Aapico Hitech

Aapico Hitech Plc (AH)

What’s new? Yeap Swee Chuan, CEO of Aapico Hitech (AH), anticipates that FY12 sales will grow at least 30% YoY. The growth is being led by the auto industry recovery (following 4Q11 flooding) and the gov’t first-time car buyer tax rebate. 3Q12 sales will be about Bt4.1bn, flattish QoQ. 
Our sales projections remain bullish: We forecast that AH’s sales will jump 42% YoY to Bt14.7bn in FY12, driven by strong demand among consumers for new cars and pick-ups, making for substantial order growth from the firm’s clients—auto makers with operations in Thailand. We expect 2H12 sales to rise HoH to Bt6.9bn. Our FY13 sales projection is for 15% YoY expansion to Bt16.2bn, led by Isuzu’s capacity increase (for the Isuzu D-max pick-up) from 210K units in 2012 to 300K units next year. 
3Q12 earnings will be good: Given sustained sales in 3Q12 and a good net margin of 6.5%, we forecast 3Q12 core earnings of Bt140m, flattish. Additionally, AH might have a windfall from insurance payouts (for damages and business interruption caused by the 4Q11 flooding). Note that its 2Q12 insurance payout was Bt90m from total insurance coverage of Bt2bn.
Action: AH should achieve greater economies-of-scale with increased production and sales volume and efficiency enhancements brought about by the installation of new technologically superior machinery (which replaces flood-damaged equipment). We forecast FY12 earnings of Bt580m (including the insurance payout at Bt90m), a turnaround from the loss of Bt390m reported for FY11. We also expect FY13 profit to grow to Bt600m (exclusive of extra gains), up 3.4%.  
The stock trades at an undemanding FY13 PER of 8.6x, which is below both the sectoral mean of 9.5x and its long-term average of 13.6x (excluding the flooding-skewed numbers posted for last year). Because of AH’s strong core earnings profile and the scope for new car sales growth, we maintain our BUY rating.