TRU Increases Capacity To Meet Rising Demand


BMI View : Thai auto assembler and component manufacturer, TRU, plans to spend THB500mn to increase its domestic capacity. This plays out our view given that we expect investment in the auto sector to remain strong. Although TRU expects 2013 Thai auto production to grow 15%, to hit 2.8mn units, we are more guarded in our forecast. BMI forecasts 2013 Thai auto production to grow 2%, to hit 2.5mn units.

Thai auto assembler and component manufacturer, Thai Rung Union Car Plc (TRU), has announced plans to spend THB500mn (US$16.9mn) to expand its production capacity in a bid to raise its 2013 revenue by 15%. TRU also expects to increase the capacity utilisation of its Bangkok and Rayong factories from 85-90% currently, to 100% by the end of 2013.

TRU's move is in line with BMI's view of the Thai auto market. While we expect 2013 domestic auto sales to contract slightly, due to the end of the first-car buyer scheme in 2012 ( see our online service, February 28 2013, 'Scaling Back Our Bullish Forecasts'), we expect auto production to grow as automakers and suppliers continue to increase investments on the back of rising export demand ( see 'Car Carriers In Sweet Spot Amid Asian Exports Boom', February 25 2013).

Japanese automakers continue to increase their Thailand investments. Even Toyota Motor, which has pledged to halt construction of any new factories globally for the next three years, is increasing investments in its existing Thailand factories as it remains bullish on the potential of the country's auto market. It would be logical for component makers such as TRU to increase their output on the back of rising demand for local parts.

Tough To Sustain Such Heady Gains
TRU Share Price (THB)

That being said, we find TRU's forecasts overly bullish. TRU forecasts 2013 domestic vehicle production to grow 15%, to hit 2.81mn units. However, BMI forecasts domestic production to grow by just 2%, from 2.45mn to about 2.5mn units. Furthermore, our Country Risk team is bearish on the Stock Exchange of Thailand Index (SETI), due to increasingly expensive valuations. As such, we believe TRU's stock has enjoyed a strong run-up in the last few years and keeping up with such heady growth will prove challenging.

This article is tagged to:
Sector: Autos
Geography: Thailand

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