Toyota update by auto analyst Chris Richter - CLSA

Toyota held a hastily organized analyst conference call last Friday.
· They said that they did not see a return to normalized production in Japan until October; overseas until November.
· They cited supply chain problems as the issue and admitted that their suppliers had too many single-sourced components that were proving hard to replace.
· Toyota gave no indication of how the improvement would come -- e.g. fast at first with a long tail or slow, with a rapid ramp-up as October approached. Nor did they give an indication of the models affected.
· It is also difficult to judge to what degree these problems are Toyota-specific, or are industry-wide. Moreover, the thought of Toyota possibly under-promising and over-delivering is hard to ignore.

Impact to Astra (ASII IJ) by Sarina Lesmina:
Reported in the news that Astra Daihatsu Motor (ADM) cutting monthly production by 2,000 units (~20%) by cutting shifts from three to two. Separately,
TMMIN (Toyota Motor Manufacturing Indonesia) is said to be operational 3 days a week, with 50% capacity at least from now until 4 June. Both ADM and TMMIN will not lay off workers.
· Impact to Astra will be on lower car sales in the coming months as a result of lower production. Astra derives most of its auto earnings from distribution given its small stakes in the manufacturing arms.
· If monthly domestic car sales in Indonesia drops 25% from current level due to shortage of components, then we are looking at 56,250 units sold per month, from an average of 75,000 unit sold per month in 3M11. Assuming sales is at 56,250 units from May to Dec, then we are looking at a total car sales of 675,049 units this year, which is a 11% YoY drop.
· We believe Astra’s market share will remain stable at 56% given other distributors will also face similar issues.
· We currently forecast a 10% YoY drop in car sales. We maintain our forecast for now. There is upside if recovery is faster than expected. Every 10% recovery in car sales volume translates into 2-3% impact to earnings.
· We expect weakness today on Astra’s share price. For long term, Astra remains a compelling consumption story for Indonesia. Maintain our positive view on Astra.