PT. Astra International, Tbk (ASII) Company Update, March 1st 2016 Expecting margin improvement and increased non-automotive segment contribution.
Hold Current Pric e 2017E P/E Target Pric e 2017E P/E Current JCI JKSE
6, 800 14. 4 7, 400 15. 7 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 Cy c le & Carriage Ltd Others under 5%
50.10 49.90
Relat ive Performanc e vs JCI JKSE: ASII
JCI JKSE
10% 5% 0% -5%
-10% -15% -20% -25% -30% -35%
ASII’s price movement is relatively inline with Indonesia Equity Index (JCI, JKSE, IHSG) with 1.5-1.7 Beta.
Analysts: Robertus Yanuar Hardy
[email protected] +6221 5790 5455 Shanti Dwi Jayanti (Research Associate)
[email protected]
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.
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PT. Astra International, Tbk (ASII) Indonesia Automotive Sector E xhibit 1:
Domest Car Sales HEADicOFFICE (unit s) Toy ota Daihatsu Isuzu Peugeot UD Truc ks Subt ot al for Ast ra
To tal Do mestic LCGC
2015 322,506 167,808 19,350 40 560 510, 264 92,730 159,253 121,667 112,527 25,108 84,341 502, 896 1, 013, 160 165,434
2014 Change 399,746 -19% 185,226 -9% 28,278 -32% 65 -38% 854 -34% 614, 169 -17% 107,849 -14% 159,147 0% 154,923 -21% 141,962 -21% 33,789 -26% 104,029 -19% 593, 850 -15% 1, 208, 019 -16% 172,120 -4%
Domest ic Mot orc yc le Sales (unit s) Ast ra Honda Yamaha Suzuki Kawasaki TVS Subt ot al for Non Ast ra Tot al Domest ic
2015 4, 453, 888 1,798,630 109,882 115,008 2,747 2, 026, 267 6, 480, 155
A stra's LCGC
Honda Suzuki Mitsubishi Nissan Others Subt ot al for Non Ast ra Tot al Domest ic
Market Share 2015 2014 32% 33% 17% 15% 2% 2%
50% 9. 2% 16% 12% 11% 2% 8% 50%
51% 8.9% 13% 13% 12% 3% 9% 49%
16%
14%
Jan-16 24,893 13,184 1,431 2 119 39, 629 7,532 19,404 10,485 7,670 1,363 6,334 45, 256 84, 885 13,535
Jan-15 Change 27,174 -8% 14,536 -9% 2,052 -30% 8 -75% 43, 770 -9% 7,434 1% 16,855 15% 12,683 -17% 11,365 -33% 1,802 -24% 7,719 -18% 50, 424 -10% 94, 194 -10% 14,125 -4%
Market Share 2014 Change 2015 2014 5, 051, 100 -12% 69% 64% 2,371,082 -24% 28% 30% 275,067 -60% 2% 3% 160,371 -28% 2% 2% 9,575 -71% 2, 816, 095 -28% 31% 36% 7, 867, 195 -18%
Jan-16 287, 776 112,124 5,587 10,681 95 128, 487 416, 263
Market Share Jan-16 Jan-15 29% 29% 16% 15% 2% 2%
47% 9% 23% 12% 9% 2% 7% 53%
46% 8% 18% 13% 12% 2% 8% 54%
16%
15%
Market Share Jan-15 Change Jan-16 Jan-15 339, 850 -15% 69% 68% 140,243 -20% 27% 28% 11,389 -51% 1% 2% 10,782 -1% 3% 2% 519 -82% 162, 933 -21% 31% 32% 502, 783 -17% So urce: A stra, Gaikindo .
Domestic Car Sales (units) 95,000 85,000 75,000
65,000 55,000 45,000
Domestic Motorcycle Sales (units) 600,000 550,000 500,000 450,000
400,000 350,000
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 future of public transportation. • Double taxation calculation for car and motorcycle owners who lived in the same address in Jakarta, will add extra consideration for consumers to buy themselves a new vehicle. • The emergence of several start-up companies that are specializing in car and motorcycle sharing will be a new consideration for consumers in determining their buying decision for a new vehicle. The ease of car and motorcycle sharing with reasonable tariff by only tapping a few command buttons in our smartphone has changed how Indonesian people commute around their city.
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PT. Astra International, Tbk (ASII) Revenue and profit contributors
Revenue Co nt ribut io n by Segment (Rp bn) Automotive
2015 96,792
2014 108,635
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%
Exhibit 2:
Net Inco me Co nt ribut io n by Segment (Rp bn) Automotive Financial Services Heavy Equipment and Mining Agribusiness Infrastructure logistics and others Information technology
Change -10.9%
Co nt ribut io n 51.8%
Net Pro fit Margin 2015 7,464 3,555 2,342 493 406 204
2014 8,491 4,750 3,263 1,996 491 200
Change -12.1% -25.2% -28.2% -75.3% -17.3% 2.0%
Co nt ribut io n 51.6% 24.6% 16.2% 3.4% 2.8% 1.4%
2015 7.7% 20.6% 4.7% 3.8% 5.1% 7.7%
2014 7.8% 30.1% 6.1% 12.2% 5.6% 8.8%
Source: Company's financial report.
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.
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PT. Astra International, Tbk (ASII) Past financial performance and future estimates
Exhibit 3: Inc ome St at ement (bn Rp) Rev enue Gross Profit EBT EAT Net Inc ome EPS
2014 201,701 38,809 27,058 22,131 19,191 474
2015 184,196 36,710 19,630 15,613 14,464 357
2016E 193,406 39,648 23,789 18,921 17,528 433
Current Pric e P/E Target Pric e P/E Market Cap (Rp tn) Market Cap (US$ bn)
2017E 203,560 42,748 25,862 20,570 19,056 471 6,800 14.4 7,400 15.7 275.3 20.6
Rat ios & Margins: Rev enue growth Gross Profit margin Net Profit margin Net Profit growth DPR (as paid) DPS (as paid) BVPS ROA ROE Total Debt Net Debt (Cash) DER DPS (as paid) DPR (as paid)
4.0% 19.2% 9.5% -1.2% 45.6% 216 2,972 8.1% 15.9% 69,023 48,121 40.0% 216 45.6%
-8.7% 19.9% 7.9% -24.6% 60.5% 216 3,126 5.9% 11.4% 69,323 42,221 33.4% 216 60.5%
5.0% 20.5% 9.1% 21.2% 60.5% 262 3,365 6.8% 12.9% 69,446 33,011 24.2% 262 60.5%
5.3% 21.0% 9.4% 8.7% 60.5% 285 3,627 7.1% 13.0% 69,584 22,857 15.6% 285 60.5%
Cash Flow s Chg in work c ap Net inc ome Deprec iation Net CF From Operat ion Capex Net CF From Invest ing Loans and Debts Employ ee Benefit Liabs Non Ctrling Int Chg in Equity Div idend Net CF From Financ ing
2014 (14,363) 19,191 4,151 8,979 (7,539) (7,539) 5,549 411 2,463 1,290 (8,744) 905
2015 (801) 14,464 5,367 19,030 (5,819) (5,819) 577 667 (223) 902 (8,744) (7,011)
2016E (167) 17,528 5,260 22,621 (5,674) (5,674) 137 86 1,876 884 (10,597) (7,614)
2017E (176) 19,056 5,154 24,035 (5,532) (5,532) 152 88 2,053 1,016 (11,520) (8,211)
Equit ies Issued & fully paid c apital Additional paid in c apital Retained earning Approriated Unapproriated Other rsv , equity c hg Minority Interest Tot al Equit y
2014 2,024 1,139 87,459 425 87,034 4,989 24,713 120, 324
2015 2,024 1,139 92,989 425 92,564 5,891 24,490 126, 533
2016E 2,024 1,139 99,921 425 99,496 6,775 26,366 136, 224
2017E 2,024 1,139 107,457 425 107,032 7,791 28,418 146, 829
2018E 214,755 46,172 28,165 22,402 20,753 513
Balanc e Sheet (bn Rp) Asset s Cash Other Inv estments Rec eiv ables Financ ing Rec eiv ables Other Rec eiv ables Inv entories Prepaid taxes Other prepay ments Tot al Current Asset s Financ ing Rec eiv ables Other Rec eiv ables Inv estment in assc & joints Other inv estments Defered tax assets Inv estment properties Plantations Fixed Assets Mining properties Conc ession/ Joint operation Goodwill Other intangible assets Other assets Tot al Non Current Asset s Tot al Asset s
5.5% 21.5% 9.7% 8.9% 60.5% 310 3,914 7.4% 13.1% 69,738 11,653 7.4% Liabilit ies 310 Short term borrowings 60.5% Pay ables Other liabilities 2018E Taxes pay able (184) Ac c ruals 20,753 Employ ee ben obligations 5,051 Unearned inc ome 25,620 Current portion of LT debt (5,393) Bank loan (5,393) Debt sec urities 168 Financ e lease 90 Tot al Current Liabilit ies 2,250 Other Liabilities 1,169 Unearned inc ome (12,546) Defered tax liabilities (8,870) Prov isions Employ ee ben obligations 2018E Long term debt 2,024 Bank loan 1,139 Debt sec urities 115,664 Financ e lease 425 Tot al Non Current Liabs 115,239 Tot al Liabilit ies 8,959 30,668 158, 455
2014 20,902 277 21,332 30,297 3,130 16,986 3,168 1,149 97, 241 30,408 2,543 27,250 5,455 2,891 2,534 6,007 41,250 9,149 4,930 1,534 1,968 2,869 138, 788 236, 029
2015 27,102 484 17,776 31,728 3,501 18,337 4,729 1,504 105, 161 28,377 4,865 29,640 5,320 3,043 3,493 6,686 41,702 4,859 5,298 1,974 2,039 2,978 140, 274 245, 435
2016E 36,435 491 17,598 32,204 3,554 18,612 4,800 1,527 115, 221 28,093 4,914 29,936 5,267 3,073 3,528 6,753 42,116 4,810 5,351 1,994 2,059 3,008 140, 902 256, 123
2017E 46,727 499 17,422 32,687 3,607 18,891 4,872 1,549 126, 255 27,812 4,963 30,236 5,214 3,104 3,563 6,820 42,493 4,762 5,404 2,014 2,080 3,038 141, 504 267, 759
2018E 58,085 506 17,248 33,177 3,661 19,175 4,945 1,573 138, 369 27,534 5,012 30,538 5,162 3,135 3,599 6,889 42,835 4,715 5,459 2,034 2,101 3,068 142, 080 280, 450
2014 10,586 18,839 5,648 2,132 5,450 430 3,603 26,835 17,898 8,487 450 73, 523 947 2,537 2,645 192 3,210 32,651 19,587 12,465 599 42, 182 115, 705
2015 11,975 20,557 7,076 2,142 5,621 451 4,170 24,227 16,437 7,357 433 76, 242 574 1,694 1,796 293 3,856 34,447 18,315 15,239 893 42, 660 118, 902
2016E 12,215 20,968 7,218 2,185 5,733 460 4,253 23,985 16,273 7,283 429 77, 040 585 1,677 1,778 299 3,933 34,586 18,132 15,544 911 42, 859 119, 899
2017E 12,459 21,388 7,362 2,229 5,848 469 4,338 23,745 16,110 7,211 424 77, 861 597 1,660 1,760 305 4,012 34,734 17,951 15,855 929 43, 069 120, 930
2018E 12,708 21,815 7,509 2,273 5,965 479 4,425 23,507 15,949 7,138 420 78, 706 609 1,644 1,743 311 4,092 34,890 17,771 16,172 948 43, 289 121, 995
Source: financial report, Reliance Research estimates.
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