Thai Stanley Electric

Thai Stanley Electric Plc (STANLY)

1QFY13 core earnings at Bt364mn, up 56% YoY and 15% QoQ. STANLY reported a 1QFY13 (Apr–Jun 2012) net profit of Bt328mn, up 41% YoY but down 22% QoQ.
Excluding a Bt35mn extra item from expenses related to the floods last year gives a core profit of Bt364mn, up 56% YoY and 15% QoQ. This is slightly below our estimated
Bt390mn, as sales missed estimates. 1QFY13 core profit accounts for 23% of our full year forecast at Bt1.6bn and we are maintaining our projection.

Key items for 1QFY13 are:

Sales at Bt2.5bn, up 30% YoY and 14%QoQ. STANLY’s strong sales YoY came from an increase in auto production in the quarter and the low base effect
from last year’s tsunami in Japan. The QoQ upswing in sales growth was driven by Honda’s resumption of normal operations in late March after a sixmonth
plant closure - Honda is STANLY’s major client with 45% of total sales.

Gross profit margin at 22%. STANLY’s gross margin was 22.3% in 1QFY13, up from 21.1% in 1QFY12 and 20.2% in 4QFY12. We are positive toward STANLY’s
gross margin, as it has resumed its healthy trend at above 20% despite the impact from the rise in minimum wage effective in April 2012. Maintain BUY with mid-2013 TP at Bt230/share.

We expect STANLY’s upswing in earnings will continue in 2QFY13 upon Honda’s production boost and the positive industry backdrop that includes the extension of the first-car buyer program to allow deliveries next year, which will boost auto sales and production. We like STANLY’s strong gross margin above 20%, as high profitability will help STANLY dilute earnings risks. For FY2013, we expect 62% core earnings growth.