Result Preview 3 Nov 2016 Please see disclaimer on last page 1 Somboon Advance Technology PCL (SAT) Better quarter QoQ ► Expect 3Q16 net profit of Bt166mn, up 40% QoQ but down 7% YoY. ► A bit better growth momentum, but waiting for next year for a significant recovery. ► Maintain BUY recommendation with 2017 target price of Bt16.35. Better quarter QoQ We expect SAT to report a 3Q16 net profit of Bt166mn, up 40% QoQ but down 7% YoY. We expect its top-line to grow 3.2% QoQ thanks to increased sales from agricultural machinery products (Kubota) boosted by the end of drought conditions which had undermined sales volume in 1H16. Kubota sales should also get help from the launch of a new model which has more horsepower, a key attribute that consumers prefer. Paddy harvesting season beginning from the middle of this month until the end of this year should increase demand for harvesting machinery. Demand from other crop farmers is also supportive. We expect the contribution from agricultural machinery to increase to 19% from 14% in the prior quarter. On the cost side, SAT’s cost control program is likely to successfully go beyond expectations, especially staff cost reduction and recycling scrap steel instead of selling it. We expect gross profit margin to improve to 16.0% from 14.2% in 2Q16 and net profit margin to increase to 8.1% from 5.9% in 2Q16. Maintain BUY with 2017 TP of Bt16.35 Although SAT’s net profit is expected to contract slightly this year due to temporary effect from the relocation from one major automaker, and a delay in economic recovery, we expect earnings growth to march on in 2017 and 2018 because of increasing domestic demand from car purchases after the end of the first-car scheme lock-up period (the majority of car changes should happen from March 2017), end of drought conditions, and the government’s bailout plan for farmers. We maintain a BUY recommendation with a 2017 target price of Bt16.35, based on the DCF method, offering 30% upside from the last closing price. BUY TP: Bt16.35 Closing price: Bt12.60 Upside/downside +30% Sector Automotive Paid-up shares (shares mn) 425 Market capitalization (Bt bn) 5.34 Free float (%) 53.83 12-mth daily avg. turnover (Bt mn) 7.73 12-mth trading range (Bt) 18.40 / 13.88 Major shareholders (%) Somboon Holding& Kitapanich family 45.7 Nortrust Nominees Ltd-Cl Ac. 5.6 Thai NVDR 3.9 AIA Co., Ltd. - AIA D-PLUS (HK) 2.2 Financial highlights Source: SETSMART, AWS Thailand Research Department Mr. Narudon Rusme, CFA License, No. 29737 Tel: 02 680 5056 Year to 31 Dec 2015 2016E 2017E 2018E Revenue (Btmn) 8,817 8,418 8,927 9,794 Net profit (Btmn) 642 597 674 838 EPS (Bt) 1.51 1.40 1.59 1.97 EPS growth (%) (1.3) (6.9) 12.9 24.2 P/E (x) 8.4 9.0 8.0 6.4 P/BV (x) 1.0 0.9 0.9 0.8 Div. yield (%) 4.7 4.4 4.9 6.1
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Result Previe · 2016-11-04 · AIA Co., Ltd. - AIA D-PLUS (HK) 2.2 Financial highlights Revenue (Btmn) Source: SETSMART, AWS Thailand Research Department Mr. Narudon Rusme, CFA License,
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Result Preview 3 Nov 2016
Please see disclaimer on last page 1
Somboon Advance Technology PCL
(SAT)
Better quarter QoQ
► Expect 3Q16 net profit of Bt166mn, up 40% QoQ but
down 7% YoY.
► A bit better growth momentum, but waiting for next
year for a significant recovery.
► Maintain BUY recommendation with 2017 target price
of Bt16.35.
Better quarter QoQ
We expect SAT to report a 3Q16 net profit of Bt166mn, up 40%
QoQ but down 7% YoY. We expect its top-line to grow 3.2% QoQ
thanks to increased sales from agricultural machinery products
(Kubota) boosted by the end of drought conditions which had
undermined sales volume in 1H16. Kubota sales should also get
help from the launch of a new model which has more horsepower,
a key attribute that consumers prefer. Paddy harvesting season
beginning from the middle of this month until the end of this year
should increase demand for harvesting machinery. Demand from
other crop farmers is also supportive. We expect the contribution
from agricultural machinery to increase to 19% from 14% in the
prior quarter. On the cost side, SAT’s cost control program is
likely to successfully go beyond expectations, especially staff
cost reduction and recycling scrap steel instead of selling it. We
expect gross profit margin to improve to 16.0% from 14.2% in
2Q16 and net profit margin to increase to 8.1% from 5.9% in
2Q16.
Maintain BUY with 2017 TP of Bt16.35
Although SAT’s net profit is expected to contract slightly this year
due to temporary effect from the relocation from one major
automaker, and a delay in economic recovery, we expect
earnings growth to march on in 2017 and 2018 because of
increasing domestic demand from car purchases after the end of
the first-car scheme lock-up period (the majority of car changes
should happen from March 2017), end of drought conditions, and
the government’s bailout plan for farmers. We maintain a BUY
recommendation with a 2017 target price of Bt16.35, based on
the DCF method, offering 30% upside from the last closing price.
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