Equity Research Sector Update

Tuesday, 18 April 2017 Automotive Sector March 2017: Car sales strengthen further ASII relative to JCI Index Gaikindo reported domestic car sales of 101,484 units in March 2017 (+7.0%

mom, +7.9% yoy). Cumulatively, domestic car sales climbed 5.7% yoy to 282,596 Jakmine (LHS) Relative to JCI (RHS) units in 1Q17. The improving car sales owe largely to strong LCGC car sales % which exhibited breakneck 55.5% yoy growth thanks to the launch of the duo 1,500 60 7-seater LCGC ( Calya and Sigra) in 2H16. Overall, the 1Q17 sales 1,300 40 are in-line with our expectations. Maintain Neutral.

1,100 20 March 2017: stronger domestic car sales. Domestic car sales rose further to 900 0 101,484 units (+7.0% mom, +7.9% yoy) in March 2017. The higher car sales reflect

700 -20 the greater optimism of consumers in the country (Danareksa Research

Institute’s consumer confidence index climbed to 98.3 in March 2017 from 95.6

1/6/16 2/3/16 3/2/16 1/4/17

3/30/16 4/27/16 5/25/16 6/22/16 7/20/16 8/17/16 9/14/16 11/9/16 12/7/16 10/12/16 in February 2017). Cumulatively, domestic car sales are up 5.7% yoy to 282,596 units in 1Q17. This is within our expectations.

Stronger sales of Toyota and... Toyota sales jumped 33.7% yoy to 107,611 units in 1Q17 underpinned by a) aggressive new car launches in the MPV market of cars such as and the 7-seater LCGC car, Toyota Calya and b) strong sales volume from (+19.4% yoy), Toyota Rush (+27.8% yoy) and (+6.0% yoy). This helped to propel Toyota’s market share to 38.1% in 1Q17 from 30.1% in 1Q16.

… Daihatsu to increase ASII’s market share further. Supported by the launch of the 7-seater LCGC , Daihatsu’s sales jumped 17.1% yoy. Combined with the sales of Toyota Calya, ASII’s LCGC sales surged 113.0% yoy. As a result, ASII’s LCGC market share rose to 80.7% in 1Q17 from 58.9% in 1Q16. All in all, with strong Toyota and Daihatsu sales, ASII’s market share increased to 57.0% in 1Q17 from 47.5% in 1Q16. And with strong car sales expected to persist, ASII’s market share should remain high. We conservatively expect ASII to maintain market share of around 56% in 2017.

Lower non-Astra sales volume. Non-Astra domestic car sales declined by 13.4% yoy in 1Q17 with three non-Astra leading brands - , Honda and Mitsubishi - recording lower sales volume of 15.8% yoy, 9.2% yoy and 6.4% yoy, respectively. Although Honda’s market share slipped to 18.8% in 1Q17 from 21.8% in 1Q16, the brand still has the second-largest market share after Toyota.

Recovery in motorcycle sales in March 2017, but still down in 1Q17. Domestic motorcycle sales rebounded by 4.4% mom to 473,896 units in March 2017. Nonetheless, the figure was still down by 15.9% yoy. As such, on a cumulative basis, domestic motorcycle sales were 6.8% yoy lower at 1.4mn units in 1Q17. The sluggish motorcycle sales partly stem from the impact of crop failure and higher administrative fees for vehicle licenses and less discounts in the beginning of the year, in our view. Given this backdrop, the Indonesian Motorcycles Industry Association (AISI) has cut its 2017 sales target to 5.9mn units from 6.1 – 6.2mn units previously.

Stefanus Darmagiri We remain Neutral on the automotive sector even though rising commodity (62-21) 29 555 831 prices are helping to improve demand for both cars and motorcycles. As such, we maintain our conservative domestic car sales volume growth target of only 5.0% [email protected] yoy for 2017, noting that moderate economic growth of an estimated 5.1% yoy

restrict gains in consumer purchasing power. This, in turn, will limit further growth in domestic car sales.

Target Market Price, EPS Growth, % ----- P/E, x ------P/B, x ----- EV/EBITDA, x ROE, Company Ticker Rec Price, Cap, Rp % Rp Rpbn 2017F 2018F 2017F 2018F 2017F 2018F 2017F 2018F Astra International ASII HOLD 8,375 9,000 339,050 25.2 16.0 17.9 15.4 2.2 2.0 12.9 10.9 12.2

www.danareksa.com See important disclosure at the back of this report 18

Automotive Sector 18 April 2017

Exhibit 1. Strong domestic car sales in March 2017 140 75

120 70

100 65

80 60

60 55 4W sales, '000 units '000 sales, 4W

40 50 % share, market ASII

20 45

- 40

Jul-13 Jul-14 Jul-15 Jul-16

Jan-13 Jan-14 Jan-15 Jan-16 Jan-17

Sep-13 Sep-14 Sep-15 Sep-16

Nov-13 Nov-14 Nov-15 Nov-16

Mar-13 Mar-14 Mar-15 Mar-16

May-14 May-15 May-16 May-13 Source: Gaikindo, Astra International

Exhibit 2. Car sales volume by brand Exhibit 3. Market share by brand

3M16 3M17 38.1% 3M16 3M17 40.0% 120 108 35.0% 100 30.1% 30.0% 81 80 25.0% 21.8% 18.8% 58 20.0% 17.6% 60 50 53 15.9% 42 15.0% 10.8% 10.4% 40 share market 4W 29 28 8.6% 9.2% 4W sales,'000 4Wunits 24 26 10.0%

20 5.0%

0 0.0% Toyota Daihatsu Suzuki Honda Mitsubishi Toyota Daihatsu Suzuki Honda Mitsubishi

Source: Gaikindo, Astra International, Various sources Source: Gaikindo, Astra International, Various sources

Exhibit 3. Domestic motorcycle sales volume 800 80

700 75

600 70

500 65

400 60

300 55 2W sales, '000 units '000 sales, 2W 200 50 % share, market ASII

100 45

- 40

Jul-13 Jul-14 Jul-15 Jul-16

Jan-13 Jan-14 Jan-15 Jan-16 Jan-17

Sep-15 Sep-13 Sep-14 Sep-16

Nov-13 Nov-14 Nov-15 Nov-16

Mar-15 Mar-16 Mar-13 Mar-14 Mar-17

May-14 May-15 May-16 May-13 Source: AISI, Astra International

2

www.danareksa.com See important disclosure at the back of this report