COMPANY UPDATE|AUTOMOTIVE SECTOR

ASTRA INTERNATIONAL
ASII IJ / ASII.JK 18 MAY 2016

Softer recovery
Target Price: IDR6,550/share |Current Price: IDR6.325/share
HOLD
PREVIOUS:HOLD

We downgraded our 2016/2017 earnings estimates by 15.8%/10.6% mainly on the back of weak
performance of United Tractor as well as Bank Permata. While an encouraging picture was seen in Up/Downside : 3.6%
the auto division with margin improvement, we have also lowered our auto sales volume assump-
tions as we now expect a softer recovery in 2016 as volume improvement is likely to be deferred into
2H16 and 2017. We maintain our Hold recommendation with a lower target price of IDR6,550/
share. PRICE PERFORMANCE
9,000
Weak performance of United Tractor and Bank Permata
Astra booked a weak 1Q16 results mainly on the back of surprisingly much weaker margin slide 8,000
from United Tractor and much higher provision from Bank Permatas worsening NPL. The good
news is that United Ttractor is in very good financial condition with a net cash position of 7,000

IDR14.6tn (IDR3,915/share) that should enable it to weather the current weak operating
6,000
environment, while Bank Permata is about to be injected with fresh capital through rights issue.
5,000
Deferred auto recovery to 2H16 and 2017 May-15 Aug-15 Nov-15 Feb-16 May-16

We have seen traction in the auto division during the past two quarters; nevertheless, it has been ASII IJ JCI Rebase as of 15-May-15
somewhat softer than we have previously anticipated so far. Up to 4M16, wholesale car sales
volume still declined by 3.3% YoY while Astras volume was still down by 4.9% YoY. In the mean
time, 2W sales was also declined by 6.9% YoY in 4M16 with Astra was down by only 1.7% YoY as
the company was able to gain market share. As such, we believe that the recovery in the auto
business will be deferred into 2H16 and 2017, and thus assume a lower 3.0% YoY and 0.0% YoY of 52-week price range (IDR) 4,975-7,950
car and 2W sales volume growth in 2016 from 8.0% YoY and 5.0% YoY previously, with Astras car YTD change (IDR / %) 325 / 5.42
and 2W volume to grow by 4.3% YoY and 4.0% YoY from previously 9.1% and 8.0%. We, however, YTD JCI return (%) 2.96
remain positive on Astras auto division with sales volume to pick up in the upcoming months Market cap (IDRbn) 256,058.47
from rising consumer confidence and purchasing power, lower interest rate environment as well Free float (%) 49.85
as the contribution from the recently launched Toyota Sienta and the rumored introduction of
Daihatsu UFC in 3Q16.

Earnings downgraded
STOCK PERFORMANCE
We have downgraded our 2016/2017 earnings estimates by 15..8%/10.6% to factor in weaker
United Tractors margin, Bank Permatas lower contribution, softer auto sales, and stronger year-
1M 3M 12M
end and average exchange rate of IDR13,372/USD and IDR13,300/USD. Absolute 17.6% -9.6% -15.7%
JCI Return -2.0% -0.8% -9.5%
Maintain Hold recommendation
Relative -15.6 -8.2% -17.0%
While the outlook remains positive, we now expect a softer auto recovery in 2016, with growth
coming more toward 2H16 propelled by lower interest environment and better economic growth.
We have also seen some multi finance companies raising funds lately in anticipation of
improvement in new financing bookings. Nevertheless, all of those have been factored-in into our
revised SOTP-based target price of IDR6,550/share. Thus, we maintain our Hold recommendation. SHAREHOLDERS

EXHIBIT 1. Financial Summary Jardine Cycle & Carriage Ltd 50.11%

Public 49.89%
Year-end 31 Dec 2013A 2014A 2015A 2016F 2017F
Revenue (IDRbn) 193,880 201,701 184,196 179,262 196,364
EBITDA (IDRbn) 24,666 27,588 28,107 24,034 26,857
Net Profit (IDRbn) 19,417 19,191 14,464 15,578 17,908
Darmawan Halim
EPS (IDR) 480 474 357 385 442
darmawan.halim@bcasekuritas.co.id
EPS Growth (%) (0.0) (1.2) (24.6) 7.7 15.0
DPS (IDR) 216 216 179 154 177
PE (x) 13.2 13.3 17.7 16.4 14.3
PB (x) 3.1 2.7 2.5 2.3 2.1
EV/EBITDA (x) 12.2 11.1 10.6 12.1 10.6
Dividend Yield (%) 3.4 3.4 2.8 2.4 2.8
Payout Ratio (%) 45.0 45.6 50.0 40.0 40.0
ROE (%) 25.0 21.4 14.6 14.7 15.4
Net Gearing (x) 0.5 0.5 0.4 0.3 0.2

Please see disclosure and disclaimer at the back of this report

EXHIBIT 2. Earnings revisions
2016F +/-% 2017F +/-%
New Old New Old
Revenue 179,262 199,486 -10.1% 196,364 219,377 -10.5%
Gross Profit 34,452 39,419 -12.6% 38,392 43,008 -10.7%
Operating Profit 15,809 18,872 -16.2% 17,970 20,412 -12.0%
Net Profit 15,578 18,510 -15.8% 17,908 20,042 -10.6%
GrossMargin 19.2% 19.8% 19.6% 19.6%
Operating margin 8.8% 9.5% 9.2% 9.3%
Net Margin 8.7% 9.3% 9.1% 9.1%

Car Sales 1,043,690 1,094,354 -4.6% 1,148,059 1,203,790 -4.6%

Astra's Car Sales 532,282 558,121 -4.6% 585,510 613,933 -4.6%
Astra's Car Market Share 51.0% 51.0% 51.0% 51.0%

2W Sales 6,480,155 6,804,163 -4.8% 6,804,163 7,144,371 -4.8%

Astra Honda's 2W Sales 4,633,311 4,830,956 -4.1% 4,864,976 5,072,503 -4.1%
Astra Honda's 2W Market Share 71.5% 71.0% 71.5% 71.0%

Source: BCA Sekuritas

EXHIBIT 3. Sum of the part valuation

SOTP Valuation Methods Assumption Ownership 2016F

Automotive , excl. Astra Otopart PER 15.0x 110,960
Financial services, Excl. Bank Permata P/BV 2.0x 65,728
United Tractor DCF+Avg 5-yr PER 16,200 59.5% 35,954
Astra Agro Lestari Consensus TP* 19,100 79.7% 23,966
Astra Graphia 5-Yr DCF WACC 12.5%, TG 5% 76.9% 2,534
Astra Otopart PER 15.0x 80.0% 8,158
Bank Permata P/BV 1.5x 44.6% 11,930
Infra-Logistic -Others PER 15.0x 7,396
TOTAL EV 266,626
Net Debt Parent Only (1Q16) 1,708
NAV 264,918
# Of Shares 40,484
NAV/Share 6,544
NAV/Share (rounded) 6,550
Current Price 6,325
Upside (downside) 3.6%
Source: BCA Sekuritas

www.bcasekuritas.co.id 2
EXHIBIT 4. New car and motorcycle volume assumption
Assumptions 2013 2014 2015 2016F 2017F
Domestic Car Sales 1,229,904 1,208,019 1,013,291 1,043,690 1,148,059
Growth 10.2% -1.8% -16.1% 3.0% 10.0%
Astra Car Sales 654,558 614,169 510,224 532,282 585,510
Growth 8.2% -6.2% -16.9% 4.3% 10.0%

Domestic 2W Sales 7,743,879 7,867,285 6,480,155 6,480,155 6,804,163

Growth 9.6% 1.6% -17.6% 0.0% 5.0%
Astra 2W Sales 4,696,999 5,051,100 4,453,888 4,633,311 4,864,976
Growth 14.9% 7.5% -11.8% 4.0% 5.0%

Astra's Car Market Share 53.2% 50.8% 50.4% 51.0% 51.0%

Astra's 2W Market Share 60.7% 64.2% 68.7% 71.5% 71.5%
Source: BCA Sekuritas, Company

EXHIBIT 5. Improvement seen in recent monthly sales volume

120,000 60% 800,000 90%

700,000
100,000 55% 80%
600,000

80,000 50% 70%

500,000

60,000 45% 400,000 60%

300,000
50%
40,000 40%
200,000
40%
20,000 35% 100,000

- 30%
- 30%
Sep-14

Sep-15
Dec-14

Dec-15
May-14

May-15
Jul-14

Jul-15
Oct-14

Oct-15
Mar-14

Mar-15

Mar-16
Apr-14

Apr-15

Apr-16
Feb-14

Feb-15

Feb-16
Aug-14

Aug-15
Jan-14

Jan-16
Nov-14

Jan-15

Nov-15
Jun-14

Jun-15
Mar-14

Mar-15

Mar-16
Apr-14

Apr-15

Apr-16
Feb-14

Feb-15

Feb-16
Aug-14

Aug-15
Jan-14

Jan-15

Jan-16
Nov-14

Nov-15
Sep-14

Sep-15
Jun-14

Jun-15
Dec-14

Dec-15
May-14

May-15
Jul-14

Jul-15
Oct-14

Oct-15

Car Sales Astra's Car Sales Market Share Motorcycle Sales Astra Honda Market Share

Source: BCA Sekuritas, Company

EXHIBIT 6. Rolling Forward PE-band

(x ) IDR
IDR
25.0 10,000

23.0 9,000

Avg PER + 2 Std Dev

21.0 20x
8,000

19.0 Avg PER +1 Std Dev 18x

7,000
17.0 16x
Avg PER
6,000
15.0 14x

Avg PER -1 Std Dev 5,000 12x

13.0

11.0 Avg PER -2 Std Dev 4,000

9.0 3,000

Source: BCA Sekuritas

www.bcasekuritas.co.id 3
EXHIBIT 7. Financial Summary
Income Statement Balance Sheet
Year-end 31 Dec (IDRbn) 2013A 2014A 2015A 2016F 2017F Year-end 31 Dec (Rp bn) 2013A 2014A 2015A 2016F 2017F

Revenue
Automotive 106,222 105,398 93,952 91,947 101,108 Cash & deposits 18,819 21,179 27,586 22,025 26,670
Financial services 13,867 15,788 17,281 18,058 19,731
Other current asset 69,533 76,062 77,575 73,423 76,693
Agribusiness 12,675 16,306 13,059 14,448 15,693

Information tecnology 2,261 2,282 2,655 3,046 3,513 Net fixed asset 58,844 61,336 58,545 58,946 59,513
Heavy equipment 51,012 53,142 49,347 43,545 47,690
Other asset 66,798 77,450 81,729 86,272 93,581
Others 7,843 8,785 7,902 8,218 8,629

Total 193,880 201,701 184,196 179,262 196,364 Total asset 213,994 236,027 245,435 240,666 256,457

% growth 3.1 4.0 (8.7) (2.7) 9.5

ST debt 12,854 10,586 11,975 9,978 8,924

COGS (158,569) (162,892) (147,486) (144,810) (157,972)
Other current liabilities 58,285 63,655 64,267 59,264 62,957
Gross Profit 35,311 38,809 36,710 34,452 38,392

Operating Profit 18,603 20,163 17,212 15,809 17,970 LT debt 27,120 32,651 34,447 27,105 27,169

EBITDA 24,666 27,588 28,107 24,034 26,857

Other LT Liabilities 9,547 8,948 8,213 8,406 8,604
% growth (1.0) 11.8 1.9 (14.5) 11.7
Minority interest 22,250 24,693 24,490 25,525 26,738

Net int inc/ (exp) (166) 151 145 (18) 266 Total Liabilities 107,806 115,840 118,902 104,752 107,653
Other inc/ (exp) 2,789 499 (2,194) 1,413 1,541
Shareholders Equty 83,938 95,494 102,043 110,389 122,066
Equity in Earnings Associates 6,297 6,245 4,467 4,660 5,402

Pre-tax Profit 27,523 27,058 19,630 21,863 25,179

Key Ratios 2013A 2014A 2015A 2016F 2017F

Tax (5,226) (4,927) (4,017) (4,215) (4,845)
Gross Margin (%) 18.2 19.2 19.9 19.2 19.6
Minority Int. (2,880) (2,940) (1,149) (2,070) (2,426)
Operating Margin (%) 9.6 10.0 9.3 8.8 9.2
Extra. Items - - - - -
Net Margin (%) 10.0 9.5 7.9 8.7 9.1
NetProfit 19,417 19,191 14,464 15,578 17,908
EBITDA Margin (%) 12.7 13.7 15.3 13.4 13.7
% growth (0.0) (1.2) (24.6) 7.7 15.0

ROE (%) 25.0 21.4 14.6 14.7 15.4

Cash Flow ROA (%) 9.8 8.5 6.0 6.4 7.2
Year-end 31 Dec (IDRbn) 2013A 2014A 2015A 2016F 2017F

Net Income EBIT / Interest Expenses (x) 16.8 14.7 12.6 10.7 16.0
19,417 19,191 14,464 15,578 17,908
EBITDA / Interest Expenses (x) 22.2 20.1 20.5 16.2 24.0
Depreciation
6,063 7,425 10,895 8,226 8,887
Net Debt / Equity (x) 0.5 0.5 0.4 0.3 0.2
Change in WC
1,390 (3,445) 1,707 4,090 115

Cash Flow From Operation 26,870 23,171 27,066 27,895 26,910 Valuation 2013A 2014A 2015A 2016F 2017F
Capex PER (x) 13.2 13.3 17.7 16.4 14.3
(12,096) (9,917) (8,104) (8,626) (9,455)
PBV (x) 3.1 2.7 2.5 2.3 2.1
Others (13,134) (10,652) (4,279) (4,543) (7,309)
EV / EBITDA (x) 12.2 11.1 10.6 12.1 10.6
(25,230) (20,569) (12,383) (16,764)
Cash Flow From Investment (13,169)

Change in debts (2,844) 5,531 1,796 (7,342) 64

Dividends (8,630) (8,925) (8,817) (7,232) (6,231)

Others 17,426 3,152 (1,255) (5,712) 666

Cash Flow From Financing 5,952 (242) (8,276) (20,286) (5,502)

Source: BCA Sekuritas

www.bcasekuritas.co.id 4
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