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 9,794Net profit (Btmn) 642 597 674 838EPS (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

Result Preview 3 Nov 2016

Please see disclaimer on last page 2

Figure 1: SAT 3Q16 results preview

Unit: Btmn 3Q15 2Q16 3Q16E %QoQ %YoY 2015 2016E %YoY

Sales and service revenues 2,263 1,970 2,034 3.2% -10.1% 8,644 8,238 -4.7%

Total revenues 2,286 1,993 2,051 2.9% -10.3%

Cost of sale of goods and services 1,912 1,690 1,708 1.1% -10.7% 7,392 7,011 -5.2%

Gross profit 351 281 325 16.0% -7.2% 1,252 1,227 -2.0%

SG&A expense 171 165 164 -0.5% -3.8% 680 643 -5.6%

Total expenses 2,083 1,857 1,873 0.8% -10.1% 8,073 7,664

EBIT 216 147 191 29.5% -11.6% 801 719 -10.2%

Net Profit 179 118 166 40.4% -7.2% 642 597 -7.0%

EPS (Bt) 0.42 0.28 0.39 40.4% -8.1% 1.51 1.40 -7.0%

Gross profit margin 15.50% 14.24% 16.00% 14.48% 14.90%

Net profit margin 7.81% 5.92% 8.08% 7.42% 7.24%

Source: Company data, AWS

Result Preview 3 Nov 2016

Please see disclaimer on last page 3

Income Statement

Unit: Btmn 2014 2015 2016E 2017E 2018E

Sales and service revenue 8,084 8,644 8,212 8,705 9,575

Cost of sales and services 6,667 7,392 7,023 7,444 8,139

Gross profit 1,417 1,252 1,189 1,261 1,436

Total revenues 8,179 8,817 8,349 8,854 9,713

SG&A expense 705 680 668 683 701

Total expenses 7,372 8,073 7,702 8,128 8,840

Operating profit 866 801 705 784 930

Financial cost 147 116 101 70 43

Pre-tax profit 719 685 605 714 887

Income tax expense 69 43 48 57 71

Net profit 650 642 556 657 816

Net profit for the company 650 642 556 657 816

Statement of Financial Position

Unit: Btmn 2014 2015 2016E 2017E 2018E

Cash and equivalents 975 1,000 935 992 1,088

Trade accounts receivable 1,296 1,311 1,265 1,341 1,475

Other receivables 76 110 61 64 71

Inventories 660 738 624 662 723

Other current assets 138 269 250 250 250

Total non-current assets 6,669 6,206 6,072 5,762 5,690

Total assets 9,814 9,634 9,207 9,070 9,297

Trade accounts payable 1,121 1,233 1,167 1,237 1,353

Other payables 298 300 300 300 300

Accounts payable - purchase of

assets 66 40 100 70 85

Long-term loans 2,913 2,244 1,554 961 545

Other liabilities 197 285 215 227 242

Total liabilities 4,596 4,103 3,336 2,796 2,525

Issued and paid-up share capital 425 425 425 425 425

Premium on ordinary shares 716 716 716 716 716

Retained earnings 4,072 4,388 4,728 5,130 5,628 Equity attributable to owners 5,217 5,531 5,872 6,274 6,772

Total equity 5,217 5,531 5,872 6,274 6,772

Please see disclaimer on last page

CG Report

4

Score Range Number of Logo Description

90 – 100

80 – 89

70 – 79

60 – 69

50 – 59

Below 50

No logo given

Excellent

Very Good

Good

Satisfactory

Pass

N/A

Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (IOD) in 2015.

Corporate Governance Report disclaimer

The disclosure of the survey result of the Thai Institute of Directors

Association (“IOD”) regarding corporate governance is made pursuant

to the policy of the Office of the Securities and Exchange Commission.

The survey of the IOD is based on the information of a company listed

on the Stock Exchange of Thailand and the Market for Alternative

Investment disclosed to the public and able to be accessed by a

general public investor. The result, therefore, is from the perspective of

a third party. It is not an evaluation of operation and is not based on

inside information.

The survey result is as of the date appearing in the Corporate

Governance Report of Thai Listed Companies. As a result, the survey

result may be changed after that date, Asia wealth Securities Company

Limited does not conform nor certify the accuracy of such survey result.

Please see disclaimer on last page

CG Report

5

ขอมล Anti-Corruption Progress Indicator ของบรษทจดทะเบยน

ระดบ 1ACD AEONTS AFC AIRA AJ ALUCON AMC AQUA ARIP AUCT BAT-3K BIG BJCBLISS BMCL BOL BRR BSBM CBG CCET CCN CGD CMR CPH CSC CSPCTW DCON DRACO DSGT DTCI E EMC ESSO FOCUS FSMART GIFT GLANDGRAND GUNKUL HFT HTECH IHL ILINK ITD JSP KDH KTIS KTP LEE LSTMAJOR MATCH MAX M-CHAI MDX MIDA ML MPIC NC NEP NNCL NWR OHTLPICO PK PL PPM PRAKIT PRECHA PRIN PSTC PYLON RAM RICH RS SANKOSAUCE SAWAD SAWANG SCN SEAFCO SF SHANG SIRI SMART SMM SOLAR SPACK SPGSPPT SPVI STA STAR SVH SVOA SWC TAPAC TC TCCC TCJ TCOAT THTKS TNH TNPC TPA TPAC TPOLY TRC TRUBB TSE TTA TTI TTL TTTMTWP TWZ U UMS UPA UPOIC UTP UVAN VARO VI VIBHA VIH VTEWG

ระดบ 22S ABICO AF AKP AMARIN AMATA AOT APCO AYUD BEAUTY BFIT BH BKDBLAND BTNC CCP CI CSR CSS EFORL EPCO FE FNS FVC GEL GLOBALHEMRAJ IEC IFS INET JUTHA KASET KCAR KKC KSL L&E LALIN LTX MMALEE MBK MBKET MEGA MK MPG MTLS NCH NCL NPP OCC OCEAN PBPCA PRINC QH ROCK RPC S&J SGP SIAM SIS SKR SMG SMIT SORKONSUSCO TAKUNI TEAM TF TIC TIP TIPCO TMC TMI TPP TRT TRU TRUETSC TSI TTW TVD TVO UKEM UNIQ UWC VNG WIIK WIN XO

ระดบ 3AABC ACAP ADVANC AEC AGE AH AIE AMANAH ANAN AP APCS APURE ASASIA ASIAN ASIMAR BIGC BROOK BTS BWG CEN CENTEL CFRESH CHARAN CHO CHOTICM CNT COL CPALL CPF CPI CPL DELTA DEMCO DIMET DNA DTAC EAECF EE EVER FPI GBX GC GFPT GLOW HMPRO HOTPOT ICC ICHI IFECINOX INSURE IRC JAS JTS JUBILE KC KTC KYE LHK LPN LRH MAKROMC MCOT MFC MFEC MINT MJD MONO MOONG NBC NDR NINE NMG NSINTV OGC PACE PCSGH PDI PG PHOL PLAT PPS PR PRANDA PREB PSQLT RATCH RML ROBINS ROJNA RWI SAMCO SCCC SCG SEAOIL SE-ED SENA SINGERSITHAI SMK SMPC SPALI SPC SPCG SPI SRICHA SSI STANLY SUPER SVI SYMCSYNEX SYNTEC TASCO TCMC TFI THAI THRE THREL TICON TKT TLUXE TNL TPCORPTMILL TMT TSTE TSTH TTCL TU TVI UOBKH UREKA VGI VNT WACOAL WHAZMICO

ระดบ 3BAAV AHC AI AIT AKR ARROW ASK BA BDMS BEC BECL BJCHI BUICGH CHG CHOW CIG CITY CK CKP COLOR CWT EARTH EASON EPG F&DFANCY FIRE FMT FORTH GENCO GL GOLD GPSC GRAMMY HYDRO IRCP IT JCTKCM KWC LH LIT LOXLEY MACO MANRIN MATI MODERN MSC NOBLE NOK NPKNUSA OISHI OTO PAF PAP PATO PF PJW PLANB PLE POLAR PRG PTLQ-CON QTC RCI S11 SALEE SAM SAMART SAMTEL SAPPE SC SCP SFP SIMSLP SMT SPA SPORT SSC SST STEC STPI SUC SUTHA T TAE TBSPTCC TFD TGCI TGPRO THANA THIP TIW TK TMW TNDT TOPP TPC TPCHTPIPL TSR TT TYCN UAC UBIS UEC UMI UP UPF UT UV VPOWAVE WINNER YUASA

ระดบ 4ASP BAFS BANPU BAY BBL BKI BLA CIMBT CNS CSL DCC DRT DTCEASTW ECL EGCO ERW FSS GCAP HANA HTC INTUCH IRPC IVL KBANK KCEKGI KKP KTB LANNA LHBANK MTI NKI PSL PTG PTTEP SABINA SCB SNCSNP SSF SSSC TCAP THCOM TISCO TIMB TMD TNITY TOG

ระดบ 5BCP CPN GYT PE PM PPP PT PTT PTTGC SAT SCC THANI TOP

ไมเปดเผยหรอไมมนโยบายA ACC AJD AQ BCH BGT BROCK BSM BTC CHUO CPR CRANE EICFER JMART JMT KAMART KBS KIAT LDC MBAX MCS METCO NEW NEWS NYTPAE PDG PERM PMTA POST RCL RICHY ROH S SIMAT TCB TR TSFTVT WORKหมายเหตระดบ 1 : มนโยบายระดบ 2 : ประกาศเจตนารมณระดบ 3 : มมาตรการปองกน ซงทง 2 กรณ ถอเปนผลการประเมนในระดบเดยวกน

3A : บรษทมการประกาศเจตนารมณเขารวมโครงการ CAC หรอภาค3B : บรษทมค ามน และนโยบายของบรษท แตมไดประกาศเจตนารมณเขารวมโครงการ CAC หรอภาค

ระดบ 4 : ไดรบการรบรองระดบ 5 : ขยายผลสผท เกยวของ

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