Astra International, Forging Ahead Despite Strong Headwinds

ASII’s domestic 4W market share rose to 57.1% in Jan-May 2012, from 54.3% in the same period last year, while its 2W market share rose to 55.2% from 51.2%. Although vehicle sales were temporary affected by the implementation of a new downpayment policy, we expect ASII’s vehicle sales growth to outperform that of the industry. That said, we are revising down our earnings estimates to IDR18.6trn-IDR21.0trn (-1.4% to -0.1%) for FY12-FY13f, factoring in slower 2W sales growth. We also cut our TP to IDR7,600 which implies 16.5x-14.6x FY12-FY13f PER.

Strong 4W sales
ASII’s 4W vehicle sales, which grew 30.5% y-o-y to 247k units in Jan-May, outpaced the industry’s y-o-y sales growth of 24.7% to 433k units. ASII’s domestic 4W market share rose to 57.1% in Jan-May 2012, from 54.3% in the same period last year. We reckon that the strong domestic 4W vehicle sales could be mainly attributed to purchases brought forward in anticipation of the implementation of the new downpayment policy.

In 2H, domestic 4W vehicle sales are expected to temporarily decline as customers have to pay a higher downpayment starting from 15 June. However, we expect the gradual recovery of domestic 4W vehicle sales by year-end.

Resilient 2W sales
ASII’s 2W vehicle sales have proved to be resilient. Domestic 2W vehicle sales declined -7.0% y-o-y to 3.2m units in Jan-May but ASII surprisingly managed to maintain a positive 2W y-o-y sales growth of 1.8% to 1.8m units. ASII’s share of the domestic 2W market rose to 55.2% in Jan-May 2012 from 51.2% in the corresponding period in 2011, thanks to its new Absolute Revo scooter model, strong distribution network and solid financing arm.

Although overall domestic 2W vehicle sales are expected to decline this year, we expect ASII to record positive 2W sales growth. Nonetheless, this year’s sales growth could be much lower than our previous estimate of 5.0% y-o-y.

Heavy equipment remains robust
We expect Indonesia’s heavy equipment sales to grow by 19% and 15% to 23,576 and 27,109 units respectively as commodity production, especially coal, is expected to remain strong. This should benefit ASII as it is the biggest heavy equipment distributor in the country with a 44% market share.

Notably, competition in the domestic small- to medium-sized equipment segment has intensified since products from China began flooding the market. This may hurt ASII’s small- to medium-sized equipment sales which account for 15%-20% of its heavy equipment sales. However, we expect ASII’s market position to remain strong, thanks mainly to its solid after-sales service and heavy equipment financing arm.

Forecast and TP revised down
Given the lower 2W vehicle sales estimates, we are revising down our net profit forecasts to IDR18.6trn-IDR21.0trn (-1.4% to -0.1%) for FY12-FY13f. We are also lowering our SOTP-derived target price to IDR7,600, which implies 16.5x-14.6x FY12-FY13f PER.