UOB Astra International Things are looking up BUY TP IDR 60.000

What’s New
Ground check: More car sales ahead of Hari Raya.
We visitedAstra International Auto 2000, a Toyota dealership branch outlet in Jl.Yos Sudarso, Jakarta. Here are the takeaways from the visit:
a) Car sales are still very strong, especially for the MPV segment,and customers are asking for earlier delivery ahead of Hari Raya,
b) Toyota is still offering many promotions, from 0% interest for Yarisand 1.5% for Altis, to free services up to a certain distance(normally 50,000 km),
c) Advertising expenses rose about 10% for 2010 for the branch, andd) The branch has reached 140% of its target sales.

Car sales reached historical high in Jul 10. Domestic car sales areexpected to reach 72,446 (+2.9% mom), a historical high according tothe car producer association. The association also forecasts car salesto reach 700,000 (+44% yoy) in 2010.

Motorcycle sales grew 6.7% mom in Jul 10. The unofficial figure fordomestic motorcycle sales in July is expected to reach 699,363 units,with Honda’s sales reaching 334,742 units (+14.3% mom). Thus,domestic 6M10 sales grew 39% yoy and Honda sales grew 42% yoy.In 6M10, Honda dominated with a 47% market share vs Yamaha with45%. The association of motorcycle producers foresees sales couldreach 7.2m units (+23% yoy) for 2010.

Aggressive launch of new products. Astra launched four newmotorcycle models in May-Jul 10: Honda Scoopy, Tiger, PCX andRevo AT. According to the company, as a result of good responsefrom customers, the backlog order for Scoopy has reached one month.

Stock Impact
Expect positive surprise from motorcycle sales. We expect apositive surprise from higher-than-expected domestic sales that maygrow 23% vs our estimate of 17.5%. At the same time, Astra mayexpand market share by 1-2ppt to 47-48%. Astra has been facingtough competition from Yamaha since 2007 when Yamahaaggressively introduced new models and succeeded in the scootersegment. However, from customers’ response to some new models,Astra should be able to gain market share in the scooter segment.

Maintain position in car market. Astra has been able to maintain 57%market share in the car market in 2010. Most of the sales came from low-end MPVs such as Toyota Avanza and Daihatsu Xenia, while the ToyotaInnova MPV remains popular in Indonesia. We think the trend maycontinue due to the popularity of these low MPVs.

Earnings Revision/Risk
None.

Valuation/Recommendation
Reiterate BUY with target price of Rp60,000. Our target price ofRp60,000 is based on sum-of-the-parts valuation, implying 15.4x 2011FPE. The stock is trading at 12.2x 2011F PE.

Share Price Catalyst
a) Low interest rates to continue, b) automobile financing war, c) strongereconomic growth, and d) acceleration of toll road development.