Still Attractive at this Level; Upgrade our TP
Rolling-over our NAV to 2015; maintaining Buy call — We have rolled-over our valuation to 2015 and increased our TP
to Rp8,250 from 7,450 and maintain our Buy recommendation. The share price has
done well YTD but we are comfortable with 2015 PER of 12.3x, a 10% discount to
the market. Although there could be more competition in Astra’s MPV segments
from Mobilio, we believe Astra’s earnings will continue to remain resilient as
we expect 10% EPS growth in 2014-15 respectively. Astra is still the proxy for
the Indonesian market with US$25bn market cap and ADTV of US$24m, with a strong
track record and execution.
2W and 4W volume to continue to grow but competition in 4W to intensify —
We are still expecting 2W/4W volume to grow by 4%/13% in 2014 and
5%/13% in 2015 respectively. There is not much competition in the 2W volume as
of now and Astra has been enjoying good market shares. On the flip side, Astra’s
4W division has been facing competition on the low MPV segment from Honda’s
Mobilio and Suzuki’s Ertiga. However, Astra’s LCGC, 14% of Astra 4W volume, has
come to the rescue recently with strong market shares and is performing better
than expected.
Analyzing Astra International’s earnings driver — 4W divisions account for c. 26% of Astra International’s earnings, followed by financial services, 2W, heavy equipment and Agribusiness with 19%, 17%, 16% and 11% net profit contributions respectively. As such, we believe competition on the low MPV segments will not impact Astra’s earnings significantly. We expect 4W distribution operating margin to
normalize with more competition at around 2.5-3.0%.
Better outlook post elections - We expect corporate and consumer spending increase post elections. Manufacturing utilization rate is at one of the highest rates in the past decade at 75.5%. Consumers have become more resilient on the fuel price hike and weak rupiah has muted impact on Astra’s earnings.
Key risks: currency volatility, slow infrastructure progress and unexpected po litical conditions.
.....
source: Citi dated 03 June 2014
