Somboon Advance Technology

Somboon Advance Technology Plc (SAT)
3Q12 earnings were 7% above our estimate
SAT booked a 3Q12 net profit of Bt258m, up by 26% YoY and 60% QoQ. The result beat our estimate by 7% and the Bloomberg consensus by 3%, attributable to stronger revenue than modeled. Rising economies-of-scale pushed up net margin to 10.5% from 7.2% in 2Q12. 9M12 earnings jumped 24% YoY to Bt626m, which represents 70% of our FY12 projection.
Results highlights
Revenue expanded by 25% YoY and 10% QoQ to Bt2.5bn as major car makers—Toyota, Mitsubishi, Honda and Nissan—ramped up their output to catch up with production lost during and after the 4Q11 flooding.  
SAT’s 3Q12 gross margin rose to 16.3% from 14.4% the previous quarter. Likewise, net margin was 10.5% versus 7.2% in 2Q12.
Outlook
We anticipate that 4Q12 earnings will rise slightly QoQ.
What’s changed?
Our FY12 earnings projection of Bt900m stands unchanged. There is also scope for upside to vehicle demand for 4Q12 from the govt’s first-time car buyer tax refund scheme, which we expect to have a flow-on effect to SAT’s order book.
Recommendation
Vehicle production has normalized and most of the car makers have expanded production ahead of YE12 in anticipation of a surge in sales. SAT currently trades at an FY13 PER of 8.5x—far below its last peak of 12.9x just ahead of the Japanese earthquake and tsunami on March 11, 2011. Given the Thai automobile industry’s swift recovery from the flooding and capacity expansion for export that will start operating next year, we maintain our BUY rating on SAT.