Somboon Advance Technology

Somboon Advance Technology Plc (SAT)

What’s new? SAT has raised its FY12 sales growth guidance from 35% YoY to 48%. The upgrade reflects expanded expectations for car sales, due to the speed of the automotive industry recovery and the gov’t first time car buyer tax rebate. Management claims that capacity utilization will rise to 75% by YE12 from 70% currently and should hit 80% next year. SAT’s CAPEX budgets are Bt800m for FY12 and Bt700m for FY13.

Our sales growth forecast remains 30%: We maintain our SAT FY12 sales growth projection at 30% YoY to Bt8.2bn, driven by strong demand among consumers for new cars and pick-ups, making for substantial order growth from the firm’s clients—auto makers with operations in Thailand. Note also that our capacity utilization assumptions are 70% for this year and 75% for FY13—somewhat more modest than SAT’s guidance. Our FY13 sales projection is for 17%
YoY expansion to Bt9.5bn.
 

3Q12 profit will be good: Given rising sales and net margin expansion from 7% in 1Q12 to 9% in 3Q12, we forecast earnings for the quarter of Bt250m, up 22% YoY. We expect profit to rise further in 4Q12. Action: SAT’s bottom-line looks set to rise sharply Action: SAT’s bottom-line looks set to rise sharply next year through the achievement of greater economies-of-scale with increased production and sales volume. We forecast FY12 earnings of Bt900m, up a hefty 120% YoY. Our FY13 profit projection is Bt1.26bn, up a further 40% YoY. If SAT’s bullish sales guidance were to prove correct, there would be upside to our current bottom-line forecasts for this year and next.
The stock trades at an undemanding FY13 PER of 7.9x, which is below both the sectoral mean of 9.5x and its last peak PER of 11.5x. Because of SAT’s strong core earnings profile, the scope for new car sales growth and the possibility of upside to our model, we maintain our BUY rating.