Earnings were above consensus estimates at 120% of 2020E. The steep earnings downgrade was beat due to increased contribution from MBT (+40% QoQ) on lower Q4 provisioning, and significant jump of Federal Land earnings (P452 Million in Q4 vs. P1 Million in Q3) on higher % of completion as construction capacity began to normalize.
Focusing on TMP (Toyota Motor Philippines), accounting for 19% of GTCAP’s earnings, vehicle sales was down 38% to 100k units in 2020 but market share went up by 11.8% to a record-high of 41%. Windfall from the strong peso combined with aggressive promotions and introduction of new car variants enabled TMP to outperform the sector.
For this year, impact of the safeguard duties (if Tariff Commission ruling is unfavorable) is seen to limit vehicle sales growth – worst case scenario is that Toyota’s vehicle sales will come in at the mid-teens. Management says gross margins will still be at double-digits though (at 13% as of 2020E).
With Toyota Motor Philippines (TMP) and Metrobank (MBT) together accounting for 76% of GTCAP’s 2020 earnings, recovery may lag compared to other holding companies. Uncertainty over the rebound of the auto-industry may put pressure in the short-term, but we believe chunk of the risk is already built-in to its current price with the stock trading at 10x FY21E vs. 15x historical mean. Our market Target Price estimate for GTCAP is at PHP 618.00.