BASML - INDO UNTR 3Q preview (19 Oct 09)

United Tractor is set to deliver a strong 3Q09 with 835 units of heavy equipment sold (vs 771 in 2Q) and 15.5mn ton coal output from mining contracting. Daisy sees 3Q EBIT at Rp1.2tn and core net profit at Rp840bn (flat QoQ). This would bring 9M EBIT to Rp 3.8tn and net profit to Rp2.78tn, accounting for 84% and 95% of her FY09 est'. Sept sales to fall ~30% MoM to 220 units due to the Ramadan holiday, but not to worry as back in 2007 during the coal px bull run, heavy equip sales fell by as much as 35% before recovering to +92% in the following month. Risk to Daisy's earnings forecast is to the upside, as she only expect 16% EBIT margin for 2009, while UNTR has booked 19% in 1Q, 18% in 2Q and 17% likely in 3Q. It seems that she may have underestimated the strength of the revenue from sales of high-margin spare parts. Buy PO Rp 17,400.