Astra International (ASII.IJ Rp 5,125; BUY TP Rp 5,900) Raising our FY24F-FY26F est., amid above-expected 2W sales, financial, and HE segment in 3Q24

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Astra International (ASII IJ)

Raising our FY24F-FY26F est., amid above-expected 2W sales, financial, and HE segment in 3Q24

ASII posted strong 9M24 earnings (above) due to recovery in auto, along with strong financial and HE segments.
We lifted our EPS est. by 10%/13%/10% in FY24F/FY25F/FY26F, driven by higher 2W sales, financial, and HE segment.
We reiterate our Buy rating with a 3% higher TP of Rp5,900. We expect the steady recovery in 3Q24 to continue in 4Q24F onwards.

ASII 9M24 results: beat due to auto recovery and strong financial/HE

ASII recorded a net profit of Rp25.8tr in 9M24 (+1% yoy), 85%/84% of our/cons numbers (above), with 3Q24 net profit reaching Rp9.9tr (+19% qoq, +21% yoy). The strong 9M24 earnings were due to: 1) recovery in 4W sales and sustainable 2W run-rate in 3Q24, which drove growth of 12% qoq in auto revenue and 14% qoq in equity income, despite still low auto distribution margin at 1.2% vs. ~2% in 2023; 2) financial segment continuing its momentum, with 11% yoy revenue growth in 9M24; 3) strong HE segment, with 2% yoy revenue growth in 9M24.

Upgrading our estimates, particularly on 2W growth, financial, HE segment

We raised our FY24F/FY25F/FY26F revenue by 8%/9%/10% and net profit by 10%/13%/10%, driven by: 1) higher 2W sales assumption by 5-10% due to strong 2W sales up to 9M24, vs. our initial assumption of slower 2W in 2H24. Nevertheless, we still expect slower momentum on 2W in FY25F, as we expect 2W sales to reflect middle-low-income economic conditions; 2) higher equity income (12%/9%/6%), especially from AHM; 3) lower auto margin of 1.3% in FY24F (vs. 1.5% in our previous assumption), then a recovery to 1.6%/1.7% in FY25F/FY26F. We noted that despite recovery in 4W and strong 2W momentum, GPM/OPM did not match the revenue momentum, possibly due to rising costs that have not been passed on; 4) upgrade in our financial revenue by 7%/10%/8%, due to the strong momentum of 2W sales in FY24F which will support FY25F revenue, offsetting the weaker impact of 4W sales in FY24F; 5) upgrade in our HE revenue by 5%/6%/8%, driven mostly by higher Komatsu unit sales.

Reiterate Buy rating with a higher TP of Rp5,900

We reiterate Buy rating with a higher SOTP-based TP to Rp5,900 (+3% from prev. TP), implying FY25F PER of 7.3x. ASII currently trades at P/E of 6.7x, 1- std dev of its 5-year mean. We believe short-term concerns on ASII (weak 4W sales, uncertainty on 2W sales) should diminish, as demonstrated by the strong 3Q24 performance. Downside risks: 1) Rapid BEV adaption; which may lead to market share loss; 2) Asset quality deterioration in financials.

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