Auto Sector
Downgrade to underweight after production in 2H13 likely to fall Underweight
Auto sector
231 thousand cars produced in May 2013, growth falls to 11% yoy
Federation of Thai Industries reported the total production in May 2013 at
231,070 cars, rising by 11.09% yoy, the smallest growth in 13 months. The
automobile export market sold 85,577 finished cars in May, rising by 0.68%
yoy. The national automobile market had the total sales of 111,692 cars,
falling by 3.7% yoy. It was the first month it decreased, after the increasing
growth during the previous 16 months as a result of the government's first
car project ending in December 2013, which stimulated the market by
outstanding car transfers.
- Production in 2H13 seems to fall... 2013 support to grow just 6% yoy
Stimulants from domestic production for transferring in the first car project
increased the production of cars in 5M13 by 31.73% yoy, or 1,123,030 car
yoy (60% domestic, 40% for export) or 225 thousand cars per month.
However, the production in June 2013 is predicted to decelerate, after all the
cars for the first car project are transferred while present reservation rate is
zero, as some purchasing power was used for first car project. Consequently,
2H13 automobile market is predicted to decline, with average monthly sale
returned to normal at 80-90 thousand cars (compared to 2H55, with 130-
140 thousand cars per month average monthly sale). In order to sustain the
production base, producers need to adjust production strategies by
increasing production for export market, along with upcoming high season
for export from 3Q56 and effects from global economy that is likely to
recover. 2H13 average automobile export totals is predicted to remain at 100
thousand cars per month. Initially, Federation of Thai Industries evaluated
total production in next 3 months (June - August 2013) by 625 thousand
cars, falling by 2.07% yoy and 5% compared to the previous 3 months. In
2013, total automobile production is evaluated at 2.6 million cars, rising by
just 6% yoy (1H56 was predicted to produce 1.3 million cars, rising by 26%
but shrinking by 6% yoy in 2H13).
- Downgrade to underweight... Choose AH and SAT as top picks
Investment lost its sentiment after all the first cars are transferred and
earning results autopart companies in 2H13 are predicted to decelerate,
along with automobile production. 2013 net profit is estimated at 4,525
million baht, rising by 18.8% yoy, lower growth rate that the overall market
image. Recommendation is downgraded to underweight from previously
neutral. AH ([email protected]) and SAT ([email protected]) are top picks as they have
the highest upside and the lowest PER at 7.7 times and 8.6 times,
respectively.
