We visited Astra International (ASII), Astra Otoparts (AUTO), Selamat Sempurna(SMSM), MPM (MPMX), Adira (ADMF) and Bintraco Dharma (CARS) last week.Key takeaways:    Weak 2W due to higher registration charges and electricity tariffs: 2W sales havecontinued to decline (by c10% in 1H17) even after falling to a decade low in 2016.Companies attribute this to a combination of factors: higher registration charges (from 1%to 2% of price), rise in electricity tariffs, delays in harvest seasons etc. However, thecompanies are optimistic about future growth as they do not believe the 2W market is stillsaturated. But the current sales volume of 6m is too low, as it implies a replacement life of15years (2W population is 90m) higher than 10years – the average life of 2Ws.    4W weakness due to lower consumer spending; expect Mitsubishi to do well. Thecompanies believe GDP growth and increased consumer spending are needed to lift 4Wsales. They expect the newly launched MPV Mitsubishi Xpander to do well, given thedesign and existing brand equity of Mitsubishi. But Wuling Confero may not make muchimpact due to a lack of awareness about the brand in Indonesia.    Autoparts offers good potential but lack of domestic raw materials is a concern.Autopart suppliers AUTO and SMSM are positive on the potential of the domestic andexports market. Indonesia has lower labour costs than Thailand but lacks domesticsources of raw material like steel, rubber, plastics etc making costs higher than in regionalauto hub Thailand, which has more raw materials available locally. While the replacementmarket is more profitable, supplying to OEM is important to gain credibility.    Asset quality of finance companies remains good. The loan books of financecompanies remain healthy despite a weak 2W market. Not all companies see higherrisks from LCGC related loans as LCGC buyers are a mix of first and second carbuyers. Another trend is growing financing of consumer durables, mostly to existing2W/4W customers.    Retain Buy on ASII and AUTO. We have Buy ratings on ASII (IDR9,000SOTP-basedTP and AUTO (IDR2,700DCF-based TP).

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