ASTRA INTERNATIONAL ASII IJ / ASII.JK

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1 Equity Research ASTRA INTERNATIONAL ASII IJ / ASII.JK Company Update Automotive Sector HOLD Previous: HOLD 16 November 2016 More powerful auto Gaining 4W market share Astra s 4W division has performed well, slightly stronger than our expectation, thanks to the successful of the Toyota Calya and Daihatsu Sigra, launched in Aug-16. The 7-seater LCGC passenger cars are priced right, at IDR115mn- 150mn, which has been selling around 14k units/month higher than the initial expectation of 12k units/month. As a result, Astra has managed to improve its market share to 53.9% in 9M16 from 50.4% in 2015, with Astra s LCGC market share rising to 64.0% from 56.1% over the same period, despite some cannibalization seen on its sister models of LCGC Toyota Agya and Daihatsu Ayla (IDR88mn-139mn), as well as Toyota Avanza and Daihatsu Xenia (IDR155mn-IDR222mn), given that Toyota Calya and Daihatsu Sigra are priced in between those twin models. We expect these new twin models to remain as the main driver for Astra s 4W in, leading to even higher market share, estimated at 57% vs.54.5% in. Bank Permata remains a concern We expect other divisions to show improvements, with financial services continuing to book higher new financing on the back of better auto sales amid lower interest rate environment, while agribusiness and HE and mining divisions should benefit from revived commodities prices. Bank Permata, however, remains a concern, as its NPL rose to 4.9% in 9M16 from 2.7% in Nevertheless, in our recent conversation with Astra we were assured that all NPL issues would be resolved this year, and next year they should dissipate. Tweaking our estimate We are tweaking our F estimate mainly on the back of 3.8% and 5.6% higher Astra 4W sales as we increase market share to 54.5% and 57% from 52.5% and 54%, along with improvement in United Tractor. This is partly offset by slightly lower 2W sales and Bank Permata s net loss estimate of IDR1.1tn in and projected net profit of IDR798bn in from a break-even and IDR998bn net profit previously. All in all, we upgrade both revenue and net profit forecasts by 1.8% and 2.7% in and 1.3% and 2.1% in, respectively. (see exhibit. 3). Maintain Hold The earnings revision also resulted in higher SOTP target price of IDR8,300 (see exhibit. 5) given a rise in auto division contribution. Note that we assign the same valuation methods and assumptions to all divisions, but lower Bank Permata s fair value to 1.0x PBV from a previous 1.5x. With only 8.9% upside to our new target price, we maintain our Hold recommendation. Exhibit 1. Financial Summary Year-end 31 Dec Revenue (IDRbn) 201, , , , ,493 EBITDA (IDRbn) 27,588 28,107 25,099 28,493 31,238 Net Profit (IDRbn) 19,191 14,464 15,868 19,121 21,554 EPS (IDR) EPS Growth (%) (1.2) (24.6) DPS (IDR) PE (x) PB (x) EV/EBITDA (x) Dividend Yield (%) Payout Ratio (%) ROE (%) Net Gearing (%) Darmawan Halim darmawan.halim@bcasekuritas.co.id ext 168 Target Price: IDR8,300 (IDR8,100 previously) Current Price: IDR7,625 Upside potential: 8.9% PRICE PERFORMANCE 9,000 8,500 8,000 7,500 7,000 6,500 6,000 5,500 Nov-15 Feb-16 May-16 Aug-16 Nov-16 ASII IJ JCI Rebase as of 15-Nov-16, BCA Sekuritas STOCK PERFORMANCE 52-week price range (IDR) : 5,700-8,875 Market cap (IDRtn)/(USDbn) : / 23.1 Avg Daily Turnover (IDRbn/USDmn) : / 21.4 MARKET DATA YTD 1M 3M 12M Absolute 27.1% -8.4% -2.9% 15.5% JCI Return 10.6% -6.0% -4.5% 13.5% Relative 16.5% -2.5% 1.7% 2.0% SHAREHOLDERS Jardine Cycle & Carriage Ltd : 50.1% Other public (each below 5%) : 49.9%

2 Exhibit 2. Financial Statement Income statement Revenue Automotive 105,398 93,952 95, , ,692 Financial services 15,788 17,281 18,058 20,112 22,297 Agribusiness 16,306 13,059 13,106 15,393 16,107 Heavy equipment 53,142 49,347 45,343 50,600 53,884 Information technology 2,282 2,655 2,767 3,083 3,452 Others 8,785 7,902 8,218 8,629 9,060 Total 201, , , , ,493 COGS 162, , , , ,983 Gross profit 38,809 36,710 35,764 40,705 44,510 Operating profit 20,163 17,212 16,874 19,605 21,585 EBITDA 27,588 28,107 25,099 28,493 31,238 Net int inc/ (exp) (167) (67) 62 Other inc/ (exp) 499 (2,194) 1,870 2,230 2,352 Equity in earnings associates 6,245 4,467 4,281 5,611 6,403 Pre-tax profit 27,058 19,630 22,858 27,380 30,402 Tax (4,927) (4,017) (4,551) (5,442) (6,000) Minority Int. (2,940) (1,149) (2,439) (2,817) (2,848) Net profit 19,191 14,464 15,868 19,121 21,554 Automotive as the largest contributor Balance Sheet Cash & deposits 21,179 27,586 22,766 26,295 29,266 Account receivable 21,332 17,776 16,637 17,384 17,943 Inventories 16,986 18,337 17,254 18,687 19,865 Other current asset 37,744 41,462 40,238 41,856 43,555 Net fixed asset 61,336 58,545 58,946 59,513 60,788 Other asset 77,450 81,729 85,759 93, ,245 Total asset 236, , , , ,662 ST debt 10,586 11,975 9,978 8,599 7,393 Other current liabilities 63,655 64,267 59,882 63,209 66,372 LT debt 32,651 34,447 27,105 26,168 25,476 Other LT liabilities 8,948 8,213 8,406 8,604 8,808 Minority interest 24,693 24,490 25,550 26,831 28,255 Total liabilities 115, , , , ,048 Shareholders' equity 95, , , , ,358 Total Liabilities and equity 236, , , , ,662 Cash Flow Net profit 19,191 14,464 15,868 19,121 21,554 Depreciation 7,425 10,895 8,226 8,887 9,652 Change in working capital (3,445) 1,707 4, Cash Flow From Operation 23,171 27,066 28,096 28,112 31,306 Capex (9,917) (8,104) (8,626) (9,455) (10,928) Others (10,652) (4,279) (4,030) (7,369) (9,117) Cash Flow From Investment (20,569) (12,383) (12,656) (16,824) (20,044) Change in debts 5,531 1,796 (7,342) (937) (692) Dividends (8,925) (8,817) (7,232) (6,347) (7,648) Others 3,152 (1,255) (5,687) (475) 51 Cash Flow From Financing (242) (8,276) (20,260) (7,759) (8,290) Net increase (decrease) 2,360 6,407 (4,820) 3,529 2,971 Cash - beginning 18,819 21,179 27,586 22,766 26,295 Cash - ending 21,179 27,586 22,766 26,295 29,266 Key Ratios Gross margin (%) EBITDA margin (%) Operating margin (%) Pretax margin (%) Net margin (%) ROE (%) ROA (%) Current ratio (x) Acid ratio (x) Gearing (x) Net gearing (x) AR turnover (days) Inventory turnover (days) AP turnover (days) Net trade cycle (days) 10 6 (2) (5) (8) EBIT / Interest expense (x) EBITDA / Interest expense (x) Margins to improve in 2

3 Exhibit 3. Earnings revision ASII IJ +/- +/- (IDRbn) New Old (%) New Old (%) Revenue 183, , , , Gross Profit 35,764 34, ,705 39, Operating Profit 16,874 15, ,605 19, Net Profit 15,868 15, ,121 18, Gross Margin (%) Operating margin (%) Net Margin (%) Earnings revision mainly on stronger 4W Domestic 4W Sales 1,043,690 1,043,690-1,148,059 1,148,059 - Astra's 4W Sales 568, , , , Astra's 4W Market Share (%) W Sales 6,026,544 6,220,949 (3.1) 6,508,668 6,531,996 (0.4) Astra Honda's 2W Sales 4,459,643 4,603,502 (3.1) 4,816,414 4,833,677 (0.4) Astra Honda's 2W Market Share (%) Source: BCA Sekuritas Exhibit 4. Auto Assumptions Assumptions Domestic 4W Sales 1,208,019 1,013,291 1,043,690 1,148,059 1,262,865 Growth (%) (1.8) (16.1) Astra 4W Sales 614, , , , ,833 Growth (%) (6.2) (16.9) Maintain domestic 4W sales, but raise Astra 4W market share, resulting in higher growth Domestic 2W Sales 7,867,285 6,480,155 6,026,544 6,508,668 6,834,101 Growth (%) 1.6 (17.6) (7.0) Astra 2W Sales 5,051,100 4,453,888 4,459,643 4,816,414 5,057,235 Growth (%) 7.5 (11.8) Astra's 4W Market Share (%) Astra's 2W Market Share (%) Exhibit 5. SOTP valuation SOTP Valuation Methods Assumption Ownership Automotive, excl. Astra Otopart PER 16.0x 152,945 Financial services, Excl. Bank Permata P/BV 2.0x 75,581 United Tractor DCF + avg 2011-YTD PER 22, % 49,271 Astra Agro Lestari Avg. 5-Yr PER 21, % 32,205 Astra Graphia 5-Yr DCF WACC 11.8%, TG 5% 76.9% 2,982 Astra Otopart PER 16.0x 80.0% 9,645 Bank Permata P/BV 1.0x 44.6% 9,890 Infra-Logistic -Others PER 16.0x 8,284 TOTAL EV 340,804 Net Debt Parent Only (9M16) 5,642 NAV 335,162 # Of Shares 40,484 NAV/Share 8,279 NAV/Share (rounded) 8,300 Current Price 7,625 Upside (downside) 8.9% 3

4 Exhibit 6. Regaining 4W market share 1,400,000 1,200,000 1,000, , , , ,000 60% 58% 56% 54% 52% 50% 48% 46% Regaining market share % Domestic 4W Sales Astra 4W Sales Astra's Market Share (RHS) Exhibit 7. Astra s 4W market share 80% 70% Thanks to new launching, market share has rebounded in % 50% 40% 30% Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Astra's Mkt Share (monthly) Astra LCGC's Mkt Share (monthly) Astra's Mkt Share (YTD) Astra LCGC's Mkt Share (YTD) 4

5 Teguh Hartanto Director of Equity, ext: 129 RESEARCH DIVISION Darmawan Halim Arga Samudro Igor Nyoman Putra Head of Research, ext: 168 FI Analyst, ext: 181 Equity Analyst, ext: 178 Strategy, Automotive, Heavy Equipment FI Strategies & Macroeconomist Banking, Industrial Estate Jennifer Frederika Yapply Aditya Eka Prakasa Johanes Prasetia Equity Analyst, ext: 179 Equity Analyst, ext: 182 Equity Analyst, ext: 185 Cigarettes, Consumer, Health Care Telco, Coal, Metal Mining Retail, Poultry Michael Ramba Nyoman Widita Prabawa Achmad Yaki Yamani Equity Analyst, ext: 184 Equity Analyst, ext: 180 Technical Analyst, ext: 186 Construction, Property Residential Cement, Plantation, Oil & Gas Technical Analyst Yuni Pratiwi Research Assistant, ext: 183 EQUITY CAPITAL MARKET DIVISION Haslienda Santoso Jodikin Arief Iskandar Equity Capital Market, ext: 137 Sales Trader, ext: 164 Institutional Dealer, ext: 136 Amru Fernando Institutional Dealer, ext: 107 Menara BCA - Grand Indonesia, 41 st Floor Jl. 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