Auto Sector

2.45 million cars produced in 2012, projected to rise to 2.5 millions in 2013 Neutral

Auto Sector

2012 record high in every market… highest auto production at 2.45 millions, growing 68.32% YoY

The Thai Automotive Industry Association has reported the auto production

volume in December 2012 at 221,353 units, increasing by 122.63% YoY but

decreasing by 13.73% MoM due to low working days. In the domestic auto

market, the total auto sales stand at 144,676 units or 165% YoY while the

export market has made it through 86,297 units or 146.24% YoY increase.

Accordingly, Thailand has become the world's 10th biggest car producer,

growing by 68.32% YoY due to benefits from the government's first car policy

that has boosted the auto sales to hit the record high at 1,436,335 units or

80.9% YoY increase. For the export market, it has made the record high in

25 years with 1,026,671 units or 39.6% YoY increase which has made

Thailand become the world's 7th biggest car exporter.

Growth of 2013 auto production projected at 2% to 2.5 million units

According to positive factors from 2012, 2013 should be another year for Thai

auto industry to hit the record high for both the auto production and export.

The domestic market is currently out of support from the first car policy that

had attracted advance demand for cars, so 2013 domestic auto sales might

decline. However, the production in 1H13 is projected to stay continuously

high from late-2012 due to the back orders that have to be transferred in

2013 over 500,000 units. After 2H13, the auto sales are likely to decelerate

gradually, so car producers have to apply the strategy via new car model

introduction and work on sales promotion to sustain the level of domestic

sales, together with more production for export. For the overall look in 2013,

the total auto production is projected to stand at 2.5 million units, increasing

only by 2% YoY.

Recommend "Neutral"…. SAT and STANLY chosen as top picks

We reiterate our recommendation of "Neutral" for the auto sector, believing

that the operation of 6 companies under our coverage would grow along the

with the auto production. The profit from operation in 2012 stands at B3.5bn

or 1.37x increase, but growing at a slower rate to 20.7% or B4.26bn in 2013.

Our top picks are SAT (FV@B40.64, based on 13x PER) and STANLY

(FV@B268.34, based on 13x PER).