United Tractors: Buy; Rp22,400; TP Rp27,200; UNTR IJ Update on quake impact - DBS Vickers

We spoke to ASII management yesterday to get further updates on the impact from the earthquake. ASII and its Japanese principals are still assessing the damage caused by the quake. The monetary value cannot be quantified at this stage. However, the management informed us that the impact should be limited for ASII on the export side. Astra exports Daihatsu Gran Max to Japan , which comprise only c.10% of Astra’s total exports, or 2-3% of total volume.

We believe the bigger impact on Indonesia ’s auto industry as a whole would be supply chain disruption. With 90+% domestic cars affiliated with Japanese principals, most Indonesia auto manufacturers are dependent on some imported components from Japan . The impact is still unknown and Astra is looking for alternatives or substitutes to prepare for any possible disruption. For now, we maintain our Buy call and target price of Rp65,000 for ASII.

On the UNTR front, United Tractors indicated that Komatsu Japan is focusing on recovery steps but the speed will depend on external factors such as power supply, logistics, component readiness, and infrastructure. Based on preliminary estimates, UNTR holds 2 months of inventory of ready to sell equipment. We are uncertain regarding the impact on supply to the domestic market. O ur sensitivity analysis indicates that every 100 units higher (lower) sales, earnings would increase (decrease) by 0.7%. Note that Komatsu contributes 52% of FY11F revenue, with 40% from mining contracting (Pama), and 8% from coal mining. We maintain our Buy call TP Rp27,200 and earnings forecast for now.