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1、HSBCGlobal ResearchEquitiesAutomobilesBy: Colin Davis and Rahul BhatiaApril 2019 research.hsbc SpOtl ightIndonesian Autos -Under the hood A deep dive into the mechanics of Indonesias 2-wheeler and 4-wheeler marketsWe conduct an in-depth market sizing and statistical analysis of the 4W and 2W markets
2、Our two consumer surveys provide insight into brand perception and consumer preferencesWe introduce new market growth forecasts to2020and upgrade Astra International to Buy from HoldDisclosures & Disclaimer: This report must be read with the disclosures and the analyst certifications in the Disclosu
3、re appendix, and with the Disclaimer, which forms part of it.MCI (P) 065/01/2019 MCI (P) 008/02/2019Our survey found that buyers are optimisticBoth surveys found that buyers are optimistic about their financial circumstances in 2019.Over 90% of respondents in both signalled that they were either opt
4、imistic or very optimistic about 2019. Both surveys also found that wage increases were the single most important factor influencing their decision to buy.Exhibit 12: 4W survey: Do you feel optimistic about your financial circumstances improving in 2019?Exhibit 13: 4W survey: Reason for buying a veh
5、icle (share of responses in the top 3)Buyers express a preference for Astra Very optimisticOptimistic NeutralPessimisticSource: HSBC, TolunaWage increase by about 10% Wage increase by about 20% Wage increase by about 30%+New model launchUpgrade to a better modelReplace an old 4- wheeler Need an addi
6、tional PVPurchase first carFuel prices downOther reasonsSource: HSBC, TolunaBuyers expressed a preference for Astra dealerships, but mostly because of location rather than the service they provide.Exhibit 14: Would you prefer to use an Astra dealership.Exhibit 15: .if so why?Source: HSBC, Toluna NoI
7、 dont know Yes Convenient locationPurchase a vehicle in past Good reputation Good promotionsOther reasonsSource: HSBC, TolunaBuyers tended to be satisfied with their last purchase.0% 0%Respondents signalled a shift in preference toward Honda and MitsubishiExhibit 16: 4W survey: How satisfied are you
8、 with the purchase? Extremely satisfiedQuite satisfied NeutralNot very satisfiedExtremely dissatisfiedSource: HSBC, TolunaNevertheless, there was a noticeable shift away from what they own today toward new brands and models. The most significant shift was toward Honda and Mitsubishi at the expense o
9、f Toyota and Daihatsu. The charts below are better read in the context of the full survey results, beginning on page 42, as the survey respondents displayed some initial sample bias toward Honda and Toyota.Exhibit 17: What brand of 4-wheeler are you likely to buy this year?Exhibit 18: What model are
10、 you likely to buy? HondaToyota Mitsubishi DaihatsuSuzuki Others XpanderAvanzaErtiga OthersSource: HSBC, TolunaSource: HSBC, Toluna2019 may see upgrading2019 may see upgradingFor 2-wheelers, it was harder to discern a noticeable trend toward or away from Honda. By model, respondents signalled that t
11、hey intended to purchase a new Honda at about the same rates of their present ownership. More obvious was an intention to upgrade to higher ASP bikes.Exhibit 19: What model did you buy?Honda BeatExhibit 20: What model are you likely to buy?Honda BeatHonda VarioYamaha MioHonda VarioYTD sales of 4-whe
12、elers have been weak, while sales of 2- wheelers have been strong Honda ScoopyYamaha V-Ixion Honda Supra X Honda Revo10%7% 8% Yamaha Soul GT Yamaha MX-King Honda CB150R21% Yamaha Mio Honda ScoopyYamaha V-IxionHonda CB150R StreetFireStreetFire Others OthersSource: HSBC, TolunaSource: HSBC, TolunaOur
13、outlook and forecasts versus IHS, Gaikindo, AISI, and FitchThe market for 2-wheelers has been exceptionally strong in the months of January and February, and the market for 4-wheelers weak. In the 4-wheeler market, retail sales declined by 9% yoy while wholesale fell 14%. Astras market share was som
14、ewhat weaker in retail (49.8%) compared to wholesale (51.3%), a result of de-stocking by Honda. The 2-wheeler market in contrast rose 19% yoy. Honda sales grew by 24% yoy, Yamaha by 2%, Suzuki by 67% and Kawasaki by 20%. To summarise, 4-wheeler sales disappointed, particularly for Astra, while 2-whe
15、eler sales were exceptionally strong, in particular for Astra.Exhibit 21: Passenger vehicle, commercial vehicle and 2-wheeler growth yoy% y/y Commercial vehicles% y/y Passenger vehicles% y/y 2WSource: Gaikindo, AISI2W sales did well in spite of palm oilTwo-wheeler sales did well in 2018, rising 8% d
16、espite weakness in palm oil prices. Palm oil prices have rallied only modestly in 2019. Coal prices, and in particular low calorific coals, have also rebounded from late year lows, but the degree of rebound by itself does not explain the strength of motorcycle sales.Exhibit 22: Indonesian palm oil y
17、oy change Indonesian palm oil future 1st month yoy%Source: BloombergThere were a number of offsets to weak commodity prices, most importantly social assistance spendingThis reporfs statistical work would have us look at lending rates, CPI and social assistance spending as alternative answers for 2-w
18、heeler strength. A decline in lending rates throughout 2017 and 2018, higher coal prices in 2017 (leading to higher activity in 2018), and an increase in social assistance spending would have all worked to offset lower agricultural prices. Social assistance spending, which is a much more efficient w
19、ay of putting money into the pockets of those who need it than subsidies, has been particularly impactful, in our opinion. Social assistance is up 70% yoy in the first two months of the year. Spending on personnel has also had a significant role. This is a much bigger percentage of the federal budge
20、t, almost four times that of social assistance. This can be spent on full-time or part-time workers. This too has been surging in the run-up to the national election. When we average these two categories of government expenditure over three months, the potential impact to lower and middle income Ind
21、onesians is clear.Exhibit 23: Social assistance and personnel spending (3-month average)Social Assistance (LHS)Personnel & Social Assistance (RHS)Source: C日C, HSBCWe think a high level of government spending is unsustainableWe doubt this surge in spending after the election is sustainable. The budge
22、t for social assistance spending is up 26% yoy. Spending on personnel is budgeted to increase just 4% yoy. We find it hard to imagine that activity in areas of the country impacted by coal prices will increase meaningfully in 2019, and palm oil prices have yet to excite us. Economic conditions in th
23、e country are better but we think the sales of 2-wheelers are very likely to slow. We forecast that 2019 sales will nevertheless end the year up 9%, implying mid single digit growth for the remainder of the year. This compares to a forecast by the Indonesian Motorcycles Industry Association of flat
24、growth yoy in 2019. We forecast 2020 sales will rise by 5%.We believe 2019 4-wheeler sales will stage a material recovery and end the year with positive growth compared to 2018.The causes of 4W weakness have been a mysteryNewspapers in Indonesia are replete with articles asking why 4-wheeler sales h
25、ave been so weak year to date. We have yet to see a satisfying answer. It is true that the Xpander, Rush and Terios were only recently launched at this point a year ago, but January and February were not months of abnormally high sales. Indeed, with the exception of June 2018 during the countrys fes
26、tive period, all subsequent months recorded higher retail sales than January and February. Meanwhile, 4- wheeler sales, which over the last several years have tended to move more or less in line with retail sales, have sharply diverged over the last several months.PV Sales (LHS)Retail Sales (RHS)Sou
27、rce: Bloomberg, CEICWe too fail to find a compelling reason for this years weakness. We think sales are likely to reboundThe statistical analysis in this report suggests we look at FX, lending rates, pump prices, CPI, and GDP for some intuition. The IDR tends to be a leading indicator, and for much
28、of 2018, the currency was under substantial external pressure. Lending rates were beneficial in our calculus, while pump price remained firmly grounded. The CPI fell, which should be mildly negative, while GDP growth was steady. Our conclusion, like that of the pundits, is that it isnt clear why sal
29、es fell as much as they did. We would consequently conclude that they are unlikely to stay depressed. Economic growth is steady, retail spending strong, and government expenditure constructive. From a model perspective, the Toyota Avanza and Daihatsu Xenia have recently received facelifts, as have t
30、he Honda Mobilio and Suzuki Ertiga.We forecast 2019 4W sales growth of 3.7%, compared to IHS at 5%, Fitch at 6%, and Gaikindo at -4.3%.We upgrade Astra2W and 4W profitability is more balanced than is typically recognised2W and 4W profitability is more balanced than is typically recognisedThe balance
31、 in Astras portfolio between 2-wheelers and 4-wheelers is more balanced than is often recognised. We estimate both generate about half the companys automotive profitability, after factoring in financial affiliates and stakes in manufacturing entities. There is more leverage to 4-wheelers in the deal
32、ership business given its higher share of revenue. That may partly explain why the market has historically been more focused on 4-wheelers than 2-wheelers. As if not more important has been the implications to the thematic investment case. Four-wheelers are supposed to grow faster than 2-wheelers an
33、d drive Astras share price for years to come. Weakness in 4-wheeler sales sows doubts about the longer term investment case. We think strong 1Q19 2-wheeler sales will provide an important ballast to profitability in the short term, but view a rebound in 4-wheeler sales as critical for the remainder
34、of the year as 2-wheeler sales slow. More importantly, we would expect any rebound in 4-wheeler sales to be a key catalyst for the companys stock price.We forecast that automobile results will improve in 2019Astra InternationaPs share price has declined by 7% YTD, compared to a rise of 5% in the Jak
35、arta composite market index. The company reported its full year 2018 results on 27 February. 4Q18 results were sequentially weaker driven by higher costs. However, we believe most of these additional costs were transitory in nature (see 4 weaker quarter, but perhaps trans让on/、27 February 2019). We a
36、lso think sales are likely to rise materially through the remainder of 2019 from a weak start to the year in January and February, as we discuss in the main body of this report. While we think Astra market share will fall from 50.8% in 2018 to 50.4% in 2019, we think sales will increase for the full
37、 year by 3%, a remarkable recovery from the 8% yoy decline in the first two months of the year. In the next two years, we forecast an increase in the automotive gross margin of 0.2ppt and an increase in the automotive EBIT margin of 0.8ppt. Net margins are less meaningful given a large contribution
38、from associates; nevertheless, we anticipate automotive net profit rising by 17% each in 2019 and 2020.We calculate a stub PE by removing listed affiliates and adding parent level net debtWe believe that the markets pessimism on the Indonesian auto outlook has been incorporated into Astras valuation
39、. When we strip out the companys listed affiliates, add in parent level net debt, and then back out the implicit multiple on forward earnings, the stub trades at a 10% discount to its 5 year median.Exhibit 25: Astra International unlisted stub valuation - one year forward P/E25.0 n20.015.010.05.0Jan
40、-14 Jun-14 Nov-14 Apr-15 Sep-15 Feb-16 Jul-16 Dec-16 May-17 Oct-17 Mar-18 Aug-18 Jan-19Source: HSBC, Refinitiv DatastreamLower calorific coal prices have rebounded stronglyUnited Tractors (UNTR IJ, IDR26,050, Buy) contributes approximately 25% of our fair value estimates for Astra. The companys stoc
41、k has de-rated since the imposition of a temporary import ban on Indonesian coals. Despite rising coal prices and a raft of positive news since then, the stock is mired near two-year lows. The stock price has declined by 25% in the last five months despite the price of lower calorific coals rising a
42、pproximately 25%-30% and several months of encouraging operational updates, in particular in the contract coal mining business.Jan-14 Jun-14 Nov-14 Apr-15 Sep-15 Feb-16 Jul-16 Dec-16 May-17 Oct-17 Mar-18 Aug-18 Jan-19Source: HSBC, Refinitiv DatastreamFor Astra International, our TP of IDR9,200 impli
43、es an upside of 20%. There are three key reasons for our optimism:Our 2019 and 2020 net income estimates are 5% and 7% ahead of consensus, respectively.We value the Automotive division (excluding Astra Otoparts) at the 5-year median PE multiple of 15.Ox. Based on our stub valuation, it current trade
44、s at 13.7x. We believe the company will re-rate as industry auto sales improve.We value United Tractors at our target price of IDR39,700. This implies an upside of 52% on the current share price.We maintain our Buy rating on Astra Otoparts with a revised TP of IDR1,970 (earlier IDR1,940) as we incor
45、porate 2018 results in our model and also our latest 4-wheeler and 2-wheeler sales forecasts in our Astra Otoparts model.In the table at the bottom of the page, we summarise our changes for the three companies.Why you should read onThis report contains a plethora of data and a large amount of useful
46、 statistical data that we think will help the reader frame the market and the factors that influence it. The report also contains summary overviews of two proprietary consumer surveys. We are confident there is much in this report that will be difficult to find elsewhere.Exhibit 27: Summary of chang
47、es in rating, target price and estimatesChange in sales (vs old estimates)CompanyTicker Current price Old TP New TP Old Rating New Rating Upside/downside2019e2020eChange in earnings (vs old estimates) 2019e2020eAstra International ASIIIJ7,6757,5009,200HoldBuy19.9%5.34.5Astra OtopartsAUTO IJ1,6151,94
48、01,970BuyBuy22.0%1.61.9United TractorsUNTR IJ26,05039,70039,700BuyBuy52.4%-Source: HSBC. Prices in IDR as of 10 April 201911.49.62.6-0.1Sizing the market Predictions for strong growth this decade were ultimately off the markWe use academic literature and our own modelling to provide some basic intuition about how much the 2-wheeler and 4-wheeler markets could grow 4W penetration should rise with increasing