Highlights:
Komatsu sales in June declined 6% MoM to 507 units. Last month’s heavy equipment sales to all sectors (except mining) weakened, meaning that May 10 sales were still the highest monthly sales ever for Komatsu.
Pama’s volume of works fell slightly in June 2010 due to heavy rainfall.
Nevertheless, both Komatsu and Pama showed very good operational performance, with the 6M10 results about half of our full year expectations and well above the 6M09 performance.
June’s DEJ coal sales rebounded to 170 Kt from 96 Kt in the previous month, although they are still below the monthly sales level in 1Q10.
Comments:
July will see less rain; thus Pama’s volume of works should increase during the month.
Given Komatsu’s and Pama’s excellent 6M10 operational performance, we are confident that at least 50% of our forecast 2010F EBITDA will come from 1H10.
As for DEJ, we expect the sales to continue rising as marketing agents will be encouraged to take more coal from DEJ as demand from Asian countries is still strong.
The 1H10 operating margin is expected to be around 10%, or lower than our expectation of 18% for the full year. We think the margin can still expand as coal mining sales are improving. Our 2010F operating margin for the mining business is 24%, or higher than our 2010F operating margin estimates for the heavy equipment and mining contractor businesses of 22% and 14%, respectively.
UNTR’s shares are attractively valued. They now trade at PE 10F/11F of 14.1x/13.6x (vis-à-vis the 10F/11F market PE of 15.8x/13.9x). BUY maintained.
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