Astra International, Sell into strength, Credit Suisse

● ASII’s 4Q11A earnings were up by 9% YoY, down 10% QoQ, with
FY11A net income up 24% YoY (3% ahead of consensus and 3%
below our expectations).
● ASII’s auto and agri divisions’ FY11A earnings came 2.8% and
6.8% below our expectations, supported largely by heavy
equipment (UNTR). ASII’s FY11A results provide further evidence
indicating that much of its performance has been attributed from
UNTR. Net net, we tweak up FY12E earnings forecasts by 1%
and FY13E earnings forecasts down by 1%.
● We see the risk of technical rebound as: (1) ASII’s share price has
dropped 7.2% YTD, 13.5% from YTD peak and underperformed
JCI by 8.1%YTD, (2) ASII is looking to do 1:10 stock split.
● We prefer to wait for potential further share price correction
particularly given potential fuel price hike, which we believe will
offer better entry points. We maintain our target price of
Rp65,890, based on SOTP, implying 14x 12E P/E.


FY11A in line: ASII’s 4Q11A earnings up by 9% YoY, down 10%
QoQ, with FY11A net income up 24% YoY, in line with ours and
consensus’ expectations (3% ahead of consensus and 3% below our
expectations).

Supported by UNTR: ASII’s auto and agri divisions’ FY11A earnings
came 2.8% and 6.8% below our expectations with FY11A earnings
supported largely by heavy equipment (UNTR) which came 4.3%
ahead of our forecasts. Similarly, auto and agri divisions’ FY11A
revenues came 1% below our expectations with heavy machinery
surpassed our forecasts by 5%. ASII’s FY11A results provide further
evidence indicating that much of its performance has been attributed
from UNTR. Net net, we tweak up FY12 earnings forecasts by 1% and
FY13 earnings forecasts down by 1%.

 Sell into strength: We see the risk of technical rebound as: 1) ASII’s
share price has dropped 7.2% YTD, 13.5% from YTD peak and
underperformed JCI by 8.1%YTD, 2) ASII is looking to do 1:10 stock
split. While it has no fundamental impact, stock splits are often
associated with temporary stock price rebounds. We will be selling
into the rebound as subsequent news flow are likely to be soft given:
(1) looming subsidised fuel price hike, (2) more new entrants eyeing
the mid-segment MPV and (3) the central bank is looking to set a
minimum down payment on auto loans.

Maintain UNDERPERFORM: Given recent underperformance,
valuations of ASII are now fairer but the stock remains trading at the
higher end of historical range and we see risk of news flow that may
hamper sentiment ahead. We prefer to wait for potential further share
price correction particularly given potential fuel price hike, which we
believe will offer better entry points. We maintain our target price of
Rp65,890, based on SOTP, implying 14x 2012E P/E.

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