Aapico Hitech

Aapico Hitech Plc (AH)

 

Earnings were 55% below our number

AH reported 2Q15 net earnings of Bt37m, a decline of 64% YoY and 60% QoQ. The result was 55% below our estimate and that of the Bloomberg consensus, due to weaker-than-assumed sales—only Bt3.5bn (down 5% YoY and 6% QoQ); we had modeled for Bt3.7bn. Profit for 1H15 dived 49% YoY to Bt129m, which represents 28% of our former FY15 earnings projection.

Results highlights

Sales inched up 5% YoY and 6% QoQ to Bt3.45bn. The numbers were below our forecast number by 7% YoY due to declining orders for exports and new car sales. Note that industry-wide, 2Q15 auto production was 411k units, down 22% QoQ and 6% YoY. GM dropped to 3.5% in 2Q15 from 5.2% in the last quarter but was up from 3.0% in the same period last year.

Outlook

We feel more bearish for 3Q15 as major clients, Isuzu Motors and AAT, plan to cut production for exports of pick-up trucks (such as Isuzu D-Max). We expect its 3Q15 earnings will be down slightly YoY from weak sales and rising OPEX. 

What’s changed?

Given the poor outlook for 2H15 new car production, we have cut our FY15 earnings projection by 41% to Bt275m from poor sales. We expect its FY15 sales to be flat from last year from the former +5%.  

Recommendation

We reiterate our SELL rating, based on: 1) downside risk to our FY15 sales assumption, 2) the possibility of a further GM squeeze if auto production were to be lower than we currently assume in 2H15, and 3) the possibility of delays to the launches of new car models by auto makers later in FY15.