Beats Earnings Expectations
Key Takeaways :
• AUTO secured a revenue of IDR18.58tn or grew by 22.63% YoY in FY22, meeting our/consensus’ estimates at 101%/102%. Domestic sales of 4W & 2W spare parts were still the top contributor to FY22 performance. Meanwhile, the net income reached IDR1.32tn (+117% YoY), above our/consensus’ estimates at 146%/144%.
• We see that tight competition still poses a threat to FY23F performance. Meanwhile, 2W sales are still favorable in the last 10 years, reinforced by electric vehicle incentives and the strong economic recovery with the 2W total population recorded at around 67mn (vs Indonesia's population of more than 250mn).
• In a strategic move to increase market penetration in OEM (Original Equipment Manufacturer) and REM (Replacement Market) product segments, AUTO has committed capital expenditures of around IDR500bn in FY23E. Management aims to further increase market penetration in FY23E by optimizing the AstraOtoshop digital platform to reach B2B and B2C customers on a wider scale
• We expect sales to remain strong in 1Q23 as AUTO continues to benefit cyclically from Lebaran's momentum. On average, there has been a 7%/24% increase in the QoQ basis during 1Q/3Q (FY18- FY22), respectively, which indicates that customers tend to perform maintenance or purchase spare parts either before or after Eid al-Fitr.
• Assuming the dividend continues along recent trends, we expect management will distribute a 40% dividend payout this year based on 10 years average payout, translating to 6.24% FY23F dividend yield, which is in a pretty sustainable range.
• We recommend BUY for AUTO at a TP: IDR2,000, which implies PE/PBV 5.50x/0.60x on FY23E and 5.00x/0.56x in FY24F. Downside risks to our call include: 1) slower than expected in 4W and 2W sales; 2) higher interest rate, which may trigger lower vehicle sales; 3) higher raw material cost (due to the chip shortage and higher base metal prices). AUTO is currently trading at mean level of 3 years average PE at 6.34x.
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