ASII - Persistent recovery

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Car sales have shown a recovery. It should improve further despite the lower incentive for certain cars. Motorcycle sales may weaken in Jul, but we foresee a recovery in Sep as the PPKM has been relaxed. We maintain our TP at IDR 6,500 and reiterate our Buy call.

Aug 21 sales. Aug 21’s domestic car sales grew by 25.0% mom, mostly driven by ASII products such as Toyota (37.4%), Daihatsu (55.2%) and Isuzu (25.1%). Meanwhile, non-ASII, Suzuki and Nissan also posted strong mom growth at 59.7% and 23.0% mom, respectively. As such, ASII’s 8M21 market share increased to 53.3% from 51.4% as Toyota’s market share rose to 32.1%. Mitsubishi also posted larger market shares at 16.4% in 8M21 vs. 14.7% in 8M20, at the expense of Honda.

PPnBM incentive was lowered to 25% in Sep-Dec 21. The 0% PPnBM incentive had played a role in driving the sales in Aug 21, as Toyota has the largest number of models that are entitled to the incentive (28 variants of 6 models). On the other hand, Honda has only a few models that are entitled to the incentive, posting declining market shares. Hence, the lower incentive to 25%, starting from Sep, will affect the car sales and may decline in Sep. However, it should remain on the recovery track as the PPnBM incentive is still in place, albeit at a lower percentage.

Motorcycle sales also showed a recovery. Domestic motorcycle sales have also shown a recovery although there is no government incentive for the segment. Jul’s motorcycle sales reached 376K units (-12.1% mom, +28.9% yoy), bringing the 7M21 sales to 2.8M units (+31.2% yoy). The decline in Jul was caused by the imposition of Emergency PPKM, hence Aug 21 sales may also be lower compared to Jun, but we believe it will recover in Sep. ASII reported that its motorcycle sales grew by 29% to 1.9M units in 1H21 or 77% of market shares.

Maintain Buy The declining new Covid-19 cases, relaxation of PPKM and the government incentive for MSME should accelerate the auto sales recovery. We maintain our forecast and our TP at IDR 6,500 (15.3x implied FY21 PE). We reiterate our Buy call.

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