Auto Sector
FY2014 production return to normal after first car scheme ends Underweight
Auto Sector
- FY2013 production makes new high at 2,457,086 units, rising 0.14%yoy
The Federation of Thai Industries (FTI) reported December car production at
158,893 units, falling 28.2%yoy and 13.1%mom, making the 20-month
lowest, due to lack of stimulation from first car scheme and fewer working
days. In December, 87,961 units of CBU cars were exported (rising
1.9%yoy), while December domestic car sales were 108,688 units (falling
24.9%yoy). However, thanks to high production in 1H13, FY2013 car
production made a new high at 2,457,086 units, increasing 0.14%yoy.
- FY2014 domestic production sluggish, depending on export to stabilize production
Thai automotive market has returned to normal, having no stimulating factor
to abnormally boost sales like the previous couple years. Thus, FY2014 car
production is projected to return to normal, reflecting actual demand for
cars. 1H14 domestic car sales would be close to 2H13, as purchasing power
would decelerate due to sluggish economy and financial institutions' stricter
loan issuance measure. However, 2H14 car sales are projected to rebound,
as there would be new marketing strategies and motor expo to promote
sales. FY2014 domestic car sales are projected at 1.2 million units, falling
10%yoy. In 2014, car export market will determine whether auto sector
would prosper. Car manufacturers have been focusing on export to
compensate for slowing domestic automotive market. Moreover, as global
economy has been recovering, FY2014 car export is projected to make a new
high at 1.25 million units. Overall, FY2014 car production is expected around
2.45-2.5 million units, close to 2013.
- "UNDERWEIGHT". Top pick is AH for lowest price
Car production has been decelerating, affecting auto part sector's earnings
forecast as well. Auto sector's FY2014 net profit is projected at B3.4bn, close
to 2013. As SET's net profit would be growing by 13%, the sector would not
outperform SET. We recommend "UNDERWEIGHT" for auto sector. Top pick
is AH([email protected]), as it price is the lowest. Its current share price has 45%
upside, and the lowest PER and PBV of 6.9x and 0.8x. We recommend "BUY"
for recovery in the future.
