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15 Juni 2022

AUTO IJ - MNC Sekuritas Initiate Report June 14, 2022

Excellence to Adapt and Grow

The Most prominent automotive component manufacturer
• PT Astra Otoparts Tbk (AUTO IJ) is a subsidiary of the PT Astra International Tbk (ASII IJ) group and is known as the largest and leading automotive component company in Indonesia that produces and distributes a wide range of 2W and 4W motor vehicle spare parts. To distribute products directly to customers, AUTO provides a modern retail trade network Shop&Drive and Shop&Bike which markets fast moving spare parts products such as batteries, lubricants, tires, and shock absorbers. AUTO has 3 Astra Otoservice outlets, 9 Super Shop&Drive outlets, 365 Shop&Drive outlets and 23 Shop&Bike outlets.
• In 1Q22, AUTO booked a revenue of IDR4.58tn (+26.69% YoY), manufacturing and trading contribute 53%/47% to total revenue, respectively. Furthermore, AUTO booked operating profit of IDR100.03bn (+81.72% YoY), making the margin to be 2.18%. Net profit stood at IDR225.33bn (+37.47% YoY), thus making net profit margin to be 4.92%.
• In terms of multiples valuation, AUTO is currently trading at 0.5x PBV (trailing), a relatively lower than its peer's average (2.1x PBV) and median (1.0x PBV). Furthermore, based on earnings, AUTO is currently trading at 8.4x PE (trailing), a 40%-50% discount from its peers. Meanwhile, EV/EBITDA stood at 7.2x, slightly in line with the market (7.3x). AUTO also offers a dividend yield of 6.8% in FY21, relatively higher than its peers at the level of 3.5%. All in all, we see a potential upturn for AUTO given the rather undemanding relative valuation.

Road to EV in FY30F
• The government targets the BEV production to reach 600 thousand units for 4W or more, and 2.4mn units for 2W in FY30F. Electric vehicle production is expected to reduce CO2 emissions by 2.7mn tons for 4W or more and by 1.1mn tons for 2W.
• Since FY20, Hyundai Motor Company (HMC) has committed to the Indonesian market with its investment on USD1.5bn aimed to develop a new factory which is divided into two stages (phase I in FY19-FY21 and phase II FY22E-FY30F). Hyundai has manufactured and released the IONIQ 5 electric car on Apr-22, starting from IDR700mn/unit, and has sold 90 units on Apr-22.
• On June-22, Wuling conducted a pre-launch in the development of an electric vehicle (EV) from Wuling for the Indonesian market. Later, Wuling EV will be manufactured at the Wuling factory facility located in Cikarang, West Java to focus on meeting the domestic demand.

Leap to Lead
Inline with the development of EVs, AUTO has an important role as a provider of automotive components to take advantage of these opportunities amid the EV industry which has been the main focus since FY20, and is targeted to become a large industry in Indonesia in FY30F. AUTO has included EV charging products and is known to have been registered in the Official Gazette of Industrial Design, Directorate General of Intellectual Property, Ministry of Law and Human Rights. In the document, the product was submitted by the Development Division (EDC) of PT Astra Otoparts Tbk.

Recommendation BUY for AUTO with TP: IDR1,700
We initiate coverage on AUTO IJ with a BUY call and a target price of IDR1,700 (+43% upside), which implies 0.47x PBV and 3.89x EV/EBITDA in FY22E. AUTO is currently trading close to -1STD PBV of 3 years historical mean. We expect AUTO should gain a good momentum this year aligning with its plan on expanding EV charging stations in FY22E-FY23F followed by the public interest in the automotive sector during the commodity boom. 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).

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