ASII - Solid based to enter 2H23

1H23 earnings beat ours and street’s expectation, backed by solid growth across the business boards. We expect to see continuing solid results in the following quarters driven by better auto sales growth, continuing solid financial services demand and HEMCE solid business in 2H23. Astra 1H23 solid result has made ours and streets ‘23F earnings for Astra now looks more conservatives and hence we expect FY23 earnings will likely to continue arrives above KBVS and consensus expectation. Maintain BUY with SOTP target price of IDR7,350, equal to 10.9 ‘23F P/E (far below average mean), while currently trading at 10.1x ‘23F P/E or slightly above its -1SD 10-year historical mean of 9.7x. 1H23 beats ours and street expectation ASII 1H23 revenue grew by 13% yoy to IDR 162.4tn, with core earnings stood at IDR17.3tn or 20% yoy higher and came better than anticipated vs ours and street expectation at 64%/58%. Adding the FV adjustment on ASII investment (IDR3.7tn in 1H22 and IDR0.1tn in 1H23), PATMI dropped by 4% yoy (KBVS ‘23F for ASII: -5.6% yoy). In all, we like 1H23 net profit achievement which mainly driven by business as usual. In another word, assuming the declining FV will persist and EBIT growth will continue to solid, FY23 earnings likely could continue arrives within our and consensus expectation. Additionally, on the scenario of the adjustment number will get higher, then ‘23F PATMI could arrives much higher, ceteris paribus. Solid growth across business segment On the segmentation basis, Astra saw solid growth across the business board with auto segment noted the highest growth of 33.3% yoy and accounted around 32.9% of total 1H23 earnings, thanks to better sales volume. HEMCE business, taking the largest chunk of Astra earnings (39.8%) and grew 11.2% yoy. Its financial arms recorded 31.8% yoy of growth underpinned by the continuing industry recovery momentum, bringing the portion to total earnings equal to 22.1%, or 200bps higher year on year. We believe ‘23F earnings will continue to be driven by its three major growth drivers, which will contribute around 34%, 19% and 41% for its auto, financial and HEMCE segment. ‘23F PATMI at IDR27.3 tn looks more conservative Better than anticipated 1H23 earnings results have made both of ours and cons. ‘23F earnings figure for ASII looks more conservative. Assuming 2H23 PATMI will arrives at the same amount, then ‘23A earnings will arrives far above ‘23F. Even assuming 2H23 earnings squeezed by 25.5% yoy (happened in FY20 PATMI, when covid strikes), ‘23A earnings still arrive above our ‘23F and will came in-line with ‘23F street expectation. We maintain our ‘23F earnings for Astra and have incorporated weakening agribusiness segment, stable HEMCE business growth and continuing auto demand as well as steady consumer demand loan appetite. Expect continuing solid 2H23 results from 3 major growth drivers We expect cash spending on 4W will continue backed by continuing discount and others promotion as competition among brand getting stiffer, while limited loan repricing should benefit and likely to maintain auto loan demand in 2H23. Worth noting that Jun23 auto sales at 505,985units has reached 52.3% (Gaikindo 48.2%) of our ‘23F for 4W total volume sales. We believe Astra will maintain its position as market leader with ‘23F market shares of 54.5% (1H23 Astra commanding the landscape competition with market shares of 54.9%). On its financial arms, we believe growth on consumer financing will remain intact and likewise for its insurance business and likewise for its HEMCE segment which we expect will continue to book solid MC business, with resilient coal volume as well as benefiting from higher coal ASP. Our main concern remains lies on its agribusiness segment which we expect will continue to get pressures from lower CPO prices. Maintain BUY with target price of IDR7,350 Our intrinsic value for ASII is IDR7,350 which derived from SOTP. Currently ASII traded at 10.1x ‘23F P/E or slightly above -1SD 10-year historical mean of 9.7x. Risks to our call: a) lower-thanexpected 4W sales, consumer financing growth and coal sales volume, b) lower-than-expected HEMCE segment performance, and c) higher than expected auto loan yield affecting demand.