Auto sector
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First car policy: power to boost auto sector toward H1 2013
OVERWEIGHT
- Global GDP growth downgraded by IMF… believed not to
affect auto export significantly
- First car policy: power to boost auto sector toward 1H13
- “Overweight”… STANLY and SAT are top picks
- Global GDP growth downgraded by IMF… believed not to
affect auto export significantly
IMF has downgraded the global GDP growth from at 3.5% in 2012 and 3.9%
in 2013 to 3.3% and 3.6% respectively. This round of downgrade mainly
goes to developed countries such as the European Union and Japan, followed
by new-born countries such as India, Brazil and China. Although this reflects
that the global economy might decelerate, it’s unlikely to significantly affect
Thailand’s export of the auto sector considered from 8M12 in which the total
export volume stood at 640,000 units or 16% YoY increase. The mention
number of auto export reflects continuous international orders, partially due
to the proportion of Thai auto export market that doesn’t depend much on
the Europe’s market (only 6.7% of the total export volume) while almost
80% of export spreads throughout Asia (32%), the Middle East (26%) and
Australia plus New Zealand (20%) of which the auto order has increased
continuously. We’re convinced that Thai auto export will still thrive due to the
main market that has grown well. FY2012 auto export volume is projected at
1,000,000 units approximately or an increase of 36% YoY.
First car policy: power to boost auto sector toward 1H13
According to the current structure of Thai auto production, the main power to
boost the auto sector comes from the domestic auto market since there’re
benefits from the government’s first car policy which will expire at end-2012.
Accordingly, the domestic auto demand has been urged substantially as
evident from the number of right-exercisers projected at 500,000. Car
makers have to accelerate the production to meet the domestic demand,
resulting in an increase of the current ratio of production for domestic usage
and production for export to 60:40 (from 50:50). Thus, the total auto
production in 8M12 has stood at 1.48 million units or an increase of 33.02%
YoY, while FY2012 auto production target is projected to peak with over 2.2
million units or 51% increase from 2011 with only 1.46 million units.
Although the auto market would return to normal in 2013 due to an
expiration of first car policy that attracts auto demand, the local market in
1H13 will not be much affected because of back orders. Afterward, the local
auto market will return to the state of real demand, so car makers have to
introduce new models continuously and work on sales promotion to sustain
the level of domestic sales, along with more production for export. For the
overall look in 2013, the total auto production is projected to stand at 2.4-2.5
million units (from the total production capacity at 2.7 million units/year) or
an increase of 10% averagely from 2012 because of car makers’ investment
on auto production expansion to meet both international and domestic
demand and inability to complete the whole production within 2012, so the
production of about 200,000-300,000 units would be placed in 2013 instead.
Accordingly, Thailand would become one of 10 major global car makers.
“Overweight”… STANLY and SAT are top picks
We reiterate “Overweight” for the auto sector, believing that the profit from
operation of 6 companies under our coverage is still able to grow along with
the auto production that still has grown in a long term. Top picks are STANLY
([email protected], based on 13x PER) and SAT ([email protected], based on 13x PER).
