STANLY - 3QFY25: Weak, as expected

3QFY25: Weak, as expected

STANLY’s 3QFY25 (October-December 2024) net profit was Bt310mn, down 30% YoY and 5% QoQ, much as expected by the market, pulled down by slow sales and lower EBIT margin. We maintain our cautious view toward the Automotive sector since there are no clear near-term signs of a recovery in the automotive industry. We assign a 3-month tactical call of Underperform to STANLY with an end-2025 TP of Bt190/share.

3QFY25: Weak as expected. STANLY’s 3QFY25 (October-December 2024) net profit was Bt310mn, down 30% YoY and 5% QoQ. Excluding extra items of impairment loss on assets from merging factories (in 2QFY25), FX loss (in 3QFY24 and 2QFY25) and FX gain (in 3QFY25), core profit was Bt303mn, plummeting 30% YoY and 42% QoQ. This lined up with market estimates, reflecting slow sales and lower EBIT margin.

Highlights.

In 3QFY25, sales were Bt2.9bn, down 18% YoY and 9% QoQ, dimmed by a poor industry backdrop with Thai auto production falling 25% YoY in October and 17% YoY in November (official December data is not yet released).
STANLY is merging factories over 2Q-4QFY25 to improve efficiency. This will bring a higher gross margin but also higher SG&A expense to sales due to cost reclassification. EBIT margin should be appropriate to reflect the operations. EBIT margin was 13% in 3QFY25, down from 15.1% in 3QFY24 on poor sales, but up from 11.5% in 2QFY25 that had the impairment loss on assets.
No dividend income in the quarter vs. Bt127mn in 2QFY25.

Maintain forecast. 9MFY25 (April–December 2024) core profit of Bt1.1bn (-9% YoY) accounted for 77% of our full-year forecast and we leave our projection unchanged. In 4QFY25 (January–March 2025), we expect earnings to continue to fall YoY but improve QoQ on seasonality.

Underperform. We maintain our cautious view toward the automotive sector since there are no clear near-term signs of recovery in the automotive industry. We assign a 3-month tactical call of Underperform on STANLY with an end-2025 TP of Bt190/share, down slightly from Bt192/share, based on a PE multiplier of 9.2x (lowered from 9.5x) or -0.5SD of historical average since FY2010. A catalyst would be an improved economy, which in turn would boost domestic auto demand and loan quality, allowing greater access to auto loans. This would clearly signal an approaching turnaround in the Thai automotive industry and earnings.

Risks. Risks are an economic slowdown that will erode auto demand and rising raw material prices. We see the key ESG risk as environmental issues (E) and STANLY intends to reduce the risk