Somboon Advance Technology
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4Q14 profit in line with model BUY
Somboon Advance Technology Plc (SAT)
4Q14 earnings as expected
SAT posted a 4Q14 net profit of Bt211m, down 49% YoY but up 48% QoQ. The result was in line with our estimate, but was 5% above the Bloomberg consensus. FY14 earnings dived 33% YoY to Bt650m, which represents exactly 100% of our projection.
Results highlights
Sales rose by 4% YoY and 4% QoQ to Bt2.1bn, as demand among the major car makers for parts to build vehicles inched up in tandem with a nascent recovery in sales of new cars.
SAT’s gross margin was 19.1%, up from 15.8% the previous quarter (owing to better QoQ sales). 4Q14 net margin was 10.1%, up from 7.1% the previous quarter because of greater revenue and good OPEX management, but down from 20.7% in 4Q13, due to the absence of extra gains (in 4Q13, SAT booked a Bt166m insurance payout).
Outlook
We anticipate that 1Q15 profit will rise somewhat YoY, but will be flattish in QoQ terms.
What’s changed?
Our earnings forecasts stand unchanged at Bt870m for FY15 and Bt980m for FY16.
Recommendation
The automotive industry’s outlook is for a gradual recovery. Therefore, SAT should deliver sequentially better YoY results for each quarter in the year ahead. Given the improved outlook for FY15 (especially for 2H15), we see some scope for upside to the share price. Our BUY rating stands.
