Maintain Buy with lower TP of IDR6,000

In autos, as discussed in our previous Anchor Report, Shifting gears — the value chain mostly goes to parts, manufacturers, distributors and dealers. Indeed, Astra has consolidated most of its dealerships, while the remaining parts of the value chain are co-owned with other stakeholders (mostly Japanese partners, according to the company). We notice the drivers of Astra’s earnings since 2016-2023 have been the heavy equipment segment (UNTR IJ, Not rated) and fincos, and thus it could be a challenge for future earnings growth to be as strong as the historical level. We still like Astra given its strong dealership franchise in Indonesia and its historical strong track record of market share in 4W and 2W.

Breaking down Astra’s earnings – superb growth from heavy equipment and fincos

Consolidated net profit grew from IDR15tn in 2016 to IDR34tn in 2023, where IDR17tn of the IDR19tn earnings increase came from UNTR IJ (delta IDR10tn) and fincos profit (delta IDR7tn), while 4W business declined slightly and 2W increased slightly, in our view. We believe this is because the autos business is challenging across the value chain, particularly in the dealers segment.

Incoming competition in 4W and new segment in 2W

We are seeing more evidence that 4W electric vehicles are gaining market share (see Fig. 9), with BYD (1211 HK, Buy) gaining 2.5% market share in just two months — surpassing Hyundai (005380 KS, Buy) and Wuling (305 HK, Not rated) according to Gaikindo. In 2W, we are seeing more traction on the sales of electric bicycles (e-bikes) — a cheaper version of 2W, but they do not require license plates (pricing start at USD200 vs USD1,200 for a conventional motorcycle) — which would be a threat to low-segment motorcycles, in our view. Our observations suggest students in local schools are using e-bikes as a driving option (see Fig. 3).

Trim earnings and cut TP to IDR6,000 but maintain Buy, implying 19% upside

We cut 2024F/2025F earnings by 3.6%/4.6% to reflect the hiccups in the autos segment. Our TP of IDR6,000 is derived from an unchanged SOTP valuation (implying 2024F P/E of 7x – previously 8x), finco (target 2024F P/B of 2.2x), the value of its listed subsidiaries using Bloomberg consensus TPs discounted by 30%, toll roads (NAV), and also equity investments using book value. Our TP implies 8.1x 2024F forward P/E (currently: 6.8x P/E). Downside risks: 1) faster-than-expected sales of ex-Astra brands (especially Chinese’s), 2) sluggish purchasing power thus hurting local sales, 3) failure to maximize cash utilization, and 4) margin pressure from auto value chain.

Fig. 1: ASII autos ASP and profit trends

 

Fig. 2: Valuation methodology

(IDR bn)	Stake	Valuation	NAV	Holding disc.	SOTP	%SOTP
Automotive	100%	Target P/E 7x	75,062	-	75,062	31%
Finco	100%	Target P/B - ROE	64,335	-	64,335	26%
UNTR	60%	Consensus TP	106,880	30%	44,515	18%
AALI	80%	Consensus TP	13,215	30%	7,371	3%
Toll road	100%	NAV	22,604	-	22,604	9%
Equity investment	100%	Book Value	29,959	-	29,959	12%
SOTP					243,847
#shares, bn					40.5
NAV/share, IDR					6,000
Notes: Automotive (4W, 2W, AUTO), Finco (ASDF, FIFA, Buana), Others (Toll road, Property)

 

Fig. 3: EV Bike seen in local school in Indonesia

 

Fig. 4: ASII's ROE %

 

Fig. 5: ASII’s revenue and margin by segment

 

Fig. 6: EV sales and penetration trends

 

Fig. 7: Automotive segment operating profit

 

Fig. 8: ASII profit breakdown by segment

 

Fig. 9: GIIAS (Gakindo Indonesia International Auto Show) 2024 booking sales performance – BYD for the first time managed to book 9% share in the first time showcase

 

Fig. 10: Wholesales (WS), retail sales (RS) and inventory days trends

 

Fig. 11: Retail sales market share 3MMA %

INVESTMENT RATINGS
A rating of ‘Buy’, indicates that the analyst expects the stock to outperform the Benchmark over the next 12 months. A rating of ‘Neutral’, indicates that the analyst expects the stock to perform in line with the Benchmark over the next 12 months. A rating of ‘Reduce’, indicates that the analyst expects the stock to underperform the Benchmark over the next 12 months. A rating of ‘Suspended’, indicates that the rating, target price, and estimates have been suspended temporarily to comply with applicable regulations and/or firm policies. Securities and/or companies that are labelled as ‘Not Rated’ or ‘No Rating’ are not in regular research coverage. Benchmark is Indonesia Composite Index (‘IDX Composite’). A ‘Target Price’, if discussed, indicates the analyst’s forecast for the share price with a 12-month time horizon, reflecting in part of the analyst’s estimates for the company’s earnings, and may be impeded by general market and macroeconomic trends, and by other risks related to the company or the market in general. 

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