Astra International, Rising competition in a growing market, Nomura

Astra’s best selling cars face
real competition for the first
time since their launch in 2004
Since their launch in Jan 2004, we think the best-selling Toyota
Avanza/Daihatsu Xenia have faced no real competition in their segment.
However, we expect this to change this year, with the launch of Suzuki
Ertiga and the upcoming launch of Nissan NV200/Evalia in June ‘12.
Rising competition in a growing market is a clear emerging theme, in our
view.


Catalysts
 Suzuki Ertiga and Nissan NV200/Evalia are credible competitors to the
best-selling Toyota Avanza/Daihatsu Xenia, which account for around
55% of Astra’s car sales.
 The automobile (4W) business accounted for 24.5% of Astra’s
consolidated earnings in 2011. The other business units related to
automotive (4W + 2W) are component parts (5.4% of 2011consolidated
earnings) and financial services (14.2% of 2011consolidated) earnings.

Action
 We still prefer Indomobil (IMAS IJ, Buy), a credible new competitor, to
Astra International (incumbent). Given the high market share of Toyota
(35%) and Daihatsu (16%), we believe it is more likely for Astra sales to
run behind market growth rate over the next three years.

Valuation and recommendation
We reaffirm our Neutral rating. Despite a fast-growing (and yet cyclical)
automotive industry, there are headwinds from rising competition and
loan-to-value regulation. Valuation is not particularly cheap as Astra
currently trades near its forward NAV of IDR81,800/share and our target
valuation of 15x FY2013F P/E.

Download file : ASII 20120423