Automotive Sector - Sales volume pressure continues

KBVS Update
Thursday, 30 May2024

Automotive - Sales volume pressure continues
(Maintain Overweight)

* Indonesia’s auto industry continues to record poor sales volume. Despite the expectation that Lebaran event momentum will boost the May ‘24 auto sales figure, both 2W and 4W sales in '24F are likely to remain under pressure, especially following the latest 25bps 7DRR hike.

* Total 2W sales grew flat (-1.1% yoy) while on a monthly basis it recorded solid growth of 18.3% yoy and -28.2% MoM (better vs. -44% MoM in April 23). In all, 4M24 2W sales volume came in within our ‘24F for motorcycle sales at 34.5% vs. 34.9% last year.

* Regardless of the poor growth, we believe Astra's market share will continue to dominate the industry landscape competition. With an average of 55.5% of M/S in Jan24-Apr24 and 56% in 4M24, we forecast Astra M/S at 55.4% in ‘24F.  On non fuel car update, we believe the EV and hybrid car trend will continue. Yet, we think it is unlikely for the non-fuel car to control the industry's total sales. Main key factors (that we believe would not happen in the near term) to rule the 4W industry are: (1) well developed infrastructure charging station (2) smaller price gap (3) cheaper battery replacement (4) consumer behaviour and life style changes.

* Softer DXY appreciation, clearer higher for longer sentiment, continuing discounts and various promotions from dealers as well as car loan providers will overall underpin industry growth. Lastly, the consumer segment tends to be more sensitive to interest rate hikes. As such, we expect slower transmission of the BI rate hike to loan yield which could add more catalyst to the sector. Maintain Overweight on automotive industry and BUY for ASII SOTP TP of IDR7,350 (8.8x ‘24F PE), which currently trades at 4.9x ‘24F PE, far below its -2SD of 6.7x.

Regards,
Akhmad Nurcahyadi - KBVS Research