Somboon Advance Technology
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3Q14 profit in line with model
Somboon Advance Technology Plc (SAT)
3Q14 earnings as expected
SAT posted a 3Q14 net profit of Bt143m, down 16% YoY but up 11% QoQ. The result was in line with our estimate, but was 4% below the Bloomberg consensus. 9M14 earnings dived 20% YoY to Bt439m, which represents 70% of our old projection of Bt614m.
Results highlights
Sales fell 7% YoY (but rose 6% QoQ) to Bt2bn, as demand among major car makers for parts to build vehicles slumped following the June 2013 delivery deadline for the government’s first-time car buyer tax rebate.
SAT’s gross margin was 15.8%, down from 17.4% the previous quarter (owing to price-cutting in order to boost sales). 3Q14 net margin was 7.1%, up slightly from 6.8% in in 2Q14 because of bigger revenue contributions by subsidiaries and good OPEX management, but down from 7.9% in 3Q13, due to lower YoY sales.
Outlook
We anticipate that 4Q14 profit will rise somewhat QoQ, but will be flattish in YoY terms.
What’s changed?
Our earnings forecasts stand unchanged at Bt614m for FY14 and Bt870m for FY15.
Recommendation
The automotive industry’s outlook is for a gradual recovery. Therefore, SAT should deliver sequentially better QoQ results in the year ahead. Given the better prospects for 4Q14 and FY15, we see some scope for upside to the share price. Our BUY rating stands.
