Mandiri Sekuritas ASII: Auto-pilot growth

Bouyed by strong domestic demand and consumer-friendly financing packages, March initial car sales figure hinted at an all-time monthly record of 64.9k units. Without any material obstruction to growth, we raised our FY10-11F net earnings forecast by 22.2% and 17.5% respectively, principally on the back of higher vehicle sales estimation. As such our SOTP has been raised to Rp50,000/shr from Rp38,500/shr previously. We maintain buy on the stock with implied PER10F of 17.2x.

Raising our assumptions for 2010. With BI being confident with higher domestic growth, seeing a higher GDP range of 5.5-6.0% this year and keeping its bench-mark rates unchanged to date, we think car sales will continue to rise at the backdrop of affordable financing schemes and bigger appetite for private consumption.

All-time high car sales in March10. Attesting to the strong domestic economy, domestic car sales hit an all-time monthly high in March10 with some 65k units sold (previous high was in Jul08 of 61k units). This brings 3M10 domestic wholesales unit sales to some 173k (+73.0%yoy), which has prompted us to raise our targets in FY10-10F to 6! 00k and 7 00k units respectively. ASII, will continue to be the main beneficiary with more than half of car demand coming from Astra brands such as Toyota and Daihatsu. Additionally, we also raised our domestic demand forecast for motorcycles to 6.4mn units from 6.2mn.

Earnings and TP upgraded. With our revised vehicle unit sales assumption, comes a 22.9% and 18.1% upgrade in our net earnings from previous estimates for FY10-11F. Our SOTP now stands at Rp50,000/shr (with 60% derived from auto-related segments. Our earnings are also sensitive to changes in vehicle volume that indicates that for every 5% increase in unit sales for the 4-wheelers e! quate to an earnings uplift of about 2.5%. Currently the stock trades at PER10F of 15.2x, as compared with the greater bourse PER10F of 14.9x. Maintain buy. Key risks are (a) rise in interest rates and (b) impact on progressive tax rate for multiple vehicle ownership.