Automotive sector

Automotive  sector   

- Feb. car production volume grows 2% yoy 

 

Car production volume in February 2015 grew 2%yoy and 7.2%mom to 178,351, showing year-on-year (yoy) growth for the second month in a row after shrinking continuously for 18 months since 2H13. Domestic sales increased 7%mom to 63,948 while total exports increased 17%mom to 108,173, thanks to the export volume to Oceania (22% of total exports) and North America and Europe (15% of total exports) that grew strongly following the economic rebound. Overall, 2M15 production volume was 344,751, rising 2.6%yoy. 

 

- FY2015 production volume to advance 12%yoy 

 

There are numerous domestic positive factors for the automotive industry in FY2015, e.g. the economic recovery, a motor show, launches of at least 10 new car models, and the excise tax restructuring effective in 2016 that will influence consumers to accelerate their car purchase. In addition, the policy rate cut of 0.25% is also positive sentiment for the sector since it means higher installment payment ability of customers. Total car exports tend to continue growing, thanks to the markets in Oceania, America, and Europe. Overall, we estimate FY2015 car production volume at 2.1 million or the growth of 11.7%yoy, 900,000 for domestic sale and 1.2 million for export. 

 

- Top picks are SAT, AH 

 

FY2015 normalized profit of the sector is projected at B4.2bn, increasing 

 

20%yoy. We recommend NEUTRAL and select SAT(FV@B22) and 

 

AH([email protected]) as top picks of the sector for their 15% and 16% upsides, respectively. SAT would benefit most from launches of new models of pickup and pickup passenger vehicle (PPV) of its major customers like Toyota and Mitsubishi (59% of its total sales), while AH has the lowest valuation, with P/BV ratio of only 0.77x and P/E ratio of 9.5x.