Aapico Hitech

Aapico Hitech Plc (AH)
 

A much deeper loss than modeled: AH reported a 4Q11 net loss of Bt664m, a reversal from the 3Q11 net profit posted for Bt136m. The loss was Bt300m deeper than our estimate and the consensus, mostly because the firm booked Bt289m in asset impairments for the quarter. As such, AH posted a loss of Bt390m for FY11 against FY10 earnings of Bt357m.      
Results highlights: Revenue plunged by 43% YoY and 38% QoQ to Bt1.9bn. The 4Q11 top-line slump was due to the fact that AH’s main plant in Hitech Industrial Estate, Ayudhya Province, was flooded out and orders for its three operational facilities in Rayong and Chonburi provinces plummeted when major car makers—Toyota, Honda and Nissan—temporarily halted production because of shortages of component parts (Honda’s assembly plant in Ayudhya Province was also inundated). EBITDA margin dived into the red at -10.1% (from 4.1% in 3Q11). Likewise, net margin was -35.1% (4.5% the previous quarter).
Outlook: We anticipate a 1Q12 profit of Bt90m, as AH’s main plant in Ayudhya Province (which was inundated from Oct 14 through to Nov 25) resumed full operations in February. Management guides that it expects insurance to fully cover the cost of flooding damage and business interruption. There is also scope new orders for new Toyota and Isuzu vehicle models this year, according to AH.
What’s changed? We maintain our FY12 earnings projection at Bt327m. Note that we have not factored an insurance payout into our model. If AH’s insurers were to fully (or partially) compensate for damage and business interruption, it would constitute upside.
Recommendation: The firm resumed full operations sooner than we expected and the outlook for the automobile industry is good. We anticipate that AH will ramp up production in order to make up for output lost during the flooding. The stock looks cheap—an undemanding FY12 PER of 9.0x, significantly below its long-term mean of 12.7x.
We have raised our YE12 target price to Bt15 from Bt12.40, pegged to an FY12 PER of 12.3x, close to the firm’s long-term mean. We, thus, have upgraded our AH rating to BUY from TRADING BUY.