FDI related investments account for 14% of US$9bn while exports account for 7.4% of US$17bn total.
This year is a strong recovery year for the auto parts industry primarily due to the strong rebound in domestic sales and the positive momentum in production and strong demand outlook. Further changes in policy leading to technology transfer and local content could spur more growth for the autoparts industry.
Here's more from Maybank Kim Eng:
Maybank's earnings projections for 1Q12 will be beaten handily, and hence estimates will be upgraded on the universe of core holdings post management meetings. 1Q12 net profit actual already account for over 25-30% of the 2012 net profit estimates.
Riding on coattails on high auto volumes: 2011 was beset by several calamities that impaired the sector. First there was the supply chain disruption and parts shortage due to the earthquake in Japan early last year. Then at end 2011 there was a prolonged flooding in Thailand that again caused supply chain disruptions.
This year is a strong recovery year, in part because of base effect but more importantly because of the strong rebound in domestic sales. The Federation of Thai Industries has raised 2012 production forecast from 2mn units to 2.1mn, +44%YoY, the same MBKET’s forecast. To hit the target production plan would run at 500K units/quarter, a new high for the industry.
Autoparts makers to benefit given the positive momentum in production and strong demand outlook. Because the pace of the recovery is much stronger than expected - plus the high OPL nature of the business which is difficult to estimate - there is upward risk bias to the 2012 estimates beyond the 1Q12 adjustments.
Bright long term outlook: According to Autofacts Global, Thailand as an auto production base will move up from No. 12 in rank globally to No. 8 this year and is expected to hold that position until 2015.
Within Thailand, the sector generates significant activity. FDI related investments account for 14% of US$9bn while exports account for 7.4% of US$17bn total. However, none of these values are reflected in the stock market; notably the Autofacts ranking is predicated on the old production plan.
Policy change pertaining to technology transfer and local content could spur growth for the autoparts industry. Incumbents with a strong R&D profile and diversified product portfolio may become the primary beneficiaries.
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