Thailand exports down by 3.9% in 1Q12

Silverlining however is seen on autoparts production now hitting higher than pre-flood levels.

Here's from Maybank Kim Eng:

Exports to perform better in 2Q12: The 6.5%YoY drop Mar-12 exports has dragged overall 1Q12 exports down by 3.9%YoY. Leading in the recovery are the auto and computer parts/components sectors. Compounded with various gov’t stimulus programs, the tax exception on machinery imports and the BOT-led soft loans initiative to SMEs, the MBKET Economics Team believes that exports, which have been contracting since Nov-11 have bottomed, and the recovery going forward could become more broad-based.

Autoparts piggy backs on high auto volumes: Auto exports growing sequentially in the 3M to Mar-12, ranging 6.3% to 39.9% could remain at the front of the recovery trend, we believe, given that production is now hitting higher than pre-flood levels. The Federation of Thai Industries has raised its 2012 production forecast from 2.0mn units to 2.1mn, +44%YoY, and this is now on par with MBKET’s forecast. The 1Q12 production reached 499,000 units, +6.5%YoY and 189.5% QoQ and we expect the momentum to pick up in the next 2-3 quarters. About 50% of the targeted volume would be exported.

Autoparts makers to benefit: Given the positive momentum in production and strong demand outlook we re-affirm our Buy calls on SAT (TP Bt33.90), STANLY (TP Bt235.00) and AH (TP Bt17.00), the indirect play into Thailand’s auto sector. Because the pace of the recovery is much stronger than expected plus the high OPL nature of the business, we are now convinced that the sector will see earnings re-rating including from us. We will be tracking closely the May-Jun production to confirm the trend and will revisit our earnings assumptions shortly.

SMIT riding coattails: This is a producer of special steel for moulds for various applications covering several products that are exported by Thailand. However, 43% of revenues come from the auto industry. Its position is further strengthened by having an in-house heat treatment that facilitates quality audit, a very attractive feature to have under general conditions but most especially now when the market is tightened by high volume production targets in a short period of time. SMIT’s fair value is Bt4.5, DDM-based at 11% CoE and 6% G.