Company Update, March 1
2016
ASII’s price movement is relatively inline with Indonesia Equity Index (JCI, JKSE, IHSG) with 1.5-1.7 Beta.
Analysts:
Robertus Yanuar Hardy
+6221 5790 5455 Shanti Dwi Jayanti (Research Associate)
Expecting margin improvement and increased non-automotive segment contribution.
FY2015 financial and business performance
Revenue declined 9% to Rp184,196 bn in 2015 from Rp201,701 bn in the year before. Net profit fall 25% to Rp14,464 bn from Rp19,191 bn (Exhibit 3).
“The Group experienced challenging trading conditions during 2015 with lower contributions from all segments, except Information Technology. Net income was down 25% at Rp 14.5 trillion. Before impairment of coal mining properties in both the current and prior years, the Group’s net income would have decreased 20% to Rp 16.0 trillion.” as quoted from Mr. Prijono Sugiarto, the company’s President Director, in a released statement.
Automotive business which contributed more than 50% to the company’s revenue has experienced a tough year. Astra’s 4W market share reduced to 50% from 51%, where sales volume declined 17% yoy while market falling 16%. However 2W’s market share managed to increase to 69% from 64%, even though sales volume dropped 12% yoy while market falling 28% (Exhibit 1). Lower commodity prices also hurts Agribusiness and Mining related business where Astra Agro Lestari (AALI) and United Tractors (UNTR) posted a significant decline in revenue (Exhibit 2). Declining Rupiah exchange rate has benefited UNTR in the 3rd quarter of last year, however with the currency’s strengthening toward the end of year, forex gain contribution has also reduced.
Opportunities in the future
Indonesia’s automobile industry in 2015 has been left by Ford and Chevrolet (General Motors). The principals of both brands has discontinued their assembling and spare part producing facility in the country, as a result of increasing production costs, because most of the production process is still located outside the country. In the other hand, sales achievement also cannot compete with other brands. Despite the negative achievement of last year’s automotive sales volume growth that we predict to continue this year (Exhibit 1), we hope with less competitors challenging, the company will find more opportunities to increase market share. With longtime existence of several production facilities in the country, Astra has the most competitive advantage of cost efficiency.
We also expect more contribution from Astra’s new businesses such as insurance (Astra Aviva), toll roads (Semarang-Ungaran-Bawen), construction (Acset Indonusa, ACST), and property (Anandamaya Residence, Astra Tower).
Valuation and recommendation
We are downgrading rating to Hold with slightly increased target price at Rp7400. Implying 15.7x of 2017 P/E Ratio. Declining prospect of automotive related business segment (Exhibit 1) is expected to be assisted by increasing growth expectation from another business segment.
Risk to our projection
Currency volatility has made other automotive brands discontinuing their operations in the country regarding some of the raw materials and factory machineries in automotive and spare part business is still have to be imported. This will also be a concern for Astra in the future.
Current Price 6,800
2017E P/E 14. 4
Target Price 7,400
2017E P/E 15. 7
Current JCI JKSE 4,770 Misc Indust ry, Aut omot ive Bloomberg Tic ker ASII IJ Reuters Tic ker ASII JK 52 week High 8,575
52 week Low 4,975
Market Cap (Rp tn) 275 Market Cap (US$ bn) 21
USDIDR 13,375
Daily Av erage Vol
('000 shares) 45,376 Daily Av erage Val (Rp bn) 286.0 Daily Av erage Val (US$ mn) 21.4 Major Shareholders (%):
Jardine Cyc le &
Carriage Ltd 50.10 Others under 5% 49.90 Relat ive Performance vs JCI JKSE:
Hold
-35% -30% -25% -20% -15% -10% -5% 0% 5% 10%HEAD OFFICE
PT. Astra International, Tbk (ASII)
Indonesia Automotive Sector45,000 55,000 65,000 75,000 85,000 95,000
Domestic Car Sales (units)
400,000 450,000 500,000 550,000 600,000
Domestic Motorcycle Sales (units)
Domestic car and motor cycle sales last year declined 16% and 18% yoy each respectively, where LCGC also weakened 4%. This condition persists in January 2016 where 4-wheels and 2-wheels vehicle sales fall 10% and 21% each yoy.
We believe domestic automotive market this year will be stagnant and tend to decline in terms of sales volume growth. Despite interest rate reduction, we see several factors will weigh the sector’s outlook, which are:
• There is a possibility of Indonesian automotive market has entered maturity stage, where domestic car and motorcycle sales have exceeded 1.1 mn and 7.2 mn units each on annual average in the last 4 years. Judging by the traffic in several large cities, we assume there will be more people switching to public transportation in the future. The rapid growth of automotive sales volume in the last 4 years yet is not followed by decent road development growth has made it entered early maturity stage.
• The government’s support to the expansion of public transportation, such as Commuter Line and Busway system in several cities, also planned MRT and LRT project will be the E xhibit 1:
Domest ic Car Sales
(unit s) 2015 2014 Change 2015 2014 Jan-16 Jan-15 Change Jan-16 Jan-15
Toyota 322,506 399,746 -19% 32% 33% 24,893 27,174 -8% 29% 29%
Daihatsu 167,808 185,226 -9% 17% 15% 13,184 14,536 -9% 16% 15%
Isuzu 19,350 28,278 -32% 2% 2% 1,431 2,052 -30% 2% 2%
Peugeot 40 65 -38% 2 8 -75%
UD Truc ks 560 854 -34% 119
-Subt ot al for Ast ra 510,264 614,169 -17% 50% 51% 39,629 43,770 -9% 47% 46%
A stra's LCGC 92,730 107,849 -14% 9.2% 8.9% 7,532 7,434 1% 9% 8% Honda 159,253 159,147 0% 16% 13% 19,404 16,855 15% 23% 18% Suzuki 121,667 154,923 -21% 12% 13% 10,485 12,683 -17% 12% 13% Mitsubishi 112,527 141,962 -21% 11% 12% 7,670 11,365 -33% 9% 12% Nissan 25,108 33,789 -26% 2% 3% 1,363 1,802 -24% 2% 2% Others 84,341 104,029 -19% 8% 9% 6,334 7,719 -18% 7% 8%
Subt ot al for Non Ast ra 502,896 593,850 -15% 50% 49% 45,256 50,424 -10% 53% 54% Tot al Domest ic 1,013,160 1,208,019 -16% 84,885 94,194 -10%
To tal Do mestic LCGC 165,434 172,120 -4% 16% 14% 13,535 14,125 -4% 16% 15%
Domest ic Mot orcycle Sales
(unit s) 2015 2014 Change 2015 2014 Jan-16 Jan-15 Change Jan-16 Jan-15
Ast ra Honda 4,453,888 5,051,100 -12% 69% 64% 287,776 339,850 -15% 69% 68%
Yamaha 1,798,630 2,371,082 -24% 28% 30% 112,124 140,243 -20% 27% 28%
Suzuki 109,882 275,067 -60% 2% 3% 5,587 11,389 -51% 1% 2%
Kawasaki 115,008 160,371 -28% 2% 2% 10,681 10,782 -1% 3% 2%
TVS 2,747 9,575 -71% 95 519 -82%
Subt ot al for Non Ast ra 2,026,267 2,816,095 -28% 31% 36% 128,487 162,933 -21% 31% 32% Tot al Domest ic 6,480,155 7,867,195 -18% 416,263 502,783 -17%
So urce: A stra, Gaikindo .
Market Share
Market Share
Market Share
Revenue and profit contributors
Tough year for the company’s financial performance is reflected by the declining numbers of Revenue and Profit each yoy from all segment except Information Technology that managed to grow. Net profit margin in Financial Services and Agribusiness segment has fallen the most, as a result of increasing cost of fund, and declining palm oil price while cots continue to increase. The volatility of Rupiah exchange rate is also contributing significantly to this negative achievement in other business segments.
In the future, with more stable outlook of Rupiah currency, and several efficiency measures that the company already implemented, we expect margins to recover, and contribution from other non automotive segment could increase.
Revenue Cont ribut ion by Exhibit 2:
Segment (Rp bn) 2015 2014 Change Cont ribut ion
Automotive 96,792 108,635 -10.9% 51.8%
Financial Services 17,281 15,788 9.5% 9.2%
Heavy Equipment and Mining 49,347 53,142 -7.1% 26.4%
Agribusiness 13,059 16,306 -19.9% 7.0%
Infrastructure logistics and others 7,902 8,785 -10.1% 4.2% Information technology 2,655 2,282 16.3% 1.4% Net Income Cont ribut ion by
Segment (Rp bn) 2015 2014 Change Cont ribut ion 2015 2014
Automotive 7,464 8,491 -12.1% 51.6% 7.7% 7.8%
Financial Services 3,555 4,750 -25.2% 24.6% 20.6% 30.1% Heavy Equipment and Mining 2,342 3,263 -28.2% 16.2% 4.7% 6.1%
Agribusiness 493 1,996 -75.3% 3.4% 3.8% 12.2%
Infrastructure logistics and others 406 491 -17.3% 2.8% 5.1% 5.6% Information technology 204 200 2.0% 1.4% 7.7% 8.8%
Source: Company's financial report.
PT. Astra International, Tbk (ASII)
Past financial performance and future estimatesExhibit 3:
Income St at ement Balance Sheet
(bn Rp) 2014 2015 2016E 2017E 2018E (bn Rp)
Revenue 201,701 184,196 193,406 203,560 214,755 Asset s 2014 2015 2016E 2017E 2018E
Gross Profit 38,809 36,710 39,648 42,748 46,172 Cash 20,902 27,102 36,435 46,727 58,085 EBT 27,058 19,630 23,789 25,862 28,165 Other Investments 277 484 491 499 506 EAT 22,131 15,613 18,921 20,570 22,402 Rec eivables 21,332 17,776 17,598 17,422 17,248 Net Inc ome 19,191 14,464 17,528 19,056 20,753 Financ ing Rec eivables 30,297 31,728 32,204 32,687 33,177 EPS 474 357 433 471 513 Other Rec eivables 3,130 3,501 3,554 3,607 3,661 Inventories 16,986 18,337 18,612 18,891 19,175
Current Pric e 6,800 Prepaid taxes 3,168 4,729 4,800 4,872 4,945
P/E 14.4 Other prepayments 1,149 1,504 1,527 1,549 1,573
Target Pric e 7,400 Tot al Current Asset s 97,241 105,161 115,221 126,255 138,369
P/E 15.7 Financ ing Rec eivables 30,408 28,377 28,093 27,812 27,534
Market Cap (Rp tn) 275.3 Other Rec eivables 2,543 4,865 4,914 4,963 5,012
Market Cap (US$ bn) 20.6 Investment in assc & joints 27,250 29,640 29,936 30,236 30,538
Other investments 5,455 5,320 5,267 5,214 5,162
Rat ios & Margins: Defered tax assets 2,891 3,043 3,073 3,104 3,135
Revenue growth 4.0% -8.7% 5.0% 5.3% 5.5% Investment properties 2,534 3,493 3,528 3,563 3,599
Gross Profit margin 19.2% 19.9% 20.5% 21.0% 21.5% Plantations 6,007 6,686 6,753 6,820 6,889
Net Profit margin 9.5% 7.9% 9.1% 9.4% 9.7% Fixed Assets 41,250 41,702 42,116 42,493 42,835
Net Profit growth -1.2% -24.6% 21.2% 8.7% 8.9% Mining properties 9,149 4,859 4,810 4,762 4,715
DPR (as paid) 45.6% 60.5% 60.5% 60.5% 60.5% Conc ession/ Joint operation 4,930 5,298 5,351 5,404 5,459 DPS (as paid) 216 216 262 285 310 Goodwill 1,534 1,974 1,994 2,014 2,034 BVPS 2,972 3,126 3,365 3,627 3,914 Other intangible assets 1,968 2,039 2,059 2,080 2,101
ROA 8.1% 5.9% 6.8% 7.1% 7.4% Other assets 2,869 2,978 3,008 3,038 3,068
ROE 15.9% 11.4% 12.9% 13.0% 13.1% Tot al Non Current Asset s 138,788 140,274 140,902 141,504 142,080
Total Debt 69,023 69,323 69,446 69,584 69,738 Tot al Asset s 236,029 245,435 256,123 267,759 280,450
Net Debt (Cash) 48,121 42,221 33,011 22,857 11,653
DER 40.0% 33.4% 24.2% 15.6% 7.4% Liabilit ies 2014 2015 2016E 2017E 2018E
DPS (as paid) 216 216 262 285 310 Short term borrowings 10,586 11,975 12,215 12,459 12,708
DPR (as paid) 45.6% 60.5% 60.5% 60.5% 60.5% Payables 18,839 20,557 20,968 21,388 21,815
Other liabilities 5,648 7,076 7,218 7,362 7,509
Cash Flow s 2014 2015 2016E 2017E 2018E Taxes payable 2,132 2,142 2,185 2,229 2,273 Chg in work c ap (14,363) (801) (167) (176) (184) Ac c ruals 5,450 5,621 5,733 5,848 5,965 Net inc ome 19,191 14,464 17,528 19,056 20,753 Employee ben obligations 430 451 460 469 479 Deprec iation 4,151 5,367 5,260 5,154 5,051 Unearned inc ome 3,603 4,170 4,253 4,338 4,425
Net CF From Operat ion 8,979 19,030 22,621 24,035 25,620 Current portion of LT debt 26,835 24,227 23,985 23,745 23,507 Capex (7,539) (5,819) (5,674) (5,532) (5,393) Bank loan 17,898 16,437 16,273 16,110 15,949
Net CF From Invest ing (7,539) (5,819) (5,674) (5,532) (5,393) Debt sec urities 8,487 7,357 7,283 7,211 7,138 Loans and Debts 5,549 577 137 152 168 Financ e lease 450 433 429 424 420 Employee Benefit Liabs 411 667 86 88 90 Tot al Current Liabilit ies 73,523 76,242 77,040 77,861 78,706
Non Ctrling Int 2,463 (223) 1,876 2,053 2,250 Other Liabilities 947 574 585 597 609 Chg in Equity 1,290 902 884 1,016 1,169 Unearned inc ome 2,537 1,694 1,677 1,660 1,644 Dividend (8,744) (8,744) (10,597) (11,520) (12,546) Defered tax liabilities 2,645 1,796 1,778 1,760 1,743
Net CF From Financing 905 (7,011) (7,614) (8,211) (8,870) Provisions 192 293 299 305 311 Employee ben obligations 3,210 3,856 3,933 4,012 4,092
Equit ies 2014 2015 2016E 2017E 2018E Long term debt 32,651 34,447 34,586 34,734 34,890 Issued & fully paid c apital 2,024 2,024 2,024 2,024 2,024 Bank loan 19,587 18,315 18,132 17,951 17,771 Additional paid in c apital 1,139 1,139 1,139 1,139 1,139 Debt sec urities 12,465 15,239 15,544 15,855 16,172 Retained earning 87,459 92,989 99,921 107,457 115,664 Financ e lease 599 893 911 929 948 Approriated 425 425 425 425 425 Tot al Non Current Liabs 42,182 42,660 42,859 43,069 43,289
Unapproriated 87,034 92,564 99,496 107,032 115,239 Tot al Liabilit ies 115,705 118,902 119,899 120,930 121,995
Other rsv, equity c hg 4,989 5,891 6,775 7,791 8,959 Minority Interest 24,713 24,490 26,366 28,418 30,668
HEAD OFFICE Reliance Building
Jl. Pluit Kencana No. 15A, Pluit Penjaringan
Jakarta 14450 T +62 21 661 7768 F +62 21 661 9884
RESEARCH DIVISION
Jasa Adhi Mulya Senior Research Analyst
Robertus Yanuar Hardy Senior Research Analyst
Aji Setiawan Associate Research Analyst
Alan Milgerry Associate Research Analyst
Shanti Dwi Jayanti Associate Research Analyst
Lanjar Nafi Taulat I Technical Research Analyst
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