CLSA SELL call on Astra International (ASII IJ). Maintain TP of Rp9,000.

Research Today: car sales, no sign of bottoming

Wilianto reiterates his SELL call on Astra International (ASII IJ). Maintain TP of Rp9,000.

ASII’s car market share has started to fall from its recent high. Car sales are falling at a faster pace.
Toyota (60-65% of ASII’s car sales) backlog order runs out and its volume fall sharply…
• Industry trend continues to worsen as sales of non Toyota brands continue to fall.
• Total car sales in Jan 09 is already 37% below last year average (-48% from peak). And NO sign of bottoming.
• Sales of non Toyota brands have declined 52% from the peak.

Recovery will be slow. A sharp recovery in 2H09 is unlikely to materialize. Our 2009 numbers are in line with consensus but we think there is downside risk (lower margins, recovery takes much longer than expectation) to our numbers. In the heavy equipment sector (16% of ASII’s earnings), for example, a number of multi finance companies have stopped giving out credit for heavy equipment purchases all-together. NPL have doubled from 2% in Sept 08 to 4%.

Historically, it took a while for car sales to recover from major macro events:

• It took 10 years for car sales to recover in 1982 (end of oil boom)
• It took 3 years in 1992 (Indo tight money policy)
• It took 7 years in 1998 (Asian financial crisis)
• It took 3 years in 2006 (domestic fuel price double, bank tightened credit)

In the mean time, vice president of Yamaha Motor Kencana Indonesia (sole authorised dealer of Yamaha) expect Yamaha sales volume in Indonesia to grow by 5% in 2009. This statement was made during press conference following the visit of Valention Rossi (Motor GP champion). We believe the target is unrealistic and if Yamaha insists on volume and market share, there is risk of price war that will put further pressure to margin of Astra Honda Motor. We expect motorcycle sales to fall by 31% yoy in 2009.