Astra International (ASII, O, PT Rp79,200): 2Q11: Earnings Up by 28% YoY - Credit Suisse

ASII is our favourite stock in the market due to its strong corporate governance and robust business outlook, which are the reasons why the stock is trading at a premium, in our view. We believe consensus earnings upgrade for ASII is in the offing, as CS new earnings forecast is 7-10% higher than the Street. We remain as a buyer on ASII.

· Analyst Teddy Oetomo and Dian Haryokusumo maintain Neutral rating on ASII stock, but raise the SOTP-based TP by 1.5% to Rp79,200/share on slight earrings upgrade at the machinery division. The new TP implies 12% upside to the current price.
· ASII earnings were upgraded by only 1.0% for 2011-13, following 2-5% 2011-13 earnings upgrade on United Tractors (UNTR, O, PT Rp37,500) on robust machinery sales outlook.
· ASII 1H11 net profits came-in at Rp8.5 tn (+2% QoQ, +33% YoY) – accounting for 48% and 52% of CS and Street’s 2011 forecast: in-line.
· Teddy and Dian believe that ASII’s robust earnings outlook has been reflected in ASII’s implied TP valuation at 17.9x 2011 PE and 15.8x 2012.