NISP United Tractors posts 11.7% YoY growth in 1Q10 net income (UNTR, Rp19,600, Buy)

• UT managed to post strong growth in net income of Rp907bn or 11.7% YoY higher from Rp812bn in 1Q09. The result came 19.1% of our full year expectation of Rp4.8tn and 21.5% of the consensus’ expectation.

• The company’s revenue grew by 25.2% YoY to Rp8.7tn, driven by the recovery in heavy equipment business of 38.4% YoY to Rp3.8tn from Rp2.8tn in 1Q09. However, the company posted a slightly lower gross profit of Rp1.6tn in 1Q10 as compared to Rp1.7tn, amid stronger Rupiah.

• Hence, the company’s profitability decreased where operating margin slid to 15.0% in 1Q10 compared to 19.1% in 1Q09. However, compared to 4Q09, the company managed to post higher profitability as operating margin was 14.9%.

• We view the company will post faster growth in the next quarters amid higher demand on heavy equipment products and also higher production volume form UT’s mining contracting business. In addition, during 1Q10, the company’s mining contracting business posted lower quarterly coal production due to the rainy season.

• Overall, the result managed to satisfy our expectation, hence with current valuation of 2010F PER of 13.2x and EV/EBITDA of 7.2x, we still maintain buy on UNTR.