What surprised us
As expected, Astra International reported weaker 4QFY2008 net profit of Rp1.8tn, vs. its previous quarter’s peak of Rp2.6tn, for full-year net profit of Rp9.2tn, up 41% yoy. This compares against our estimate of Rp8.5trn, with the difference due to Rp403bn exceptional gain on plantation asset disposal. In 4Q, almost all its core divisions had weaker earnings as we expected, automotive operating profit down 74% QoQ to Rp187bn, largely due to fewer car and motorcycle sales (down 7%/26% QoQ respectively), in fact, we note its auto retail distribution unit had Rp185trn in operating losses. Despite Astra Honda squeezing more profits from each motorcycle sale, quarterly earnings were still down 18%, inline with fewer motorcycle sales.
Plantation and heavy equipment/coal mining earnings fell 63% and 34% QoQ, respectively: United Tractors sold fewer Komatsu heavy equipment units, down 61% QoQ as credit tightened, while weaker palm oil prices affected Astra Agro Lestari. Astra International separately proposed to pay a Rp570 final dividend, which including the interim dividend of Rp300, would represent a 38% payout for earnings.
What to do with the stock
The weaker 4QFY2008 results did not surprise us; we had expected a slower 4Q on domestic demand slowdown, and lower commodity prices. That said, we think investors are likely to take comfort in the inline core earnings results. We have raised our 2009E-2010E EPS by 3.1%-8.7%, primarily to reflect higher Rupiah assumptions. Introduce 2011 estimates. Retain our Buy; 12-m NAV-based PT revised marginally up to Rp14,300 (previous Rp14,100). Downside risks include sharper than expected decline in auto and heavy equipment sales, further decline in commodity prices, and more severe than expected credit loss.
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