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Mar 16, 2016 09:41:29
Indonesia Automotive: February wholesale auto sales: Flattish

§ 4W: -0.6% y-y; 2W: -5.6% y-y: Based on sales figures (exhibits 5 and 6) released by Gaikindo (4W association) and AISI (2W association), February 2016 4W sales reached 88k units, -0.6% y-y, but +3.8% m-m, in line with our expectation of unexciting demand. For 2W, February sales reached 525k units, -5.6% y-y but +26% m-m, in line with our expectation of weak demand from the outer Java area due to unsupportive commodity prices.

§ ASII market share flat: In February, ASII's market share reached 47.0% (Jan-16: 46.6%; Feb-15: 49.0%) with monthly sales of 41.5k units, -4.7% y-y but +4.6% m-m. Despite support from the new Innova and new Fortuner, sales of Avanza were disappointing compared to last year. Nissan booked monthly sales of 1.8k units, -47% y-y but +31% m-m. Honda booked strong February sales of 19k units, +35% y-y but -5% m-m, due to its new model, the Honda BRV.

§ Flat to slightly lower discounts in March: Based on our channel checks, we are seeing flat to slightly lower discounts across the board in March compared to February (exhibits 11 and 12). In March, the Toyota Avanza is being discounted by IDR15mn (7.4%), slightly lower than the IDR16mn (8.4%) level in February, while the Daihatsu Xenia is being discounted by IDR15mn (8.4%), similar to the February level. We expect the discount level to hover around the current level, slightly lower than last year’s level.

§ Honda 2W ($ASII) sales improve m-m but decrease y-y: Honda’s February 2W sales ($ASII) reached 363k units, -4% y-y and +26% m-m, reflecting a market share of 69.1% (Jan-16: 69.1%; Feb-15: 67.8%). Yamaha booked even lower sales of 139k units, -8% y-y but +24% m-m, reflecting a lower market share of 26.5% (Jan-16: 26.9%; Feb-15: 27.1%).

Outlook: Margins likely to remain unexciting on intense competition
This fight for market share is likely to be exacerbated by continued soft farmer incomes due to low commodity prices, with some purchasing power recovery only likely to materialize in 2H16. Thus, we expect margins to remain unexciting despite a low 2015 base. On volume, we forecast flat 2016 domestic sales of 1.02mn units for 4W and 6.4mn units for 2W, despite lower interest rates and gasoline prices. That said, we expect intense competition and weak demand to result in flat market shares at best for both $ASII and $IMAS.

Recommendation: REDUCE $ASII; HOLD $IMAS; BUY $GJTL
At this stage of the market cycle, we retain our UNDERWEIGHT call on the Indonesia automotive sector on a likely fight for market share and due to limited purchasing power growth on a weak commodity price trend. For $ASII, unexciting earnings prospects have us maintaining our REDUCE rating and SOTP-based 12M TP of IDR5,550. For $IMAS, we retain our HOLD rating as the current price is approaching our DCF-based TP of IDR2,000. For $GJTL, we retain our BUY rating and DCF-based TP of IDR860 on expected improved performance. Risks to our calls are higher revenue and margins for $ASII, higher or lower auto sales for $IMAS and a weaker IDR and margin for $GJTL.
Bull
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