Struggling to Swim
UNTR as Performance Driver
ASII booked revenue IDR174.88 trillion or grew by 16.41% YoY during 9M18. Meanwhile,
net income could reach IDR17.07 trillion (+20.58% YoY). Heavy equipment segment
(UNTR) was the main driver for ASII’s performance since last year along with strong
Komatsu sales, which its bottom line contribute to ~32% of ASII’s net income. Automotive
segment was still top contributor in ASII’s performance, but net profit margin from its
segment was down to 8.81% in 9M18 (vs 9.19% in 9M17) due to tight competition,
especially in LMPV segment. We see that tight competition will still impact ASII’s
performance until FY19F but 2W sales will be better, along with online transportation and
economy growth.
Will New LSUV Compensate for Loss in LMPV?
ASII's sales in the 4W segment fell –1.85% YoY to 486,072 units in 10M18, along with
increasingly tight competition in the 4W industry, which could be seen as ASII's market
share shrink to 50% in 10M18 (vs. 55% in 10M17). This decline was triggered by poorer
sales of Toyota Avanza and Daihatsu Xenia by -31.62% YoY to 67,940 units and -21.82%
YoY to 24,818 units during 10M18, which was overshadowed by the launch of newcomers,
Mitsubishi Xpander and Wuling Confero. For LSUV segment, sales of the All New Toyota
Rush and All New Daihatsu Terios grew significantly by 179.76% YoY to 45,156 units and
157.54% YoY to 25,169 units in 10M18. However, we see that increasing sales from the
LSUV duo helped automotive segment for not falling deeper from losing its market share.
Meanwhile, the increasing number of Japanese and Chinese car manufacturers that are
crowding the LSUV segment, will become threats to ASII.
Recommendation: HOLD at TP IDR8,500
We recommend HOLD for ASII at a target price of Rp8,500, representing implied PER at a
level of 14.96x/13.82x for the FY18E/FY19F. Currently, ASII is trading at a PER of 13.8x
(November 29, 2018). ASII performance will still be driven especially by UNTR, followed by
2W sales. Meanwhile, ASII also has positive catalyst from capital inflow that based on new
regulation about free float requirement for IDX30 and LQ45, as ASII will have 10.72%
weight of new free float regulation once it is fully applied (from 7.63% weight based on
old market capitalization regulation). However, intense competition for 4W, weakening of
Rupiah exchange rate, as well as an increase in interest rates are all risks for ASII.
