Thai Stanley Electric

Thai Stanley Electric Plc (STANLY) 

 

3Q16 profit was 7% over our numbers from better sales

STANLY posted 3Q16 (Oct-Dec 2015) earnings of Bt262m, declining 25% YoY and 41% QoQ. The number was 7% over our estimate and 10% above the Bloomberg consensus. The firm accrued better sales than our forecast, with 3Q16 figures that were 2% over our numbers. Note that its 9M16 earnings grew 12% YoY to Bt885m, which represents 78% of our FY16 earnings projection of Bt1,140m.

Results highlights

Revenue rose 9% YoY and 2% QoQ to Bt2.6bn (we expect its sales were Bt2.5bn, flat from last quarter). The YoY growth was due largely to new orders from big carmakers—Toyota (new Fortuner), Nissan (new Navara), Honda (new Accord and Zoomer) and Mitsubishi (new Pajero sport and Triton). Note that Oct-Dec 2015 vehicle output was 481k units, down 3.1% QoQ but up 2.1% YoY. STANLY’s GM rose to 16.5% in 3Q16 from 15.7% in the previous quarter (but down from 18.5% posted in the same period last year (due to rising OPEX from new investment for new car models as mentioned above).

Outlook

We anticipate that STANLY will post a moderate rise in QoQ core earnings growth for 4Q16 (Jan-Mar 2016) from improved GM YoY due to well managed production cost on business expansion for new car models as mentioned above. Note that the Federation of Thai Industries (FTI) forecasts 2016 Thai car production to stay at 1.95m units, up 2% YoY after a 2% increase in 2015.

What’s changed?

We maintain our earnings projections in FY16 and FY17.

Recommendation

We expect the industry to start recovering in 2H16, so STANLY will see gradually stronger order flows (Nissan, Mitsubishi and Honda) in late 3Q17 (Oct 2016-Dec 2016) onwards. We expect its new orders could deliver to the firm 8% growth in sales in FY17 (Apr 2016-Mar 2017) with profit growth of 12%, driven by rising economy of scale. We have maintained our BUY rating on STANLY.