Price (Bt) 8.35
Target (Bt) 9.00
Set Index 556.47
2Q09 earnings down less than the industry
2Q09 earnings fall to Bt42mn (-38% qoq, -49% yoy)
Inoue Rubber (Thailand) (IRC) reported a weak 2Q09 (Jan – Mar 2009)
net profit of Bt42mn (EPS Bt0.21), down 38% qoq and 49% yoy. Although a slump in earnings, this level of net profit is still impressive when compared with the industry after auto production has slumped by 46% and motorcycle production is down 20%. IRC sales were Bt937mn, down 36% qoq and 32% yoy. This fall was less than the industry as IRC sales are diversified into 1) industrial elastomer products and 2) motorcycle tires and tubes in all three sectors (OEM, replacement and exports). The gross margin was still good at 10% compared with 10-11% previously, although production was at a low utilisation with lower raw material costs. Sales and administrative expenses were down to Bt44mn (-37% qoq, -20% yoy) from good expense controls and interest was a low B3mn.
Further revision as crisis deepens more than previous forecast
The world financial crisis has widened and has severely impacted Thai auto production, which has
fallen 40-50% for domestic autos and exports falling by 30%. This fall has been more severe than our report
of Feb 11, 2009. We are therefore revising down our earnings projection. However, in the second half of
this year, after inventory stocks have been cleared, we expect production to return to the same level as
sales (down yoy 30%). Motorcycle production is expected to fall by around 20%. Overall, we have forecast
the 2009 sales at Bt4,600mn, down 19% yoy and earnings to fall to Bt206mn (EPS Bt1.03), down 26%.
Maintain HOLD with next quarter down much less
The current IRC price of Bt8.35 has strongly increased from low at Bt5.5 by 55% from the market
view that the auto industry will pass the low production level in the second quarter. The current share
price is trading on a 2009 PER of 8.1x with an EV/EBITDA of 3.5x and below the book value of Bt8.6. We are
maintaining our fair value of Bt9 based on a 2010 PER of 7-8x. Overall, we maintain our recommendation of
HOLD.
Earnings summary
Year End Sep 30 2006 2007 2008 2009F 2010F
Sales (Btmn) 4,512 4,882 5,648 4,600 5,060
EBITDA (Btmn) 407 571 536 485 533
Earnings (Btmn) 172 293 277 206 240
EPS (Bt) 0.86 1.46 1.39 1.03 1.2
PER (x) 9.7 5.7 6 8.1 7
EV/EBITDA (x) 5.2 2.9 3.5 3.5 3.1
CF/share (Bt) 3.3 1.4 2.9 2.2 2.5
BVPS (Bt) 5.9 7.1 8 8.6 9.4
P/BV (x) 1.4 1.2 1 1 0.9
DPS (Bt) 0.29 0.48 0.45 0.36 0.42
Dividend yield (%) 3.50% 5.70% 5.40% 4.30% 5.00%
Net debt/Equity (x) 0.4 0 0.1 0 Cash
ROA (%) 11.00% 9.50% 6.90% 8.40% 9.00%
ROE (%) 22.40% 18.30% 12.40% 13.30% 13.20%
Source : Company reports and KELIVE Research estimates.
By Kim Eng Securities (Thailand) Company Limited on May 20, 2009
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