Aapico Hitech

Aapico Hitech Plc (AH)
2Q13 profit as expected
AH reported 2Q13 net earnings of Bt187m, down by 33% YoY and 33% QoQ. The result was in line with our estimate but was 6% below the Bloomberg consensus. 1H13 earnings grew 24% YoY to Bt466m, which represents 55% of our FY13 projection.
Results highlights
Sales were flat YoY and fell 14% QoQ to Bt3.9bn. The QoQ top-line contraction was due mainly to declining orders from automakers related to a slew of public holidays during 2Q13, especially in April. Thus, GM fell to 7.3% from 8.5% in 1Q13. Furthermore, net margin dropped to 4.8% from 6.1% the previous quarter and 7.1% in 2Q12, largely because equity earnings from subsidiaries dived by 47% YoY and 43% QoQ to Bt49m.
Outlook
We anticipate that the firm will deliver weaker QoQ core earnings for 2H13. Deliveries for the government’s first-time car buyer tax rebate scheme ended in June, so we expect domestic vehicle sales to decline HoH in 2H13. The effect of that decline should be mitigated (but not fully offset) by export growth.
Nevertheless, AH should be cushioned from the worst effects of the expiry of the first-time car buyer program because much of its production is jigs (and other parts) for pick-ups, such as the Isuzu D-Max. The D-Max didn’t qualify for the tax rebate under the first-time buyer scheme because its engine displacement is too large. As such, there shouldn’t be a significant HoH fall in domestic sales in 2H13. Furthermore, the D-Max sells well in export markets.
What’s changed?
We maintain our FY13 earnings projection of Bt850m unchanged.
Recommendation
AH currently trades at an inexpensive FY13 PER of 6.6x (below its mean of 6.8x); its last peak was 13x (up 2.5SDs). The stock’s cheap valuation and generous dividend yield of 6.1% makes it worthy of a BUY rating, we believe.