Date: 25 September 2024
Broker: UOB Kay Hian
Company Overview
Astra International (ASII IJ) is a conglomerate involved in distributing and assembling automobiles, motorcycles, and spare parts. The company operates in various sectors, including mining, plantations, finance, and information technology. As of the latest update, Astra International has issued 40,483.60 million shares, with a market cap of Rp213,550.99 billion (US$14,061.43 million).
Major Shareholders
- Jardine Cycle & Carriage: 50.1%
Stock Performance
- 52-week high/low: Rp6,275/Rp4,290
- Price: Rp5,275
- Target Price: Rp5,800 (previous target price: Rp3,900)
- Upside: 9.95%
Impact of Rate Cuts on Sales
Astra International is expected to benefit from Indonesia’s recent interest rate cuts. Around 70% of Astra’s car and motorcycle sales are financed, making them highly sensitive to changes in interest rates. The recent reduction in the Bank Indonesia rate from 6.25% to 6.00% is projected to positively influence sales by reversing the current weak performance in car sales by 2025. Motorcycle sales, which have already increased by 3% year-on-year for the first eight months of 2024, are also expected to accelerate.
New Electric Vehicle (EV) Launches
Astra International is preparing to expand its product lineup with the introduction of new electric vehicles (EVs) and hybrid models:
- Toyota BEVs: Three new battery electric vehicle (BEV) models are expected to be introduced over the next three years. While the company currently sees hybrid models as better suited to Indonesia’s infrastructure, especially outside Jakarta, BEVs will play a role in the near future.
- Honda Electric Motorcycles: Astra plans to launch seven new electric motorcycles by 2030. The 2023 launch of the Honda EM1 e-motorcycle saw limited traction due to pricing, but a more affordable and improved model is expected to launch in 2024.
Motorcycles and Financing
Astra’s motorcycle financing subsidiary, Federal International Finance (FIF), has been successful in growing sales. In the first eight months of 2024, motorcycle sales increased by 3% year-on-year, reaching 4.3 million units. FIF and other industry players have been offering lower down payments (below 25%), contributing to higher sales. The financing interest rate remains at 30% annually, with an increase of 100 basis points translating to a minimal rise in monthly payments. FIF’s non-performing loan (NPL) rate remains under control, allowing it to offer more competitive financing.
Digital Banking Success
Astra International’s investment in Bank Jasa Jakarta, through its digital finance product Bank Saqu, has exceeded expectations. Bank Saqu has opened more than 1.1 million accounts, surpassing Astra’s initial target. Bank Saqu focuses on the younger generation and solo entrepreneurs, a segment expected to contribute 36% of Indonesia’s GDP by 2030.
Used Car Sales
Astra International’s venture into the used car market through OLXmobbi is showing strong results. In the first half of 2024, Astra sold 12,000 units on the platform, marking a 40% year-on-year increase. Multi-purpose vehicles (MPVs) accounted for 33% of the sales, followed by sport utility vehicles (SUVs) at 26%, and low-cost green cars (LCGCs) at 20%. Popular models include the Toyota Avanza (6.5% of sales), Daihatsu Ayla (4.9%), and Toyota Kijang (4.7%).
Toll Road Expansion
Astra International continues to expand its presence in Indonesia’s toll road sector, with 396 km of toll roads under its control as of the first half of 2024. Astra is looking to add more toll road concessions, with greenfield projects expected to generate a high teens internal rate of return (IRR) and brownfield projects yielding low teens IRR, averaging a blended mid-teen IRR across its toll road business.
Medical Device Production
Astra’s subsidiary, Astra Graphia (ASGR), has made strides in medical device production. ASGR is currently manufacturing 20 stock keeping units (SKU) of medical devices, supporting the Indonesian government’s BPJS Health initiative. Astra Graphia Xprins Indonesia (AXI), another division, has introduced 3D printing services targeting personal users, MSMEs, corporations, and industries.
Financial Outlook
- FY24 Net Profit (Adjusted): Rp29,532 billion
- EPS (FY24): Rp729.5
- PE (FY24): 7.2x
- Dividend Yield: 6.3%
- ROE: 12.8%
- Net Debt/Equity: 20.2%
Valuation and Recommendation
UOB Kay Hian has upgraded Astra International to a BUY recommendation, with a target price of Rp5,800, reflecting a 9.95% upside. The target price is based on a 6.8x FY25 PE, which is near -2SD of its 2025F PE. The upgrade reflects Astra’s potential growth due to the rate cut cycle, its EV and hybrid vehicle plans, and continued toll road and digital banking expansions.
