P.C.S. Machine Group Holding

P.C.S. Machine Group Holding Plc (PCSGH)

 

3Q15 earnings as expected

PCSGH posted a 3Q14 net profit of Bt146m, a drop of 23% YoY but up 16% QoQ. The result was in line with our estimates. Earnings for 9M15 plunged 24% to Bt476m, which represents 68% of our FY15 earnings projections.

Results highlights

Revenue rose only 3% YoY and 8% QoQ to Bt1.1bn. The top line was 5% below our number. Note that 3Q15 auto production grew 21% QoQ to 496k-units, driven by exports (growing 32% QoQ and 18% YoY to 328k-units). PCSGH reported a GM expansion of 16.6%, up from 16.2% in 2Q15 but down from 21.0% in the same period last year (we had modeled for 16.2%). Likewise, 3Q15 net margin was 13.7% up from 12.8% the previous quarter (but down from 18.4% in the same period. We expect its FY15 net margin to be 17.4.

Outlook

We anticipate that its 4Q15 profit will be slightly up QoQ and YoY (in tandem with gradual recovery in auto production and the well managed OPEX from new production line expansion).

What’s changed?

We have maintained our FY15 and FY16 earnings forecast for PCSGH before the company holds an analyst meeting next week. 

Recommendation

We have seen downsides on PCSGH from poorer sales and GM compression from less economy of scale this year and next, caused by poorer export sales (in Brazil) and rising OPEX from new investment (new diversification from pick-up and commercial cars into new field of big truck and motorcycles). Therefore, our earnings forecasts might have a possibility to be revised down. As such, we have reiterated our SELL for PCSGH.