● Astra’s 1Q10 results were simply robust (+61% YoY) and ahead of our forecasts (26%). Core automotive-related profit, especially, came in 10% above our forecast.
● Stronger-than-expected 1Q10 volume performance and better profitability due to stable pricing strategy (despite a stronger IDR) were the key reasons. We increase our earnings by 8% for 2010- 11E, putting our forecast 5-8% above consensus’.
● We believe Astra’s main catalysts would continue to be the strong earnings momentum, but earnings upside risk is not going to be significant. A possible new auto tax system is a negative catalyst but the timing and implementation is uncertain.
● Despite the positives above, we believe that most of them have been priced in Astra’s strong share price performance (+162% over the past 12 months) and based on our forecasts, valuations are no longer looking inexpensive. Our new SOTP-based target price of Rp52,000 (from Rp43,400) implies only 10% upside, and therefore we downgrade the stock to NEUTRAL.
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