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P H
Jan 16,2017 09:27:39

Auto: Stronger vehicles wholesales

Based on Indonesia Auto Industry Association (Gaikindo) and the Indonesia Motorcycle Industry Association, indicative FY16 cars and motorcycles wholesales reached 1.05m (+3.9% YoY) and 5.93m units (-8.5% YoY), respectively. We expect an improvement in demand for both 2W and 4W in 2017, mainly driven by:
 
i) Relaxation LTV threshold policy
ii) Lower financing costs
iii) Better consumer spending, boosted by higher commodity prices, such as CPO and coal

$ASII $IMAS

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P H
Nov 18,2016 09:56:36

Automotive: Honda 4W sales reached 17,088 units in October 2016

In October 2016, Honda managed to book 4W sales of 17,088 units, +17% y-y and +8% m-m, resulting in 10M16 4W sales of 168,937 units, +27% y-y. This 4W sales achievement was supported by Honda’s superior products including Honda BR-V, New Honda Mobilio, New Honda Brio Satya, All New Honda Jazz, and Honda HR-V. (CNN Indonesia)

$ASII $IMAS

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P H
Sep 16,2016 14:16:57

Indonesia Automotive: August auto sales: Strong recovery

§ Solid 4W sales, +6% y-y; 2W: -15% y-y: Based on figures (exhibits 7 and 8) released by Gaikindo (4W association) and AISI (2W association), August 2016 4W wholesale sales reached 96k units, +54% m-m and +6% y-y, bringing 8M16 sales to 691k units, +3% y-y, in line with our expectation. For 2W, August sales reached 528k units, +73% m-m but -15% y-y, with 8M16 sales reaching 3.8mn units, -10% y-y, lower than our forecast.

§ ASII continues strong momentum; Honda also strong: In August, ASII's wholesale market share reached 59.2% (July-16: 59.3%; August-15: 54.1%), with monthly sales of 57k units, +54% m-m and +17% y-y, helped by the newly launched Calya and Sigra, in line with our estimates. For 8M16, ASII booked 4W sales of 368k units, +10% y-y. August sales of Nissan and Datsun of 3.2k units were +13% m-m but -21% y-y. For Honda, monthly sales recovered to 17k units, +84% m-m and +29% y-y.

§ ASII average discount increases from 7.3% to 7.9% in September: Based on our channel checks, ASII’s discount increased from 7.3% in August to 7.9% in September (exhibits 11 and 12), mostly due to the Low MPV, Low SUV and LCGC models. In July, the Toyota Avanza was discounted by IDR16.5mn (8.1%), higher than the IDR15mn (8.1%) level in August. Toyota Innova also had a higher discount of IDR17mn (5.5%), compared to IDR10mn (3.5%) in August. As such, we expect the average 2016 discount level to hover around current levels.

§ Weak Honda 2W (ASII) sales despite solid market share: August 2W sales (ASII) were 389k units, +91% m-m but -10% y-y, for 8M16 sales of 2.8mn units, -3% y-y, below our expectation. Yamaha sales were 124k units, +36% m-m but -27% y-y, for 8M16 sales of 934k units, -23% y-y. Honda maintained its dominance due to solid scooter demand (8M16: 72.5%; 8M15: 67.3%).

Outlook: Stronger growth with ASII’s rising market share
In our view, the auto sector should benefit from Indonesia’s likely upcycle in 2017 GDP growth to 5.4% on: (1) higher purchasing power on lower interest rates, contained inflation and a stronger IDR; and (2) increased infrastructure projects, helped by tax receipts from the government’s tax amnesty program. The FSA also plans to boost the auto-sector demand by lowering the downpayment for vehicles from 20-25% to 5%. In 2017, we expect 4W sales volumes to reach 1.1mn units, +7% y-y. We expect ASII’s market share to improve from 50% in 2015 to 58% in 2017, backed by strong demand for its new models.

Recommendation: Maintain BUY on ASII, IMAS, and GJTL
Helped by lower interest rates and higher government spending ahead due to the tax amnesty, we expect the economy to improve, supporting demand for big-ticket items. Thus, ASII continues to be a BUY with an unchanged SOTP-based TP of IDR9,100 on higher sales volumes, market share and margins. On IMAS, we retain our BUY rating on 41% upside potential to our unchanged DCF-based IDR2,000 TP on severe ytd underperformance (exhibit 4). For GJTL, we also maintain our BUY rating with an unchanged DCF-based TP of IDR1,700. Risks to our stock calls: Lower margins (ASII), lower Datsun sales (IMAS) and weaker IDR (GJTL).

$ASII $GTJL $IMAS

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P H
Jun 15,2016 09:58:12
Indonesia Automotive: May auto sales: Weak despite Lebaran preparation

* Poor retail sales with 4W: -2.0% y-y; 2W: -1.7% y-y: Based on the sales figures (exhibits 7 and 8) released by Gaikindo (4W association) and AISI (2W association), May 2016 4W wholesale sales reached 88.5k units, +4.5% m-m and +11.5% y-y, resulting in 5M16 sales of 440k units, -0.6% y-y. However, retail sales data was not as rosy as the wholesale figures as May 4W sales only reached 86k units, +2% m-m but -2% y-y, resulting in 5M16 sales of 432k units, flat y-y. For 2W, May sales reached 462k units, -3.5% m-m and -1.7% y-y, for 5M16 sales of 2.4mn units, -6% y-y. Both 4W and 2W numbers were lower than our expectations for the full year.

* ASII’s retail sales better than industry’s; Honda recovered m-m: In May, ASII's wholesale market share reached 55.3% (Apr-16: 55.7%; May-15: 49.7%) with monthly sales of 49.0k units, +3.8% m-m and +24.3% y-y. However, on retail sales, ASII booked 50.3k units, +3.7% m-m and +5.9% y-y, or 5M16 sales of 231k units, +7.9% y-y, helped by LCGC models and the newly launched Innova and Fortuner, in line with our estimates. Nissan & Datsun’s sales of 4k units were -2% m-m and -7% y-y with higher proportion of Datsun units. For Honda, monthly retail sales recovered to 13.8k units, +20% m-m and +13% y-y (wholesale: 17.4k, +21% m-m and +54% y-y).

* ASII’s average discount rose from 7.2% in May to 7.5% in June: Based on our channel checks, ASII’s discount increased from 7.2% in May to 7.5% in June (exhibits 12 and 13), mostly due to LCGC and Low SUV models, and Toyota Avanza. In June, Toyota Avanza was discounted by IDR20mn (9.9%), higher than the IDR19mn (9.1%) in May. Toyota Agya carried a higher discount of IDR10mn (7.9%), compared to IDR8mn (6.3%) in May. Honda maintained its IDR8mn (3.9%) discount for Honda Mobilio. As such, we expect the average 2016 discount level to hover around current levels.

* Honda’s 2W (ASII) sales higher on market share: Honda’s May 2W sales (ASII) reached 339k units, -2.7% m-m but +11% y-y, resulting in 5M16 sales of 1.8mn units, +1% y-y, in line with our expectation. Yamaha booked sales of 112k units, -6.7% m-m and -25.6% y-y, bringing 5M16 sales to 592k units, -18.6% y-y. We believe that higher scooter demand will continue to benefit Honda’s market share (5M16: 72.8%; 5M15: 68.1%).

Outlook: Intense competition likely to persist
Despite some short-term improvements, we expect current intense competition and discounts to persist in the medium term, especially as several brands will launch new products in 2017. On slow purchasing power growth ahead, we believe that 4W sales will only experience a 7% y-y CAGR in 2016-20 while 2W sales will likely grow just 2.5% y-y. In 2016, we expect 4W sales volume recovery to 1.08mn units, +7% y-y, and flat 2W sales volumes of 6.4mn units.

Recommendation: REDUCE ASII; HOLD GJTL & BUY IMAS
We believe weak purchasing power and the government’s aggressive taxation drive, including tax amnesty, will continue to take a toll on big ticket items. For ASII, we maintain our REDUCE rating with SOTP-based 12M TP of IDR5,650 due to its adverse impact from dealership restructuring. We raise IMAS from Hold to BUY on 33% upside to our DCF-based TP of IDR2,000 on severe ytd underperformance (exhibit 4). However, we cut GJTL from Buy to HOLD as it has surpassed our DCF-based TP of IDR860. Risks: Higher margins ($ASII), lower Datsun sales ($IMAS), and weaker/stronger IDR ($GJTL).
Bull
P H
Apr 18,2016 00:21:34
Indonesia Automotive: March wholesale auto sales: Improved m-m; 3M16 declined y-y
 
- 4W: -5.5% y-y; 2W: +3.1% y-y: Based on sales figures (exhibits 7 and 8) released by Gaikindo (4W association) and AISI (2W association), March 2016 4W sales reached 94k units, -5.5% y-y, but +6.5% m-m. For 2W, February sales reached 563k units, +3.1% y-y and +7.3% m-m. For 3M16, auto sales still declined, by 5.4% y-y for 4W and 6.3% for 2W. However, we are seeing an improving trend m-m.
§ Honda’s solid momentum: In March, ASII's market share reached 49.1% (Feb-16: 47.0%; Mar-15: 50.2%) with monthly sales of 46.2k units, -7.5% y-y but +11.4% m-m, in line with the industry trend. Nissan booked monthly sales of 2.3k units, -54% y-y but +30% m-m. Honda continued its strong momentum, booking monthly sales of 20k units, +47% y-y and +11% m-m, supported by its new model Honda BRV.

- Higher discounts in April: Based on our channel checks, we are seeing higher discounts across the board in April compared to March (exhibits 13 and 14). In April, the Toyota Avanza is being discounted by IDR17mn (8.4%), higher than the IDR15mn (7.4%) level in March. Daihatsu Xenia is being discounted by even more at IDR20mn (11.1%). There is currently an IIMS 2016 exhibition (7-17 April), which could push up discounts as well. However, we expect the average 2016 discount level to hover around the current level, slightly lower compared to last year.

- Honda 2W (ASII) sales higher on market share: Honda’s March 2W sales (ASII) reached 440k units, +17% y-y and +21% m-m, reflecting a higher market share of 78.1% (Feb-16: 69.1%; Mar-15: 68.9%). Yamaha booked even lower sales of 108k units, -26% y-y and -22% m-m, reflecting a lower market share of 19.2% (Feb-16: 26.9%; Mar-15: 26.7%). We believe that higher scooter demand positively affected Honda’s market share.

Outlook: Intense competition likely to persist
Despite some short-term improvement, we expect the intense competition and resulting discounts to persist in the medium term, especially as several brands will be launched in the market in 2017. Given the longer-term GDP growth of 5.2%, we believe that the Indonesia auto sector will experience a CAGR of only 7% in 2016-20 compared to 15% y-y in the commodity boom years (2007-2013). 2W sales will likely grow just 3% y-y during that period. However, for 2016, we expect a gradual 4W sales volume recovery to 1.08mn units, +7% y-y and flat 2W sales volumes of 6.4mn units.

Recommendation: Neutral with Reduce ASII, Hold IMAS & GJTL
The sector has outperformed the market (exhibit 4) due to the expectation of a higher GDP growth, interest rate cut and stronger IDR. At this stage, we upgrade our sector rating from Underweight to Neutral as we believe that auto sales had bottomed out in 2015. However, we believe that weak commodity prices will negatively affect purchasing power ahead. For ASII, even though we raise our SOTP-based TP from IDR5,450 to IDR6,450, we maintain our REDUCE rating as the stock has rallied above its fundamental value. For IMAS, we reiterate our HOLD rating and DCF-based TP of IDR2,000 on continued weak prospects. On GJTL, we cut our rating from BUY to HOLD with unchanged DCF-based TP of IDR740, as the share price almost reached our TP. Risks: higher margins (ASII), increased Datsun sales (IMAS), and a weaker IDR (GJTL).

$IMAS $ASII $GTJL
Bull
P H
Apr 18,2016 00:14:16
2W/4W 1Q16 : On the Road to Recovery
 
1Q16 4W wholesales stood at 267.2k units (+7% qoq/ -5% yoy) accounting for 25% of our FY16E forecast (1.07mn units,+7% YoY), while 4W retail sales stood at 262.2k units, +2% yoy. 1Q16 2W wholesales stood at 1.5mn units (-9% qoq/ -6% yoy).
 
1Q16 4W wholesales: 267.2k units (+7%qoq/ -5%yoy) accounting for 25% of our FY16E forecast at 1.07mn units (+7%yoy). 1Q16 wholesales volume for Toyota stood at 80.5k units (-1%qoq/ -6%yoy), while Daihatsu stood at 42.5k units (+3%qoq/ -6%yoy), bringing ASII’s 1Q16 sales volume to 127.3k units (flat qoq/ -7%yoy). ASII’s 1Q16 4W wholesale market share slightly declined to 48% vs. 49% in 1Q15, while Toyota's and Daihatsu’s 1Q16 market shares remained stable at 30% and 16% respectively. Meanwhile, Honda’s 1Q16 wholesales volume totaled 58.4k units (+41%qoq/ +31%yoy), bringing Honda’s 1Q16 market share to 22% vs. 16% in 1Q15. The significant increase in Honda’s market share was driven by successful product launches, the HRV and BRV.
 
1Q16 2W wholesales volume totaled 1.5mn units (-9%qoq/ -6%yoy). 2W wholesales volume for Astra Honda stood at 1.09mn units (-8%qoq/ flat yoy), bringing ASII’s 1Q16 2W market share to 72% vs. 68% 1Q15. It is worth noting that Mar-16 2W volume has started to recover (563.3k units; +7%mom/+3%yoy), while Astra Honda's 2W sales totaled 440.2k units (+21%qoq/ +17% yoy), bringing its market share to 78% vs. 69% in Feb-16. We suspect the strong increase in Honda’s market share is driven by brand switching.
 
Positive signals: 1Q16 4W retail sales stood at 262.2k units, +2% yoy. Toyota is still leading 1Q16’s 4W retail sales growth at +15% yoy (85.6k units), followed by Honda at +10% yoy (50.0k units), and Daihatsu at +2% yoy (42.3k units). We highlight that Toyota’s 1Q16 retail market share improved to 33% vs. 1Q15 at 29% due to deliveries of the new Kijang Innova and Fortuner. We believe that 4W wholesales volume will start to pick up if strong retail volumes persist over the next few months, indicating recovery of consumer confidence and purchasing power.
 
Fortuner on high demand. While Innova sales have normalized at 4-5k units per month, the new Fortuner is still highly demanded as sales are still above Toyota’s target of 1.5-2k units per month. Based on our channel checks, the waiting time for the a diesel Fortuner is approximately 3 months, while the waiting time for a gasoline Fortuner is approximately 1 month. Just like the Innova, we expect Fortuner sales to normalize within 3-4 months post its initial launch. Our channel checks with dealers indicate that discounts for the Toyota Avanza vary around 7-8%, while discounts for the Kijang Innova vary around 2-3.5%, meanwhile, no discounts are offered for the new Fortuner.
 
Expect turn around in 2H16. We continue to anticipate pick up in 4W volumes in 2H16 on the back of realization of infrastructure spending, rebound in CPO prices,  lower interest rates (3x25 bps BI rate cut), fuel price cuts (effective April 1, 2016: gasoline Rp6,450/liter and diesel Rp5,150/liter),  and recovery of consumer confidence. Maintain BUY with TP of Rp8,000 and trading at FY16 P/E of16.2 x.

$ASII $IMAS
Bull
P H
Apr 05,2016 11:08:25
Toyota main dealer Auto2000 booked  25% YoY growth in sales volume in 1Q16, reaching 13,120 units (vs. 10,600 units in 1Q15). The company mentioned that Avanza (L-MPV) contributed 35% to total sales, followed by  Innova (mid-MPV) 24%, and Agya (LCGC) 15%.

$ASII $IMAS
Bull
P H
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
P H
Mar 16,2016 09:41:28
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
P H
Mar 16,2016 09:41:28
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
P H
Mar 16,2016 09:41:27
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
P H
Mar 16,2016 09:37:21
Penjualan mobil tumbuh 4% pada February 2016 menjadi 88.236 unit dibanding bulan sebelumnya. Kenaikkan ini didorong dengan model-model baru yang ditawarkan oleh agen pemegang merek. Namun, jika dibandingkan dengan bulan yang sama tahun 2015, penjualan turun 0,5%.

$ASII $IMAS
hide
P H
Feb 19,2016 08:30:39
ASII: Expect Better Sales Ahead Despite a Weak January

In January, Indonesia’s domestic 4W vehicle wholesales declined 9.9%
YoY while 2W vehicle wholesales fell 17.2% YoY. MoM, Astra lost market
share in 4W vehicle sales, but gained in the 2W market. Still, we think that
weak January sales do not represent its full-year performance, as we
expect it to record a recovery in the second half of the year. We lift our
SOP-based TP to IDR7,300 (8% upside), implying 15x/13x FY16F/FY17F
P/Es. A key risk is rising competition, especially in the low MPV segment.

Weak January sales do not represent full-year sales. Indonesia Auto
Industry Association (Gaikindo) reported that January domestic four-wheel (4W)
vehicles whole sales declined to 84,900 units. Meanwhile, according to the
Indonesia Motorcycle Industry Association (AISI), two-wheel (2W) vehicle
wholesales fell to 416,300 units. Astra International’s (Astra) vehicle wholesales
were also weak, in line with that of the national sales trend. MoM, it lost market
share in 4W vehicles which declined to 46.7% in Jan 2016 but grew its 2W
market share to 69.1% in the same period.

Expect better sales ahead. We expect 4W vehicle wholesales to grow 7.5%
YoY this year. We estimate the monthly sales volume at around 85,000 units, ie
the same as the monthly sales average in the second half of last year.
However, it should improve to around 95,000 units, driven by a further cut in the
BI rate in the second half of the year. As 1Q14-1Q15 domestic monthly sales
averaged around 95,000-100,000 units, we think our monthly sales estimates
are quite reasonable.

Still NEUTRAL, but with a higher TP. We changed our valuation methodology
to SOP (from target P/E) as SOP better reflects the valuations of Astra’s
different divisions. We value its automotive division based on DCF and DDM,
assuming a WACC of 10.2%, cost of equity of 14%, and terminal growth of 2%.
Our new SOP-based TP of IDR7,300 (from IDR5,650) values Astra at 13x
FY17F P/E, close to its 5-year average P/E.

Rising competition is a key risk. Rising competition in the industry is likely to
cap Astra’s 4W wholesales growth. Competition in the low-multi-purpose
vehicle (MPV) segment – Astra’s best-selling cars – is likely to remain intense.
In addition to competition from models made by existing manufacturers – such
as the Honda’s Mobilio, Suzuki’s Ertiga, and Nissan’s Livina – there is a new
player joining the fray. SAIC-GM-Wuling (SGMW) plans to build a new
manufacturing facility with production capacity of 120,000 units pa (ie 6% of
national capacity) near Jakarta. The SGMW plant is to start production of the
low-MPV in 2017.

$ASII $IMAS
Bear