Sep 24, 2017 09:03:02

Despite intensifying competition from Mitsubishi’s Xpander and Wuling’s Confero, Astra’s 4W vehicle wholesales still increased MoM. YTD, its 8M17 4W vehicle wholesales grew 8.7% YoY, while its market share widened to 55.7% in 8M17 (8M16: 53.2%). Its motorcycle wholesales also improved in August (+4% MoM, +8% YoY). Going forward, we expect competition in the domestic 4W market to stay intense. SGMW is likely to launch a new medium-sized MPV – either with a 1.5L or 1.8L engine – which may compete with Toyota’s Avanza or Innova. However, the conglomerate’s robust heavy equipment sales and mining contracting business should partially offset its lower earnings from the auto division. Astra would benefit from the replacement cycle for heavy equipment as well. Premised on this, we maintain our BUY recommendation and IDR9,200 TP (18% upside), which implies 17x FY18F P/E.

Wholesale numbers improve in August. Astra’s 4-wheel (4W) wholesales increased to 52,000 units (+9% MoM). YoY, 4W wholesales declined, as wholesales of low-cost green car (LCGC) multi-purpose vehicles (MPV) sales normalised. Astra’s LCGC-MPV was launched in Aug 2016, while there are no significant new product launches slated for this year. YTD, its 8M17 4W wholesales rose to 399,000 units (+9% YoY).

For 2-Wheel (2W) vehicles, its wholesales for August increased to 419,000 units (+4% MoM, +8% YoY). In our calculation, its market share increased to 75.5% in August (July: 75%). We expect Astra to continue dominating the domestic 2W market, thanks to its strong products, distribution and net worth of its motorcycle financing business. (Andrey Wijaya)