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Thai Storage Battery
BAT-3K
<Bt38.25>
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Recommendation
New : LONG-TERM
BUY
Previous : LONG-TERM
BUY
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Expectations
of strong 4Q02 earnings
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Thai Storage Battery (BAT-3K)
is expected to report very strong 4Q02 results within the
next few days. We estimate that the company's 4Q02 net
profit rose 99.4% qoq and 59.2% yoy to Bt62mn (EPS of
Bt3.1). For the full-year 2002, we expect to see net profit
of Bt148mn (EPS of Bt7.4), up 45.9%.
The major factors driving
4Q02 earnings are 1) strong domestic and export demand,
particularly during the traditional fourth quarter high
season, 2) strong demand for BAT-3K's new maintenance-free
batteries, which captures a higher profit margin and 3)
lower raw material costs following the cut on import duties
on lead from 10% to 1%. We are forecasting BAT-3K to achieve
4Q02 sales of Bt542mn, up 39.1% qoq and 9.9% yoy.
Looking forward, BAT-3K's
earnings prospects remain bright. According to management,
the company's orders in excess of its current manufacturing
capacity, especially for maintenance-free batteries. To
serve this growing demand, the company is in the process of
increasing capacity from 150,000 units per month to 170,000
units at a cost of around Bt50mn.
We are projecting BAT-3K's
sales growth this year of around 8% and earnings growth of
17.6% to Bt174mn (EPS of Bt8.7). Based on this forecast, we
believe that BAT-3K can afford to step up its dividend pay
out to Bt2.6 per share, up from the Bt2.25 per share to be
paid this year.
BAT-3K is trading on a
relatively cheap PER of 4.39x, EV/EBITDA 2.14x, P/BV 0.6x
and dividend yield of around 6-8%. The company has a strong
financial position with debt/equity ratio of only 0.24x. We
maintain our target price of Bt50/share, which would still
put the stock on an undemanding PER slightly below 6x. The
major drawback to the share, however, is its relatively low
liquidity in the market. For this reason, we rate BAT-3K as
"LONG TERM BUY."
BAT-3K's income statement (Mn Bt)
| |
4Q02F |
3Q02 |
QoQ |
4Q01 |
YoY |
2002F |
2001 |
YoY |
|
Sales |
542.8 |
390.3 |
39.1% |
493.7 |
9.9% |
1,754.9 |
1,598.8 |
9.8% |
|
Other Income |
6.9 |
6.4 |
8.5% |
2.0 |
242.7% |
25.0 |
23.9 |
4.7% |
|
COGs |
357.5 |
258.5 |
38.3% |
328.2 |
8.9% |
1,184.5 |
1,052.8 |
12.5% |
|
Depreciation&amortisation |
23.7 |
23.9 |
-0.5% |
24.1 |
-1.5% |
94.8 |
91.9 |
3.1% |
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Gross profits |
161.5 |
107.9 |
49.6% |
141.4 |
14.2% |
475.6 |
454.1 |
4.7% |
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Gross margin (%) |
29.8% |
27.7% |
- |
28.6% |
- |
27.1% |
28.4% |
- |
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SG&A |
72.5 |
67.2 |
7.8% |
74.7 |
-2.9% |
250.1 |
283.8 |
-11.9% |
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SG&A / Sales |
13.4% |
17.2% |
- |
15.1% |
- |
14.3% |
17.7% |
- |
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EBITDA |
117.9 |
69.8 |
68.9% |
94.8 |
24.3% |
340.3 |
281.0 |
21.1% |
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EBITDA margin (%) |
21.7% |
17.9% |
- |
19.2% |
- |
19.4% |
17.6% |
- |
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Interest expense |
4.6 |
5.1 |
-8.6% |
7.3 |
-36.3% |
22.3 |
30.7 |
-27.3% |
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Net profit before extra item |
62.0 |
28.5 |
117.7% |
40.7 |
52.1% |
164.0 |
102.3 |
60.4% |
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Extra ordinary gain (loss) |
- |
2.6 |
N.A. |
(1.8) |
N.A. |
(16.0) |
(0.9) |
NA |
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Net profit |
62.0 |
31.1 |
99.4% |
38.9 |
59.2% |
148.0 |
101.4 |
45.9% |
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EPS (Bt) before extra item |
3.10 |
1.42 |
117.7% |
2.04 |
52.1% |
8.20 |
5.12 |
60.4% |
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EPS (Bt) |
3.10 |
1.55 |
99.4% |
1.95 |
59.2% |
7.40 |
5.07 |
45.9% |
Note: COGs does not include Depreciation and Amortisation
- Based on recent data from
the Bank of Thailand, total production of car batteries in
Thailand rose 26.6% yoy and 14% qoq in 4Q02 to 3.4mn
units. Domestic sales, meanwhile, increased 28% yoy and
21% qoq to 1.9mn units.
However, BAT3K's 4Q02 sales
numbers will look a little different from total industry
sales since the company had very strong exports in 4Q01 and
a low level of exports in 3Q02. Based on the assumption that
BAT3K's exports in 4Q02 rose by around 50% from the previous
quarter, we estimate the company's quarterly sales will come
in around Bt543mn, up 39% qoq and 10% yoy.
According to BAT-3K's
management, the company is currently producing at full
capacity. In order to serve future growth in demand, the
company is in the process of expanding production capacity
from 150,000 units per month to 170,000 units. The company
will spend around Bt50mn to install new production machines.
At the present, we are forecasting BAT-3K to achieve
full-year 2003 sales growth of around 8%, compared to the
9.8% growth estimated in 2002.
BAT-3K’s quarterly sales
| |
4Q01 |
1Q02 |
2Q02 |
3Q02 |
4Q02F |
%QoQ |
%YoY |
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Sales |
493.72 |
419.17 |
401.52 |
390.31 |
542.76 |
39% |
9.9% |
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> Domestic Sales |
192.88 |
170.73 |
208.36 |
170.84 |
213.55 |
25% |
10.7% |
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> Export Sales |
300.84 |
248.44 |
193.16 |
219.47 |
329.20 |
50% |
9.4% |
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%Portion |
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> Domestic Sales |
39.1% |
40.7% |
51.9% |
43.8% |
39.3% |
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> Export Sales |
60.9% |
59.3% |
48.1% |
56.2% |
60.7% |
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- We expect BAT-3K's gross
margins in 4Q02 to slightly improve to 29.8% from 27.7%
due to the success of its high-margin maintenance free
batteries, as well lower raw material prices with the
reduction in the import duty on lead from 10% to 1% at the
end of 2Q02. Pure lead accounts for 27% of the company’s
total raw material costs.
Last year BAT-3K could sell
more in OEM market to Isuzu D-MAX and some of the European
and American brands like, Mercedes Benz, Volvo, Land Rover,
Alpha Romeo and Chrysler. However, OEM sales still
represented a relatively small 5% of total sales.
The company has already
expanded production capacity for high margin, but low volume
products, such as solar, EV, golf cart and forklift
batteries.
BAT-3K was successful in
opening new export markets in Africa, America, Indochina and
the Caribbean. Previously, the bulk of BAT-3K's exports were
to the Middle East.
BAT-3K has the second largest
share in the battery replacement market of around 28%. GS
Battery is a largest with a share of 35%. BAT-3K should
benefit from the strong rebound in auto sales over the last
three years. Government statistics show that total vehicle
registrations (excluding motorcycles) rose to 7.7mn million
units in 2002.
- Based on our DCF model,
BAT-3K's shares are worth Bt58 apiece. We don't believe
the market yet reflects the company's strong recovery in
earnings. Even if we adopt a conservative valuation of 6x
prospective earnings, or Bt50 per share, the stock still
has very sizeable upside potential of 30.7%.
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Income Statement |
1999 |
2000 |
2001 |
2002F |
2003F |
2004F |
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Sales |
1,283 |
1,587 |
1,599 |
1,755 |
1,895 |
1,990 |
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Other income |
21 |
20 |
24 |
25 |
20 |
20 |
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Total revenues |
1,304 |
1,607 |
1,623 |
1,780 |
1,915 |
2,010 |
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Cost of Goods sold |
768 |
994 |
1,053 |
1,185 |
1,283 |
1,347 |
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Depreciation and Amortisation |
68 |
89 |
92 |
95 |
89 |
94 |
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SG&A and Others Expenses |
248 |
329 |
289 |
255 |
289 |
304 |
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EBIT |
220 |
195 |
189 |
246 |
254 |
266 |
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Interest expenses |
44 |
34 |
31 |
22 |
16 |
11 |
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Net profit before extra item |
121 |
91 |
102 |
164 |
174 |
187 |
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Equity Acc. + Extraordinary Gains |
(3) |
10 |
(1) |
(16) |
- |
- |
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Net profit |
118 |
102 |
101 |
148 |
174 |
187 |
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EPS |
5.88 |
5.08 |
5.07 |
7.40 |
8.71 |
9.36 |
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EPS Growth |
70.8% |
13.6% |
0.1% |
45.9% |
17.7% |
7.4% |
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PER |
6.51 |
7.53 |
7.54 |
5.17 |
4.39 |
4.09 |
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EV/EBITDA |
3.10 |
3.17 |
3.47 |
2.50 |
2.14 |
1.68 |
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P/BV |
0.89 |
0.82 |
0.76 |
0.67 |
0.60 |
0.54 |
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P/Sales |
0.60 |
0.82 |
0.48 |
0.44 |
0.40 |
0.38 |
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Dividend / Share |
1.50 |
1.50 |
1.50 |
2.25 |
2.61 |
2.81 |
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Debt / Equity |
0.49 |
0.46 |
0.56 |
0.36 |
0.24 |
0.12 |
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Analyst: Surachai P. (Ext. 1420)
Email: Surachai.p@kimeng.co.th
If you have
any questions or suggestions please feel free to email our Research
Webmaster
Copyright © March 2000,
Kim Eng Securities (Thailand) PLC. All rights reserved.
Disclaimer
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