemming from Toyota (+11.6% MoM) and Daihatsu (+4% MoM). This brought ASII’s 7M13 car sales volume to 379k units (+6.4% YoY), still in line with our estimate. Ex-ASII, car sales volume in July grew 7% MoM, driven mainly by Suzuki (+8.1% MoM), Honda (+12.1% MoM), and Nissan (+9.4% MoM).

Continued stiff competition; Suzuki overtook Daihatsu to second place in July. Competition in the car market continued be stiff in July, with Suzuki climbing to second position with a 15% market share, replacing Astra Daihatsu Motor (ADM) for two consecutive months. Nevertheless, the top five marques in 7M13 remained unchanged with Astra Toyota having a market share of 36%, followed by ADM (14.5%), Susuki (12.9%), Mitsubishi (12.8%) and Honda (8.1%). On the flip side, Nissan has not been able to regain its fifth position in the domestic market given its lack of competitive new MPV models. We believe that competition will remain fierce until the end of year, but current market share should remain stable.

Sales to slow down in August before recovering in September on auto show. We expect car sales volume to fall in August on fewer working days due to the Ramadan holidays. Nevertheless, we expect
car sales to recover in September, particularly because the automotive association will host the annual Indonesia International Motor Show, where new models will be launched. This should boost customer
enthusiasm and prompt more buying activities in September.

2W sales volume growth accelerated in 7M13. Domestic 2W sales volume in 7M13 accelerated to 8.1% YoY compared to flat growth in early January. This is mainly driven by Astra Honda Motor (AHM) solid volume growth of 13.7% YoY, raising its market share to 60% in 7M13 vs. 57% in 7M12. On the flip side, Yamaha continued its weak performance as volume grew at tepid rate of 0.8% YoY in 7M13.

Maintain NEUTRAL on short-term hiccup; BUY ASII. We maintain our view that the short-term sales hiccup in the automotive sector on the back of higher lending rates will persist towards the end of year,
before recovering in FY14 on LCGC commercial production. As such, we maintain our NEUTRAL rating on the sector. We also retain our BUY rating on ASII (TP: IDR8,000), following its steep share price
correction, LCGC-ready production in 4Q13, and as it is a partial beneficiary of the weakening IDR via its commodity business units. We reiterate our SELL rating on IMAS with unchanged TP of IDR4,300 on
potentially disappointing car sales volume in FY13-FY14. Note that its single-digit car sales volume growth in July implies that the new facelifted Livina model was not able to boost its sales volume.

source: KIMENG dated 23 August 2013