Astra International: Buy; Rp58,100; TP Rp65,000; ASII IJ April 4W and 2W sales - DBS Vickers

Astra International’s (ASII) 4W sales volume declined by 30% m-o-m and 12% y-o-y to 31,724 units in April, while 2W sales rose 9% m-o-m and 22% y-o-y to 370,467 units. Its 4W market share has dropped 3% ppt m-o-m to 52% while 2W market share improved by 5% ppt to 53%. 4M11 sales are in line with our estimates, with 4W sales comprising 32% of our FY11F target and 2W sales 33%.

We start to see impact from the Japanese quake with the drop in sales for 4W units. Please note that ASII’s local content for 4W stands at c.65% while local content for 2W is at a much higher c.98%. Hence, the impact of the Japanese quake is more on 4W sales. We expect to see a recovery only after 2Q11. According to the latest information, Daihatsu has resumed normal production, after 20% production cut in April and half of May. Toyota is expected to only resume normal production by June, after a 50% production cut in April and May. We estimate that there should be 27K units lost due to the production cut. However, we believe Toyota and Daihatsu should be able to make up for more than 50% of the lost production as they head into late 3Q-4Q. This is because market pent up demand will continue to rise and the auto manufacturing units are expected to adapt to overtime production shifts.

After Astra’s 6% correction over the past 2 two days, the counter is currently trading at 14.2x FY11F PE, 25% lower than its peak valuation from last year. As we approach June, we expect concerns over the production disruption to start to ease and raise sentiment for the sector.

As such, we maintain our positive stance on the counter with a Buy call and target price of Rp65,000.