Industry Update Thursday February 26, 2015
Automotive
AUTO Rec.: NEUTRAL
Engines on, ready to move again The automotive sector has showed a sign of recovery. Car production volume could grow year on year (yoy) in January, while driving factors in 2015 are launches of new car models and excise tax restructuring. We upgrade our recommendation to NEUTRAL. Top picks are SAT and AH.
Jan car production shows first year-on-year growth in 18 months Car production volume in January 2015 grew 2.22%yoy and 8.2%mom to 166,260, showing the first year-on-year (yoy) growth in 18 months after shrinking continuously since 2H13. Car exports increased 14%yoy to 92,440, while domestic sales dropped 12.9%yoy to 59,669 since the high season has just ended in late 2014.
Strong rebound expected in 2015
We estimate total car production volume in 2015 at 2.1 million or a rise of 11.7%yoy, driven mainly by domestic sales that would grow 7.7%yoy to 950,000. Thailand’s economic recovery in 2015 would help boost purchasing power of consumers and domestic demands for cars. In addition, launches of at least 10 new car models this year and the excise tax restructuring to be effective in 2016 will influence consumers to buy new cars faster. The interest rate downtrend also has positive sentiment on the sector since it means higher purchasing power. Total exports are projected to stabilize at 1.15 million; despite an effect from decreasing revenues of the Middle East countries as a result of falling oil prices, there is compensation from importers in Asia, Oceania, and the US.
Upgrade to NEUTRAL. Top picks are SAT, AH
We upgrade our recommendation to NETRUAL and revise up the sector’s P/E ratio to 11-12x (from 10-11x). Fair value of STANLY, SAT, and IRC have been increased earlier; now we revise up AH’s fair value to B18.37 (based on 11x P/E ratio) and IHL to B6.54 (based on P/E ratio of 12x, equivalent to those of SAT, STANLY, and PCSGH, for their higher profitability). The sector’s profit in FY2015 is estimated at B4.18bn, growing 17.26%yoy. Top picks are SAT and AH, whose share prices have an upside of 17% and 18.5%, respectively. SAT would show the strongest profit growth among peers at 20%yoy, while AH has the lowest valuation, with P/BV ratio of only 0.83x and P/E ratio of 9.3x.
Key Data FY: Closing Dec 31 Sales Gross Profit Net Profit Normalized Profit Gross Margin PER (X) PBV (X) ROAA ROAE
FY12A 50,549 7,733 5,405 5,202 15.3% 9.54 1.92 12.2% 21.5%
FY13A 48,568 7,528 5,047 4,682 15.5% 10.22 1.97 10.7% 19.0%
FY14F 43,918 5,718 3,563 3,469 13.0% 14.48 1.62 7.5% 12.3%
Source: ASP Research English research reports are a rough translation of our Thai-language research products. It is produced primarily with time efficiency in mind, so that English-reading clients can see what the main recommendations are from our Thai-language research team. Given that this is a rough-andready translation, Asia Plus Securities pcl cannot be held responsible for translation inaccuracies.
FY15F 47,586 6,692 4,178 4,178 14.1% 12.35 1.50 8.5% 12.6%
FY16F 50,188 7,134 4,517 4,517 14.2% 11.42 1.38 8.9% 12.6%
Nuanpun Noiruchchukorn License No.: 019994
[email protected] Attavut Pukprayoon Analyst Assistant
The Thai language research reports and information contained therein are compiled from public data sources and our analysts' interviews with executives of listed companies. They are presented for informational purposes only and not to be deemed as solicitations to buy or sell any securities. Best attempts have been made to verify information from these vast sources, but we cannot guarantee their accuracy, adequacy, completeness and timeliness. The analyses and comments presented herein are opinions of our analysts and do not necessarily reflect the views of Asia Plus Securities.
Industry Update Research Department
Car makers to launch at least 10 new models in 2015 The automotive industry in Thailand had been sluggish throughout 2014. The government’s first-car scheme had come to an end and the economy had been decelerating; a number of promotional campaigns were launched but still could not encourage sales. However, we believe the industry is bottoming out and ready to rebound again. More than 10 all new models are going to be launched in 2015, signaling improving confidence of car makers. Particularly, pickups and new pickup passenger vehicles (PPVs), e.g. Toyota’s Vigo and Fortuner and Mitsubishi’s Pajero Sport are believed to be a major driver for car production in 2015. In 2014, Toyota and Mitsubishi’s pickup and PPV production accounted for 38.94% of total domestic car production volume, their sales made up 23% of total domestic car sales, and their exports comprised 41% of total car exports. We are convinced that SAT will most benefit from the new model production since both Toyota and Mitsubishi are its major customers (accounting for 59% of its sales).
New Models in 2015 Car Makers
4Q57A 4Q14A All-New Model
MG MAZDA FORD HONDA
All-New Model
Captiva, Colorado
Cruze
BT 50pro
Mazda 2
Ranger, Focus
Everest
MG3
HR-V
ISUZU NISSAN
Minor Change
MG6
CHEVROLET
MITSUBISHI
2558F 2015F
D-max, Mu-x Triton X-trail, Navara
SUZUKI TOYOTA
Pajero Sport Juke
Navara PPV
Camry
Ciaz, Swift Vigo, Fortuner
* Only for produced in Thailand * models
Source: Collected by ASP Research
Buyers to accelerate car purchases before new tax policy effective A vehicle excise tax restructuring is taking effect since January 1, 2016 onward. According the new policy, the vehicle excise tax rates will change from engine size based (cc) to carbon dioxide emission quantity based, aiming at encouraging car makers to develop more environment-friendly cars. However, carbon dioxide emission rate of most current models is above the standard, especially pickups and PPVs which have an emission rate of 200 g/km, so they will have to pay higher tax rates, except the tax rates for eco-cars will decrease due to benefit from the BOI’s eco-car program phase 2.
2
Industry Update Research Department Current Tax Structure vs New Tax Structure
Current Tax
Engine Size (cc) Tax Rate %
New Tax
CO2 2
CO
Tax Rate %
200g/km
40%
Eco-car #
