Date of Report: October 14, 2024
Broker: Maybank Sekuritas Indonesia

Stock Rating and Target Price

• Current Rating: BUY
• 12-Month Price Target: IDR 5,250 (+10% upside)
• Current Share Price: IDR 5,075
• Valuation Metrics:
  • FY24E Price-to-Earnings (P/E): 7.1x
  • Dividend Yield: 6%
  • Price-to-Book (P/B): 1.2x
  • Net Dividend Yield: 9.2% (FY23A), 5.9% (FY24E)

Overview of Astra International

Astra International (ASII) is a diversified conglomerate with strong market leadership in Indonesia’s automotive sector. The company is involved in several sectors, including automotive, financial services, heavy equipment, plantations, and more.

Key Business Segments:

• Automotive: Dominates Indonesia’s market with a 55% car market share and 77% motorcycle market share.
• Financial Services: Supports automotive business, with around 20% market share for car and motorbike financing.
• Heavy Equipment: A significant player in both heavy equipment and contract mining markets.
• Healthcare: Recently expanded into healthcare, acquiring a 95% stake in Heartology Cardiovascular Hospital in Jakarta.

Recent Performance

Automotive Sales Trends

• Car Sales:
  • September 2024 car sales fell 5% month-over-month (MoM) and 9% year-over-year (YoY), totaling 72.7k units.
  • 9M24 car sales dropped by 16% YoY, reaching 633k units.
• Motorcycle Sales:
  • September 2024 sales fell 8% MoM but increased 4% YoY to 528.7k units.
  • 9M24 sales were 4.87m units, a 3% YoY increase and 11% above the 2017-2023 average.

Despite the slowdown, Astra International’s market share remained stable at 55% for cars and 77% for motorcycles. The company has managed to retain its dominance even in the face of new entrants like BYD and increased competition from electric vehicle (EV) makers.

Market Share Insights

• Toyota and Daihatsu: ASII holds the largest distributorships in Indonesia, with Toyota gaining +90bps market share in September 2024.
• Honda and Hyundai: Both brands saw losses in market share due to competition from newer models.
• BYD: Lost 100bps in market share, dropping to 2.9% from a peak of 3.9%.

Expansion into Healthcare

Astra International has ventured into the healthcare sector by acquiring a 95% stake in Heartology Cardiovascular Hospital. The hospital is a 50-bed specialized cardio facility in Jakarta. Though the investment is small, the company aims to generate IDR 1.2-1.5 trillion in profit from its healthcare division by FY30E. The move is part of Astra’s strategy to diversify away from its core automotive business.

Financial Overview

Key Financial Metrics (FY24E):

• Revenue: IDR 307.7 trillion (down 2.8% YoY)
• EBITDA: IDR 51.4 trillion
• Core Net Profit: IDR 30.2 trillion (down 10.9% YoY)
• Free Cash Flow (FCF): 13.3% yield expected in FY24E
• Debt to EBITDA Ratio: 1.5x

Revenue Breakdown

• The automotive division is expected to continue driving the majority of earnings, contributing about 60-65% of FY24E earnings.
• Astra’s balance sheet remains robust, enabling the company to maintain a dividend payout ratio of 40%.

Risks and Opportunities

Upside Opportunities

• New model launches, particularly electric vehicles (EVs) from Toyota, could boost demand.
• A recovery in coal and crude palm oil (CPO) prices could benefit the heavy equipment and motorcycle divisions.
• Lower interest rates would translate to reduced auto financing rates, encouraging higher demand.

Downside Risks

• Weaker-than-expected auto demand due to a slow economic recovery.
• Increased competition from EV manufacturers, which could erode ASII’s dominant market share.
• Government policies, such as higher ICE (Internal Combustion Engine) tax or lower fuel subsidies, could negatively impact automotive sales.

Environmental, Social, and Governance (ESG) Considerations

Astra International has a strong focus on ESG, particularly in the environmental arena. The company has launched initiatives like Astra Green Company and Astra Green Energy to promote energy efficiency and reduce greenhouse gas emissions. In 2022, Astra achieved a 10% reduction in emissions compared to its 2019 baseline, and 43% of total energy consumed came from renewable sources.

Conclusion

Astra International remains a dominant player in Indonesia’s automotive market, with stable market share despite challenges from new entrants and weakening demand. The company’s expansion into healthcare provides new growth avenues, while its strong financial position ensures resilience. However, macroeconomic factors and rising competition in the automotive industry present significant risks moving forward.