BH - Gajah Tunggal-Credit Suisse

10 June 2013
Asia Pacific/Indonesia
Equity Research
Tires & Rubber
Gajah Tunggal
(GJTL.JK / GJTL IJ)
Rating
OUTPERFORM*
Price (07 Jun 13, Rp)
3,100.00
Target price (Rp)
4,300.00
Upside/downside (%)
38.7
Mkt cap (Rp bn)
10,802.9 (US$ 1.1)
Enterprise value (Rp bn)
14,152
Number of shares (mn)
3,484.80
Free float (%)
40.0
52-week price range
3,325.0 - 2,025.0
ADTO - 6M (US$ mn)
2.0
*Stock ratings are relative to the coverage universe in each
analyst's or each team's respective sector.
Target price is for 12 months.
Research Analysts
Dian Haryokusumo
62 21 255 37974
dian.haryokusumo@credit-suisse.com
Share price performance

Price (LHS)
Rebased Rel (RHS)
4000
3500
3000
2500
2000
Jun-11 Oct-11 Feb-12 Jun-12 Oct-12 Feb-13
120
100
80
60
40
The price relative chart measures performance against the JSX

COMPOSITE INDEX which closed at 4865.32 on 07/06/13
On 07/06/13 the spot exchange rate was Rp9790./US$1
Performance Over
Absolute (%)
Relative (%)
1M
3.3
7.7
3M
44.2
44.4
12M
31.9
5.2
INITIATION
Full of grip
Initiate coverage with an OUTPERFORM rating. Gajah Tunggal (GT) is the
largest integrated SEA tyre manufacturer with own production of synthetic
rubber and tyre cords. We believe the Indonesian tyre industry would benefit
from the growing auto industry, where we started to see an inflection point in 4W
population, growing at 11% CAGR over FY13-15E. GTs valuation is
undemanding, trading at 8.0x FY13E P/E, a 13% discount to regional tyre peers
and 33% discount to Indonesia auto. The stock is also a play on domestic
consumption, benefitting from rising middle-high income population, where it is
trading at a steep discount of around 76% to Indonesian consumer stocks.
Improvement in the replacement market by better penetrating into OEM
business. The domestic replacement tyre market is contributing more than 50%
of GTs total tyre revenue. For radial tyres, GT has 24% market share in the
replacement market. We expect its market share to improve to 27% by FY15
through better penetration into OEM tyre by: (1) being the biggest tyre supplier
for Suzuki Ertiga (the new breakthrough low-end MPV after Toyota Avanza and
Daihatsu Xenia), (2) supplying the potential low cost green car (LCGC) market.
We expect domestic radial tyre revenue to grow at 28% CAGR.
Continues to dominate 2W and bias (heavy duty) tyres. More than 70%
each of 2W and bias tyre revenue is generated from replacements, a highmargin business. GT has been the biggest tyre supplier for Yamaha and
Suzuki motorcycles. We expect the combined revenue to witness a 14%
CAGR over FY13-15, with 2W tyres as the main growth driver.
Target price at Rp4,300. We use DCF and P/E to value the company. Our
DCF indicates a target price of Rp4,900, implying 12.1x FY13E P/E. Given
regional peers are trading at an implied P/E range of 715x, we use 10.5x
FY13E P/E to arrive at our target price of Rp4,300. GTs 15% earnings
growth for FY1315E is among the highest versus its peers, with margin
gradually improving along with relatively stable raw material costs. Key
risks: commodity price and competitions from both existing and new players.
Financial and valuation metrics
Year
Revenue (Rp bn)
EBITDA (Rp bn)
EBIT (Rp bn)
Net profit (Rp bn)
EPS (CS adj.) (Rp)
Change from previous EPS (%)
Consensus EPS (Rp)
EPS growth (%)
P/E (x)
Dividend yield (%)
EV/EBITDA (x)
P/B (x)
ROE (%)
Net debt/equity (%)
12/12A
12,578.6
2,116.8
1,677.2
1,132.2
325.00
n.a.
n.a.
65.8
9.5
0.32
6.6
1.9
22.6
56.0
12/13E
13,628.1
2,296.7
1,837.6
1,410.6
404.91
12/14E
15,100.5
2,709.3
2,200.6
1,612.7
462.90
12/15E
16,584.5
3,051.2
2,492.5
1,876.3
538.58
335
24.6
7.7
0.53
6.2
1.6
22.6
52.1
374
14.3
6.7
0.66
5.1
1.3
21.0
38.2
404
16.3
5.8
0.76
4.5
1.1
20.1
28.6
Source: Company data, Thomson Reuters, Credit Suisse estimates.
DISCLOSURE APPENDIX CONTAINS ANALYST CERTIFICATIONS AND THE STATUS OF NON US ANALYSTS. FOR
OTHER IMPORTANT DISCLOSURES, visit www.credit-suisse.com/researchdisclosures or call +1 (877) 291-2683 US
Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result,
investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors
should consider this report as only a single factor in making their investment decision.
CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS
BEYOND INFORMATION
Client-Driven Solutions, Insights, and Access
10 June 2013
Focus charts
Figure 2: to benefit Indonesias domestic tyre industry
Figure 1: Improving auto population
4W tyre (mn units)

18
18.0
120
11% CAGR 13E-15E
16
100
14
12
14.0
80
10
12.0
10.0
60
Replacement: 12% CAGR 13-15E

OEM: 10% CAGR 13-15E
16.0
8.0
40
6.0
4.0
20
2.0
2005
2007
2009
2011
4W population (mn units, LHR)
2013E
2015E
2005 2006 2007 2008 2009 2010 2011 2012 2013E 2014E 2015E
2W population (mn units)
Replacement
OEM
Source: Indonesia Tyre Association, Credit Suisse estimates
Source: Indonesia Tyre association, Credit Suisse estimates
Figure 3: GT has 24% market share in replacement
Figure 4: Tyre revenue to grow at 11% YoY over FY1315E
market, despite having relatively small OEM business
on higher replacement tyre contribution

18,000
Others
5%
EP
10%
15,867
16,000
14,314
12,808
14,000
11,702
12,000
Rp bn
Bridgestone
33%
Gajah Tunggal
24%
10,721
8,996
10,000
6,979
8,000
6,000
7,244
5,713
4,000
Dunlop
28%
2,000
2007
2008
2009
2010
Replacement
2011
OEM
2012 2013E 2014E 2015E

Export
Source: Company data FY12
Source: Company data, Credit Suisse estimates
Figure 5: Margins to gradually improve on relatively
Figure 6: Undemanding valuation
stable raw material costs

3,000
14.6%
14.4%
13.3% 13.5%
13.1%
2,500
15.0%
16%
2,493
14%
2,201
2,000
10.0%
1,677
8.5%
1,500
7.3% 1,145
1,000
665
1,838
1,010
2%
0%
2009
2010
2011
Operating profit (Rp bn, LHS)
NPV (Rp bn)

TV multiple
10%
4%
2012 2013E 2014E 2015E

Operating margin
CoE
WACC
12%
6%
581
2008
Assumptions: : 1.2
TPX (Rp/share)
8%
1,287
500
2007
DCF valuation
Implied FY13E P/E (x)

Comparisons
14%
11.4%
20,453
19
4,900
12.1
Current FY13E P/E
Regional tire peers*
9.2
Indo auto*
12.0
Indo consumer*
33.1
Gajah Tunggal
TPX (Rp/share)
4,300
Implied FY13E P/E (x)
10.5
Current FY13E P/E (x)
8.0
*CS coverage. Source: Credit Suisse estimates
Gajah Tunggal
(GJTL.JK / GJTL IJ)
10 June 2013
Full of grip
Gajah Tunggal (GT) is the largest integrated SEA tyre manufacture with own production of
synthetic rubber and tyre cords. The tyre business includes radial, bias (heavy duty), and
motorcycle tyres with replacement market being the main contributor to total tyre revenue.
We initiate coverage on GT with an OUTPERFORM rating and a target price of Rp4,300.
Benefits from the growing auto sector

We estimate Indonesias automotive population will grow at 11% YoY over FY13-15,
benefitting from the rising middle-high income segment in Indonesia over the past years,
resulting in improving affordability. We also expect the LCGC to create a new segment
within the industry, suggesting potential room for growth. This should benefit the domestic
4W tyre industry, which we expect to grow at 11% YoY over FY13-15, with higher OEM
tyre contribution resulting in a growing replacement market. Despite a bigger export radial
tyre market, we estimate the growth will be flat due to increasing competition. Indonesia
has a huge 2W replacement tyre market, witnessing a 14% CAGR during FY05-12A,
supported by high 2W penetration. We expect it to see a 11% CAGR over FY13-15.
The largest integrated SEA tyre manufacturer

As the largest integrated tyre manufacturer in South East Asia, GT both manufactures
tyres and produces its own synthetic rubber and tyre cords. The companys revenue is
primarily coming from the sales of radial, bias and motorcycle tyres with contribution of
35%, 36%, and 24% to total sales, respectively. The domestic market plays an important
role in GTs tyre business, where revenue from the replacement market contributes more
than 50% of total tyre revenue, followed by export (33%), and OEM (14%). For radial tyres,
GT has 24% market share in replacement market, despite having a relatively small OEM
business. But, we expect its market share to increase to 27% by FY15 through better
penetration into OEM tyre by: (1) being the biggest tyre supplier for Suzuki Ertiga (the new
breakthrough low-end MPV after Toyota Avanza and Daihatsu Xenia), (2) supplying the
potential LCGC market. We expect the domestic radial tyre revenue to grow at 28% CAGR
during FY1315.
We believe GT should continue dominating the 2W and bias tyre markets. More than 70%
each of 2W and bias tyre revenue is from the replacement market; the high-margin business.
We expect the steady cash flow from these businesses to continue. GT has been the biggest
tyre supplier for Yamaha and Suzuki 2W. We expect the combined revenue to grow at 14%
over FY1315E, with 2W tyre continuing to be the main growth driver. In all, we expect total
domestic revenue for GT to grow at 14% CAGR, driven by growth in its tyre business, which
is expected to grow at 11% CAGR on the back of 8% CAGR volume growth.
Initiating with OUTPERFORM and a TP of Rp4,300

We have used DCF and P/E to value the company. Our DCF indicates a target price of
Rp4,900, implying 12.1x FY13E P/E. Given regional peers are trading at an implied P/E
range of 715x, we use 10.5x FY13E P/E to arrive at our target price of Rp4,300. GTs
current valuation is undemanding, trading at 8.0x FY13E P/E, a 13% discount to regional
tyre peers and 33% discount to Indonesia auto. The stock is also a play on domestic
consumption, benefitting from rising middle-high income population, where it is trading at a
steep discount of around 76% to Indonesian consumer stocks. GTs 15% earnings growth
for FY1315E is amongst the highest versus its peers, with margin gradually improving
along with relatively stable raw material costs.
Risks
Key risks include: (1) commodity price risk, (2) competition from both the existing and new
players, (3) regulatory risk, and (4) macroeconomic risk.
Gajah Tunggal
(GJTL.JK / GJTL IJ)
10 June 2013
Gajah Tunggal GJTL.JK / GJTL IJ

Price (07 Jun 13): Rp3,100.00, Rating:: OUTPERFORM, Target Price: Rp4,300.00, Analyst: Dian Haryokusumo
Target price scenario
Scenario
TP
4,800.0
Upside
0
4,300.0
Central Case
0
4,000.0
Downside
0
Income statement (Rp bn)
Sales revenue
Cost of goods sold
SG&A
Other operating exp./(inc.)
EBITDA
Depreciation & amortisation
EBIT
Net interest expense/(inc.)
Non-operating inc./(exp.)
Associates/JV
Recurring PBT
Exceptionals/extraordinaries
Taxes
Profit after tax
Other after tax income
Minority interests
Preferred dividends
Reported net profit
Analyst adjustments
Net profit (Credit Suisse)
Cash flow (Rp bn)
EBIT
Net interest
Tax paid
Working capital
Other cash & non-cash items
Operating cash flow
Capex
Free cash flow to the firm
Disposals of fixed assets
Acquisitions
Divestments
Associate investments
Other investment/(outflows)
Investing cash flow
Equity raised
Dividends paid
Net borrowings
Other financing cash flow
Financing cash flow
Total cash flow
Adjustments
Net change in cash
Balance sheet (Rp bn)
Cash & cash equivalents
Current receivables
Inventories
Other current assets
Current assets
Property, plant & equip.
Investments
Intangibles
Other non-current assets
Total assets
Accounts payable
Short-term debt
Current provisions
Other current liabilities
Current liabilities
Long-term debt
Non-current provisions
Other non-current liab.
Total liabilities
Shareholders' equity
Minority interests
Total liabilities & equity
%Up/Dwn Assumptions
54.84 radial tyre vol to go up by 10%
Key earnings drivers

Tyre volume (mn units)
Rubber price (US
cents/kg)
Oil
price (US/bbl)
12/12A
36.6
312.6
112.8
12/13E
39.3
310.4
112.0
12/14E
42.8
304.9
110.0
12/15E
46.3
304.9
100.0
Per share data

Shares (wtd avg.) (mn)
EPS (Credit Suisse) (Rp)
DPS (Rp)
BVPS (Rp)
Operating CFPS (Rp)
Key ratios and
valuation
Growth(%)
Sales revenue
EBIT
Net profit
EPS
Margins (%)
EBITDA
EBIT
Pre-tax profit
Net profit
Valuation metrics (x)
P/E
P/B
Dividend yield (%)
P/CF
EV/sales
EV/EBITDA
EV/EBIT
ROE analysis (%)
ROE
ROIC
Asset turnover (x)
Interest burden (x)
Tax burden (x)
Financial leverage (x)
Credit ratios
Net debt/equity (%)
Net debt/EBITDA (x)
Interest cover (x)
12/12A
3,484
325
10.0
1,597
490
12/12A
12/13E
3,484
405
16.5
1,986
570
12/13E
12/14E
3,484
463
20.6
2,428
544
12/14E
12/15E
3,484
539
23.5
2,943
533
12/15E
6.2
66.1
65.4
65.8
8.3
9.6
24.6
24.6
10.8
19.8
14.3
14.3
9.8
13.3
16.3
16.3
16.8
13.3
11.6
9.0
16.9
13.5
12.9
10.4
17.9
14.6
13.3
10.7
18.4
15.0
14.1
11.3
9.5
1.94
0.32
6.33
1.10
6.55
8.27
7.7
1.56
0.53
5.44
1.04
6.16
7.70
6.7
1.28
0.66
5.69
0.92
5.11
6.30
5.8
1.05
0.76
5.81
0.82
4.46
5.46
22.6
16.0
0.98
0.87
0.78
2.35
22.6
16.0
0.97
0.96
0.80
2.19
21.0
16.9
0.94
0.92
0.80
2.00
20.1
16.9
0.91
0.94
0.80
1.85
56.0
1.45
5.06
52.1
1.46
4.93
38.2
1.13
6.03
28.6
0.92
7.23
38.71
29.03 Radial tyre vol to go down by 10%
12/12A
12,579
10,142
760
(439.7)
2,117
439.7
1,677
331.8
87.9
24.1
1,457
325.2
1,132
1,132
1,132
12/12A
1,677
(82.0)
111.9
1,707
(1,973)
(265.8)
(80.3)
704.2
(1,349)
(34.8)
(12.8)
(47.6)
310.4
7.4
317.8
12/12A
905
2,227
1,479
584.1
5,194
6,122
793.2
761
12,870
1,210
202.2
1,608
3,020
3,769
602.8
7,391
5,564
12,870
12/13E
13,628
10,891
900
(459.1)
2,297
459.1
1,838
373.0
272.6
26.1
1,763
352.7
1,411
1,411
1,411
12/13E
1,838
20.1
127.2
1,985
(1,720)
265.0
(26.1)
(9.4)
(1,755)
(57.5)
(195.4)
(252.9)
(23.4)
(23.4)
12/13E
881
2,155
1,492
529.9
5,058
7,383
819.3
824
14,084
1,332
215.4
1,542
3,090
4,015
545.1
7,650
6,917
14,084
12/14E
15,100
11,975
925
(508.7)
2,709
508.7
2,201
364.7
151.0
28.9
2,016
403.2
1,613
1,613
1,613
12/14E
2,201
(224.9)
(79.3)
1,896
(1,552)
343.9
(28.9)
(13.1)
(1,595)
(71.6)
89.6
18.0
319.8
319.8
12/14E
1,201
2,388
1,640
587.1
5,816
8,426
848.3
913
16,004
1,466
216.5
1,698
3,380
4,035
604.0
8,019
8,458
16,004
12/15E
16,585
13,076
1,016
(558.7)
3,051
558.7
2,493
344.7
165.8
31.8
2,345
469.1
1,876
1,876
1,876
12/15E
2,493
(576.8)
(57.5)
1,858
(1,552)
305.7
(31.8)
(13.2)
(1,598)
(81.9)
72.5
(9.4)
251.3
251.3
12/15E
1,452
2,623
1,791
995.1
6,861
9,420
880.0
1,003
18,164
1,602
216.5
1,855
3,674
4,035
663.4
8,372
10,253
18,164
Source: Company data, Thomson Reuters, Credit Suisse estimates.

12MF P/E multiple
14
12
10
8
6
4
2
0
2008
2009
2010
2011
2012
2013
2012
2013
12MF P/B multiple

3.0
2.5
2.0
1.5
1.0
0.5
0.0
2008
2009
2010
2011
Source: IBES
Gajah Tunggal
(GJTL.JK / GJTL IJ)
10 June 2013
Benefits from a growing auto sector

Indonesias automotive industry has benefitted from the growing middle-high income
population over the past years. Based on Nielsens survey, in Indonesias 12 cities, the
proportion of middle and high income groups spending population increased from 42% in
2008 to 62% in 2010, implying around 48 mn people moved into the middle-high income
segment during the period. We expect the middle-income groups spending to continue to
grow along with an estimated rise in Indonesias GDP per capita from about US$2,985 in
2010 to US$4,139 in 2014E. Therefore, we expect affordability to improve.
Figure 7: Middle-income groups spending is rising
42%
51%
62%
8%
9%
11%
14%
18%
20%
4,000
24%
24%
27%
27%
25%
21%
4,500
22%
17%
10%
7%
12%
4%
2008
2009
2010
Below Rp 700K
Rp 700K - Rp1mn
Rp 1 mn - Rp1.5 mn
Rp 1.5 mn - Rp 2 mn
Rp 2 mn - Rp 3 mn
Over Rp 3 mn
Source: Nielsen Media Research, Media Index
3,500
GDP per capita (US$)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Figure 8: along with rising GDP per capita
3,000
2,500
2,000
1,500
1,000
2006
2007
2008
2009
2010
2011
2012 2013E 2014E
Source: CEIC, Credit Suisse estimates
Potential room to grow in the 4W market

The four-wheeler (4W) industry in Indonesia has grown at 21% CAGR over the past five
years, with the MPV (multi-purpose vehicle) segment being the biggest contributor. We
remain positive on the outlook of Indonesias 4W industry, given the countrys improving
purchasing power, as well as the low penetration rate of the 4W market, where Indonesia
exhibits the second-lowest 4W penetration after India. This suggests a potential room to
grow further. We expect 4W industry volume to grow at 10% CAGR over 2013E-15E,
bringing the total 4W population to grow at 11% CAGR.
Figure 9: 4W industry to grow at 10% CAGR 2013E-15E
Figure 10: Low 4W penetration
1,800,000
35%
1,600,000
30%
4W Penetration rate
1,400,000
Units
1,200,000
1,000,000
800,000
25%
20%
15%
10%
5%
600,000
0%
400,000
Korea
Malaysia
Thailand
China
Indonesia
India
200,000
2007 2008 2009 2010 2011 2012 2013E 2014E 2015E
Source: Gaikindo, Credit Suisse estimates
Gajah Tunggal
(GJTL.JK / GJTL IJ)
10 June 2013
to benefit 4W tyre industry

Exports play a major role in Indonesias 4W tyre industry, especially for the passenger car
radial tyre. North America is the main destination for tyre export, where Indonesia is the
fifth-largest passenger car tyre exporter to the US market after South Korea (based on
2009 data). In 2012, 4W tyre export market was down by around 10% YoY, mostly driven
by the global crisis in the US and Europe.
Figure 11: Indonesiathe fifth-largest PC tyre exporter to the US market
Units
45,000,000
40,000,000
2009
35,000,000
2008
30,000,000
25,000,000
20,000,000
15,000,000
10,000,000
5,000,000
0
China
Japan
Canada
South Indonesia Mexico

Korea
Brazil
Thailand
Costa
Rica
Germany Others
In contrast, the OEM 4W tyre industry has grown by 28% YoY last year, which was in line
with higher 4W new sales volume during the period. The higher 4W sales volume is mainly
driven by the contribution of MPV (multi-purpose vehicle) segment, which contributed
more than 60% of total 4W market. In particular, the low MPV segment has been the key
driver for the strong growth last year, where new models such as Suzuki Ertiga and Nissan
Evalia have entered the Indonesian MPV market starting last year. In addition, the
comeback of Honda into the industry has also contributed to higher growth, after its supply
was disrupted due to Thailand floods back in 2011.
We expect 4W volumes to grow at 10% CAGR over 2013E-15E. Starting this year, we
expect the LCGC to create a new market segment in Indonesias 4W market, which will
drive 4W volume growth, and would automatically result in potential demand growth for
4W tyres in domestic market, including both OEM and replacement tyre markets.
A higher OEM tyre contribution to the total 4W tyre market has also resulted in a higher
replacement market. Although the growth in 4W replacement tyres was only 7% YoY in
2012, the contribution to total market increased to 24% (from 22% in 2011). We believe
that the replacement market would grow by 12% CAGR over 2013E-15E, driven by OEM
market that is estimated to grow at 10% CAGR which will result in higher contribution for
both replacement and OEM to total 4W tyre market. Thus, the total domestic 4W tyre
market is estimated to grow at 11% CAGR. Combined with the expectation of a relatively
flat growth in export tyre market over the next two years, we estimate the total 4W tyre
industry (including export) will grow at 5% CAGR.
Gajah Tunggal
(GJTL.JK / GJTL IJ)
10 June 2013
Figure 12: 4W tyre export market still plays a major role
Figure 13: while higher contribution in OEM resulted in
mn units
better penetration in the replacement market
40.0
100%
35.0
90%
80%
30.0
70%
25.0
60%
20.0
50%
15.0
40%
30%
10.0
5.0
13%
14%
14%
11%
26%
27%
29%
8%
7%
8%
8%
19%
21%
22%
21%
22%
24%
2007
2008
2009
2010
2011
2012
20%
6%
10%
0%
2007
2008
2009
2010
Replacement
2011
OEM
2012
2013E 2014E 2015E
Export
Source: Indonesia Tyre Association, Company data, Credit Suisse

estimates
Replacement
OEM
2013E 2014E 2015E
Export

estimates
Highly penetrated two-wheeler market

Indonesias two-wheeler (2W) penetration per household recently surpassed 80% and our
analysis indicates the risk for higher volatility in the countrys 2W sales volume growth
ahead. Our analysis finds that being above 80% 2W penetration per household, Thailands
2W sales volume growth exhibits higher sensitivity to real GDP growth and policy rates. In
countries having below 80% penetration per household, 2W sales generally service firsttime buyers, implying 2W is perceived as a necessity product. In the case of above 80%
penetration per household, however, much of the 2W sales will be servicing replacement
and/or second 2W and thus, exhibits higher sensitivity to macroeconomic variables since it
is perceived more as discretionary rather than a necessity product.
Figure 14: 2W industry to grow at 10% CAGR 2013E-15E
Figure 15: Indonesias motorcycle per household (%)
10,000,000
100
9,000,000
2W per household (%)
90
8,000,000
Units
7,000,000
6,000,000
80
70
60
50
40
30
5,000,000
20
4,000,000
10
-
3,000,000
2007 2008 2009 2010 2011 2012 2013E 2014E 2015E
Source: AISI, Credit Suisse estimates
1989
1992
1995
1998
2001
2004
2007
2010
Source: CEIC, Credit Suisse estimates
resulted in high replacement in 2W tyre industry

We believe this supports the argument of high replacement market in 2W tyre industry in
Indonesia, in which the replacement market for 2W tyre has grown at 14% CAGR over
2005-12 and we expect it would continue to grow at around 11% CAGR for next two years.
Gajah Tunggal
(GJTL.JK / GJTL IJ)
10 June 2013
Last year, the 2W replacement tyre market grew at an estimated 21% YoY, while the 2W
OEM tyre market softened, which was mostly as a result of the softening of 2W industry in
Indonesia. The soft 2W industry last year was led by: (1) softening commodity prices,
which we believe has impacted the purchasing power of 2W customers. As Indonesias
2W penetration has reached above 80%, we believe that most of the 2W customers are
secondary and/ or replacement buyers, in which fluctuation in commodity prices becomes
more sensitive to them; and (2) the introduction of minimum down payment regulation for
conventional loan for cars and motorcycles to 2530%, and 2025%, respectively. This
has resulted in softened 2W new sales volume as the customers preferred to postpone
their 2W purchases in order to save their money to meet the required down payment.
We believe this year 2W industry would grow at around 10% YoY on the back of low base
from last year. In addition, we expect this years commodity price to normalise, thus 2W
purchasing power should recover, which would also support the growth of 2W tyre
industry. We expect the 2W OEM tyre to grow at 10% CAGR over 2013E15E. We
believe the introduction of minimum down payment regulation for Sharia auto loans would
not have a significant impact to automotive industry, particularly the 2W market, given
Sharia loans as percentage to total loans in Indonesia only accounts for less than 5%.
Unlike the 4W tyre market, export in 2W tyre industry is relatively small in terms of
contribution to total 2W tyre volume. More than 90% of the 2W tyre in Indonesia is
servicing the domestic market, given the high 2W penetration.
Figure 16: Growing replacement market in 2W tyre
Figure 17: which contributes 67% of total domestic 2W
mn units
tyre market
45.0
100%
40.0
90%
35.0
80%
41%
45%
43%
39%
40%
59%
55%
57%
61%
60%
2007
2008
2009
2010
2011
33%
33%
33%
32%
67%
67%
67%
68%
70%
30.0
60%
25.0
50%
20.0
40%
15.0
30%
10.0
20%
5.0
10%
2007
2008
2009
2010
2011
Replacement
2012
2013E 2014E 2015E
OEM

estimates
0%
Replacement
2012
2013E 2014E 2015E
OEM

estimates
Gajah Tunggal
(GJTL.JK / GJTL IJ)
10 June 2013
The largest integrated SEA tyre

manufacturer
Established in 1951, Gajah Tunggal (GT) is the largest integrated South East Asian tyre
manufacturer with own production of synthetic rubber and tyre cords. The companys
revenue comes mainly from sales of radial, bias and motorcycle tyres with contributions of
35%, 36% and 24% to total sales, respectively. Rest of the revenue comes from sales of
synthetic rubber and tyre cords, which are mostly sold internally.
Figure 18: Tyres is the key business with 95%
Figure 19: Replacement tyres to be the major contributor
contribution
Synthetic
rubber
4%
Tire cord
1%
Export
33%
Radial tires
35%
Motorcycle tires
24%
Replacement
53%
OEM
14%
Bias tires
36%
--- GTs tyre revenue. Source: Credit Suisse estimates FY13E
Source: Credit Suisse estimates FY13E
In terms of total tyre revenue, replacement tyre is the majority contributor, where in more
than half of the revenue comes from Java, followed by Sumatra (29%), Kalimantan (11%)
and Eastern Indonesia (9%). Exports are expected to contribute 33% of FY13 tyre revenue
(mostly from radial and bias tyres), with the US as the main destination. In addition, in line
with the companys strategy, we expect OEM revenue to increase gradually, which will
improve the performance of GTs replacement tyre market.
Figure 20: Domestic replacement sales breakdown, FY12
Figure 21: Export sales breakdown, 1Q13
Source: Company data
We expect total GT revenue to see a 10% CAGR 2013-15 mostly driven by the growth in
the tyre business, which we expect to grow at 11% p.a. on the back of an 8% volume
CAGR. We expect revenue from its other businesses, i.e., synthetic rubber and tyre cords,
to decline as the company gradually reduces the proportion of sales to external parties.
Gajah Tunggal
(GJTL.JK / GJTL IJ)
10 June 2013
Figure 22: Tyre volume to see an 8% CAGR FY13-15E

50.0
43
45.0
40.0
36
30.0
27
29
37
18,000
46
15,100
16,000
39
11,836
12,000
28
25.0
20.0
12,576
9,854
10,000
7,963 7,935
8,000 6,660
15.0
6,000
10.0
4,000
5.0
16,585
13,628
14,000
Rp bn
mn units
35.0
36
Figure 23: Total revenue to see a 10% CAGR FY13-15E
2,000
2007
2008
2009
2010
Radial
2011
2012 2013E 2014E 2015E
Bias
MC tire
2007 2008 2009 2010 2011 2012 2013E 2014E 2015E
Radial tires
Bias tires
Motorcycle tires
Synthetic rubber
Tire cord
Radial tyres
GTs radial tyres are mostly exported (79% of FY13E radial tyre revenue) to more than 90
countries, with the US being the main destination, while 17% of FY13E radial tyre revenue
should come from the replacement market, and the remaining from the OEM business.
To increase the replacement market by a better penetrating OEM business
For the radial replacement market in Indonesia, GT has a market share of 24% (est. 2012
excluding Multistrada). The market is led by Bridgestone (33% market share) of PT
Bridgestone Indonesia (Not-listed) and Dunlop (28% market share) of PT Sumi Rubber
Indonesia (Not-listed). To increase its competitiveness in the replacement market, the
company aims to improve or better penetrate into the OEM market. The Indonesian
customers tend to choose their replacement tyres based on the original tyres of the
vehicles. Thus, if a tyre company successfully manages its OEM business relation, then it
would be able to control the replacement market as well.
Figure 24: GT has a 24% market share in the radial
Figure 25: Volume of GT replacement and OEM tyres to
replacement market, FY12
see a 21% CAGR FY13-15E

3.0
Others
5%
2.5
2.5
2.1
Bridgestone
33%
Gajah Tunggal
24%
2.0
mn units
EP
10%
1.5
1.0
Dunlop
28%
1.7
1.5
1.2
0.9
1.0
1.3
1.0
0.8
0.4
0.5
0.0
0.1
0.0
0.0
2007
2008
2009
2010
0.8
0.6
0.2
Replacement
2011
2012 2013E 2014E 2015E
OEM
Gajah Tunggal
(GJTL.JK / GJTL IJ)
10
10 June 2013
GTs OEM passenger car tyre exposure includes Suzuki Ertiga (biggest tyre supplier) and
some of Daihatsu Xenia, besides Toyota Avanza. Suzuki Ertiga has been doing very well
since it was launched in April last year. It targets the same segment as Daihatsu Xenia
and Toyota Avanza are in. GTs exposure to Suzuki Ertigas OEM business plays an
important role for the company as it will drive future growth of both OEM tyres as well as
replacement tyres. In addition, the launch of LCGC should bring in additional growth to
tyre demand as a whole and GT in particular. In the global OEM tyre market, the company
supplies tyres to Proton Malaysia and Mitsubishi Thailand.
We expect the volume of replacement radial tyre for GT to grow by 14% YoY this year to
1.7 mn units, with OEM tyres to grow by 40% YoY, which will be contributed by the growth
of domestic car sales from both non-LCGC and LCGC cars.
US import tariffs for China have expired
In 2012 volumes of GTs radial export tyres softened by about 13% YoY, mostly driven by
softer demand in the US and Europe markets. In addition, the three-year US import tyre
tariffs for China expired on 27 September 2012. These tariffs were enacted in 200935%
import tariff in the first year, 30% in the second year and 25% in the third yearto reduce
unemployment in the US tyre industry. After the tariff expired last September, imported
tyre volumes from China have doubled starting October-November 2012. As a result, we
believe the export market would become more competitive, hence expect GTs radial
export tyre volumes to remain relatively flat over the next two years.
Off-take agreement with Michelin
GT has signed an off-take agreement with Michelin in 2004. Last year, the off-take volume
from Michelin reached 2.9 mn units, which is expected to reach around 2.8 mn units this year.
In addition, the company has a strategic relationship with GITI which allows synergies in
various marketing and technical aspects of the tyre business. In 2011 the company signed an
off-take agreement with GITI China of up to 1 mn tyres to serve the US market.
Figure 26: Export volumes to remain relatively flat
Figure 27: Michelin off-take agreement
11.0
4.0
10.3
3.5
10.0
9.1
8.0
9.0
8.5
8.8
8.8
8.8
3.0
mn units
mn units
9.0
7.9
7.0
2.5
2.0
6.5
1.5
6.0
1.0
5.0
2007
2008
2009
2010
2011
2012 2013E 2014E 2015E
Export
2007
2008
2009
2010
2011
2012 2013E 2014E 2015E
Michelin - off take volume
Competitive pricing
We expect the average blended selling price to see a 2% CAGR 2013-15E on the back of
relatively flat export selling prices due to intense competition. Based on our channel checks,
GT Radials domestic selling prices are considered to be competitive versus other tyre
players prices. For example, for a tyre size of 165/55/16, Bridgestones tyres are about 46%
expensive, while Good Years are at a 22% premium. The company is planning to improve
its relationships with OEM players to better penetrate into the replacement market.
Gajah Tunggal
(GJTL.JK / GJTL IJ)
11
10 June 2013
We estimate radial tyre revenue from the replacement market to see a 28% CAGR over
the next two years with OEM revenue to grow by 29% YoY. Thus, total domestic radial
tyres revenue should grow at 28% YoY FY13-15E. However, we expect revenue from the
export radial market to increase by only 1% YoY given potential higher competition.
Figure 28: Competitive retail price for passenger car tyre
Figure 29: GT Radial Champiro Eco
1,800,000
68% premium
1,600,000
46% premium
Selling price per unit (Rp)
1,400,000
22% premium
1,200,000
1,000,000
800,000
600,000
400,000
200,000
Bridgestone
Gajah Tunggal
Good Year
Continental
*Original retail price prior to discount. Source: kiosban.com, Credit

Suisse
Figure 30: Replacement and OEM revenue to post a
Figure 31: Radial export revenue to remain flat
strong 28-29% CAGR

1,400
4,500
1,286
1,026
647
538
600
446
350
Rp bn
Rp bn
3,000
785
800
3,807 3,727 3,793 3,793
3,500
1,000
400
3,972
4,000
1,200
2,500
2,775
2,531
2,208
2,054
2,000
1,500
352
1,000
265
500
200
2007
2008
2009
2010
Replacement
2011
2012 2013E 2014E 2015E
2007
2008
2009
2010
2012 2013E 2014E 2015E
Export
OEM
2011
Bias tyres
Most of GTs bias tyres serve the domestic replacement market, where the company
continues to be the dominant player. Given the advancement of radial tyres over the
period, bias tyres are now used less frequently. In the developed countries, radial tyres are
preferred for commercial vehicles as the road infrastructure is well developed. However, in
developing countries such as Indonesia, the use of bias tyres is still relatively high as they
normally contain more natural rubber versus synthetic rubber enabling the tyres to become
more flexible, and thus better manoeuvring of bad roads or poor infrastructure.
Gajah Tunggal
(GJTL.JK / GJTL IJ)
12
10 June 2013
Figure 32: Dominates the bias tyre replacement market
Figure 33: Volumes to see a 5% CAGR 2013-15E

4.0
Others
Dunlop 6%
7%
3.5
3.0
3.0
Swallow
21%
mn units
2.5
Gajah Tunggal
49%
2.2
2.2
2.0
1.5
1.1
0.9
1.0
Bridgestone
17%
2.6
2.5
2.3
3.5
3.3
3.2
1.1
0.9
0.8
0.7
0.7
0.8
0.8
0.5
2007
2008
2009
2010
Replacement
2011
OEM
2012 2013E 2014E 2015E

Export
As infrastructure continues to be developed in Indonesia, the company plans to reduce the

proportion of bias tyre volumes gradually in the longer term. We expect total volumes of
bias tyres to see a 5% CAGR over the next two years. According to GT, it is able to
maintain high margins for bias tyres which we believe is due to its dominance in the
replacement market. Thus, the contribution of revenue from this segment is estimated to
remain 38% of total FY13 revenue.
Figure 34: Bias tyre volume contribution to gradually
Figure 35: but the contribution to total revenue remains
decline
high backed by higher margins
100%
100%
90%
90%
80%
80%
70%
53%
55%
59%
61%
56%
58%
60%
62%
63%
60%
40%
38%
36%
50%
13%
13%
30%
20%
22%
33%
33%
10%
12%
12%
27%
29%
11%
33%
12%
30%
12%
28%
26%
26%
39%
38%
35%
36%
2009
2010
23%
23%
25%
27%
28%
35%
37%
38%
38%
38%
43%
39%
37%
36%
34%
2011
2012
70%
60%
50%
21%
40%
11%
11%
27%
26%
30%
20%
41%
41%
2007
2008
10%
0%
2007
2008
2009
2010
Radial
2011
Bias
2012
MC tire
2013E 2014E 2015E
0%
Radial tires
Bias tires
2013E 2014E 2015E
Motorcycle tires
We expect the average selling price to grow at 6% YoY over FY13-15E on the back of
relatively flat rubber prices ahead and estimated average inflation of around 6%. Thus,
total bias tyre revenue should increase by 11% YoY over the next two years, with
replacement tyres continuing to be the major revenue contributor.
Gajah Tunggal
(GJTL.JK / GJTL IJ)
13
10 June 2013
Figure 36: Total bias tyre revenue to see a 11% CAGR
Figure 37: GT Super Grip
5,000
4,373
4,500
3,921
4,000
3,524
3,500
3,149
Rp bn
3,000
2,370
2,500
2,000
1,500
1,821
2,591
2,043
1,495
1,000
500
87
278
252
2008
2009
515
666
743
832
926
1,032
2007
2010
Replacement
2011
OEM
2012 2013E 2014E 2015E

Export
Motorcycle tyres
Leader in the replacement market
GTs IRC brand is very popular among the 2W tyre customers. GT dominates the 2W tyre
replacement market with a 50% market share as of last year. It has a licence to
manufacture and sell IRC motorcycle brand tyres in Indonesia since 1973. GT has been
one of the biggest suppliers for 2W tyre OEMs such as Yamaha, Suzuki, Kawasaki and
TVS. The company has also supplied around 10% of Hondas total 2W tyres. However,
majority of Hondas 2W tyres are supplied by PT Suryaraya Rubberindo Industries, a
subsidiary of Astra Honda Motor, under the brand name Federal, which has around 28%
market share.
Given high 2W penetration in Indonesia, we expect the replacement tyre market, the main
focus of 2W tyres, to continue to grow. We expect total motorcycle tyre volumes to grow at
11% YoY over the next two years.
Figure 38: Leading the motorcycle tyre market
Figure 39: Continue to see a 11% CAGR over 2013-15E

25.0
Dunlop
7%
20.8
Others
6%
16.9
15.2
mn units
Swallow
9%
Gajah Tunggal
50%
Federal
28%
18.7
20.0
15.0
10.0
5.0
13.2
9.5
9.5
12.6
10.5
6.4
6.4
2008
2009
7.8
7.6
4.8
6.2
6.9
7.6
8.3
2007
2010
Replacement
2011
OEM
2012 2013E 2014E 2015E

Export
Gajah Tunggal
(GJTL.JK / GJTL IJ)
14
10 June 2013
Launched new brand Zeneos

The company launched its new 2W tyre brand Zeneos in June 2012, targeting medium
and low-end customers, at about 10% lower prices compared to IRC. The company
expects to enter the export market in 1Q14, at the earliest.
Still the preferred brand
Based on our channel checks, IRC is still customers most preferred option for 2W
replacement tyres. The selling price of IRC is also relatively low versus its closest rival,
FDR (Federal), whose price is at about 8% premium to IRC. While brands like Swallow are
relatively cheap versus IRC and FDR, they dont have much brand value. Branding is
crucial for any consumer product, including tyres. As IRC offers both a strong brand value
and competitive pricing, it continues to be popular.
Figure 40: IRC offers competitive pricing
Figure 41: 2W tyre revenue to grow at 18% YoY

4,000
160,000
8% premium
140,000
3% discount
2,857
3,000
120,000
2,425
2,500
100,000
Rp bn
Selling price per unit (Rp)
3,363
3,500
80,000
2,057
2,000
1,702 1,721
1,500
60,000
1,000
40,000
500
20,000
953
269
2007
Gajah Tunggal (IRC)
FDR
*Non-tubeless back tyre. Source: Credit Suisse
1,137
421
2008
1,350
629
525
2009
2010
Replacement
Swallow
738
2011
OEM
686
808
944
1,103
2012 2013E 2014E 2015E

Export
We expect the average selling price to see a 6% CAGR over 2013-15E on the back of
relatively flat rubber prices going forward and estimated average inflation of around 6%.
Thus, total motorcycle tyre revenue should increase 18% YoY over the next two years,
with replacement tyres continuing to be the major revenue contributor.
Margins to benefit from relatively stable costs

Relatively stable costs ahead
More than 70% of total cost of a tyre company is raw materials, out of which 36% is
natural rubber and 27% is synthetic rubber. GT sources natural rubber mostly from a
domestic trader under a supply contract that is set on an annual basis based on volumes,
while the average price of the tyre is based on the average price of raw materials on the
previous month. We estimate that rubber prices will be relatively stable going forward,
benefiting the companys natural rubber costs.
Gajah Tunggal
(GJTL.JK / GJTL IJ)
15
10 June 2013
Figure 42: More than 70% of total cost is raw materials

Depreciation
4%
Figure 43: with more than half related to rubber
Others
4%
Others
15%
Energy
7%
Labour
8%
Natural rubber
36%
Carbon black
10%
Tire cord
12%
Raw materials
77%
Synthetic
rubber
27%
As the largest South East Asia tyre manufacturer, GT produces the synthetic rubber inhouse, accounting for around 27% of FY13E costs. The raw material for synthetic rubber
is butadiene, which is mostly imported from Korea. We expect the price of butadiene to be
relatively flat.
Based on our report, Auto Parts Sector: Bridgestone & Sumitomo Rubber Industries have
firm grip on profits (refer Appendix 2), according to the International Rubber Study Group
(IRSG), global inventories of natural and synthetic rubber are on the rise. In other words,
given lingering uncertainties on the demand side, the current supply-demand balance
makes a sudden sharp rise in materials prices unlikely. In particular, we believe the current
increase in production of natural rubber by such major producing countries as Thailand will
contribute to more stable natural rubber prices.
Figure 44: Global natural rubber production and
Figure 45: Global synthetic rubber production and
consumption
consumption
000 tonnes
000 tonnes
3,500
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
3,000
2,500
2,000
1,500
1,000
500
0
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
2010
NR Production (LHS)
2011
2012
NR Consumption (LHS)
Source: IRSG (International Rubber Study Group)
3,900
4,300
3,800
4,200
3,700
4,100
3,600
4,000
3,500
3,900
3,400
3,800
3,300
3,700
3,200
3,600
3,100
3,500
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
2010
NR Stock (RHS)
SR Production (LHS)
2011
2012
SR Consumption (LHS)
SR Stock (RHS)
Gajah Tunggal
(GJTL.JK / GJTL IJ)
16
10 June 2013
Figure 46: Historical natural rubber prices
Figure 47: High correlation between butadiene and oil

prices
500
Rubber price (US cents/ kg)
450
4500
160
4000
140
3500
400
120
3000
350
2500
300
2000
100
80
60
1500
250
40
1000
200
20
500
150
0
0
Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13
100
2005
2006
2007
2008
2009
2010
2011
Butadiene (US$/t, LHS)
2012
Source: Malaysian Rubber Board
Brent oil price (US$/barrel)
Source: Bloomberg
In addition to synthetic rubber, GT has in-house production of tyre cords, which is based
on polyester or nylon. The cord filament is sourced from Filamendo Sakti (Not-listed), a
subsidiary of Polychem Indonesia (25.6% owned by GT). Carbon black is added to rubber
as both filter and as a strengthening or reinforcing agent. It is an oil-based product sourced
from a US firm located in Indonesia called Cabot.
Margins to benefit
The relatively stable raw material costs, which account for more than 70% of GTs total
costs, should benefit the companys overall margins, which are expected to improve
gradually with a higher contribution from the replacement market due to GTs growing tyre
OEM business.
We estimate GTs earnings this year will grow by 25% YoY. We continue to believe that
the companys earnings will continue to see positive strong growtha 15% CAGR over
the next two yearsgiven relatively stable costs.
Figure 49: with a gradual improvement in margins
Figure 48: Gross profit to see a 13% CAGR

4,000
25%
23.0%
3,500
3,000
19.4%
19.7%
17.6%
20.1%
20%
14.1%2,437 2,737
14.3%
2,000
1,500
1,000
1,822
1,175
1,135
2007
2008
0%
2010
1,677
8.5%
1,500
7.3% 1,145
1,000
2009
10.0%
15%
5%
2011
Gross profit (Rp bn, LHS)
2012 2013E 2014E 2015E

Gross margin
15.0%
16%
2,493
14%
2,201
2,000
1,669
13.3% 13.5%
13.1%
2,500
10%
1,939
14.6%
14.4%
21.2%
3,126 3,508
2,500
500
20.7%
3,000
665
1,838
12%
10%
8%
1,287
1,010
6%
581
4%
500
2%
0%
2007
2008
2009
2010
2011
Operating profit (Rp bn, LHS)
2012 2013E 2014E 2015E

Operating margin
Gajah Tunggal
(GJTL.JK / GJTL IJ)
17
10 June 2013
Sensitivity of rubber prices to earnings

We have done a sensitivity analysis of rubber prices to the companys total earnings.
Assuming other variables remain constant, if rubber prices move up by 1%, total earnings
will decline by 2%. Conversely, if rubber prices go down by 1%, the company will enjoy
lower costs, and thus earnings will go up by 2%.
On an expansion mode
GTs radial tyre production facility is running at 45,000 units/day, with an approximately
64% utilisation rate. The company plans to increase its capacity to 55,000 units/day by
2014 through debottlenecking. GTs bias tyre production facility is about 14,300 units/day,
with 90% utilisation. It targets to increase the production to 14,500 units/day by this year
through debottlenecking. Motorcycle tyre capacity is 90,000 units/day (79% utilisation),
which is planned to be expanded to 105,000 units/day by 2014E. The company is also
planning to build a new facility for TBR (truck & bus radial) tyres, which would be a new
revenue contributor. Its current capacity is still minimal at 350 units/day, and expected to
reach 2,200 units/day by 2016.
In addition, the company is building a new R&D centre in Tangerang, West Java, which
will be used to develop new tyre products. GT is also building its own tyre proving ground
at the recently acquired Karawang land (approximately 60 ha).
The companys capex for this year is estimated to reach US$170 mn, out of which US$50
mn will be used for TBR facility, US$40 mn for debottlenecking, US$30 mn for R&D and
the remaining for maintenance.
We estimate the companys total debt will reach Rp4.2 tn in 2013. In February 2013 GT
issued US$500 mn bond with a five-year tenor, expiring in 2018, with a 7.75% coupon.
The proceeds are used to refinance its matured bond, while the remaining will be used for
expansion.
Figure 50: GTCapital expenditure
Figure 51: GTNet debt

5,000
2,500
4,500
1,973
4,000
1,720
1,553 1,553
1,500
1,000
840
913
382
3,000
2,500
2,000
1,500
669
500
3,500
Net debt (Rp bn)
Capital expenditure (Rp bn)
2,000
1,000
346
500
-
2007
2008
2009
2010
2011
2012 2013E 2014E 2015E
2007
2008
2009
2010
2011
2012 2013E 2014E 2015E
Gajah Tunggal
(GJTL.JK / GJTL IJ)
18
10 June 2013
Initiating with OUTPERFORM and a

target price of Rp4,300
We initiate coverage on Gajah Tunggal (GT) with an OUTPERFORM rating and a target
price of Rp4,300. We use DCF and P/E to value the company. Our DCF indicates a target
price of Rp4,900, implying 12.1x FY13E P/E. Given regional peers are trading at an implied
P/E range of 715x, we use 10.5x FY13E P/E to arrive at our target price of Rp4,300. Over
the past three months, the stock has traded at an average of US$2.9 mn per day.
Figure 52: Peers valuation comparisons
Ticker
Company name
2105.TW
5108.T
5110.T
Cheng Shin Rubber

Bridgestone
Sumitomo Rubber
Industries
APLO.BO Apollo Tyres
MICP.PA Michelin
Weighted average
GJTL.JK
Gajah Tunggal
Mkt cap Rating
Curr. Target
US$ mn
price price
8,451
25,797
4,102
O
O
O
827
16,259
U
N
1,157
Upside
P/E (x)
EV/EBITDA (x)
Implied P/E (x)
EPS
13E
14E
13E
14E
13E
14E
18%
25%
31%
12.8
9.2
8.0
10.9
8.7
7.5
9.2
6.3
5.3
7.9
5.8
5.0
15.1
11.5
10.5
12.9
10.8
9.9
CAGR
13E-15E
14%
7%
6%
89
60
-5%
-11%
7.0
7.8
9.2
6.1
7.8
8.6
4.8
5.2
6.3
4.3
5.1
5.8
6.8
7.0
10.6
5.9
7.0
9.8
14%
6%
6%
3,250 4,300
32%
8.0
7.0
6.4
5.3
10.5
9.3
15%
89
105
3,210 4,000
1,523 2,000
93
67
Source: Credit Suisse estimates
We derive our DCF valuation by assuming 11.4% WACC (a 7.5% risk-free rate, 1.2 beta,
and 5% risk premium) with 5.8% terminal growth. The Rp4,900/share equates to 12.1x
FY13E P/E.
Figure 53: DCF valuation
Rp bn
2013E
Risk-free rate
Beta
Risk premium
Ke
Kd
Tax
Debt/Capital
Equty/Capital
WACC
Terminal value multiple
Growth
Net Present Value (Rp bn)
Add: Cash (Rp bn)
Minus: Debt (Rp bn)
Shareholder value (Rp bn)
Shareholder value (Rp/share)
Implied FY13E P/E
7.5%
1.2
5%
14%
11%
22%
0.4
0.6
11.4%
19
5.8%
20,453
881
(4,231)
17,104
4,909
12.1x
Undemanding valuation
GTs current valuation is undemanding, trading at 8.0x FY13E P/E, a 13% discount to
regional tyre peers and 33% discount to Indonesia auto. The stock is also a play on
domestic consumption, benefitting from rising middle-high income population, where it is
trading at a steep discount of around 76% to Indonesian consumer stocks. GTs 15%
earnings growth for FY1315E is amongst the highest versus its peers, with margin
gradually improving along with relatively stable raw material costs.
Gajah Tunggal
(GJTL.JK / GJTL IJ)
19
10 June 2013
Figure 54: Undemanding valuation

35.0
33.1
30.0
FY13E P/E (x)
25.0
20.0
15.0
12.0
10.0
9.2
8.0
5.0
Gajah Tunggal
Regional tire peers*
Indo auto*
Indo consumer*
Figure 55: GJTLFwd P/E band
Figure 56:Currently trades at 7.5x fwd P/E vs. historical

peak of 13.1x
4500
14.0
4000
12.0
3500
3000
10.0
Fwd P/E (x)
2500
2000
1500
1000
8.0
6.0
7.5
6.1
4.0
500
0
Jun-09
13.1
2.0
Dec-09
Price
Jun-10
Dec-10
4X
Jun-11
Dec-11
6X
Source: Bloomberg, Credit Suisse estimates
8X
Jun-12
Dec-12
10 X
Jun-13
Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13
Source: Bloomberg, Credit Suisse estimates
Gajah Tunggal
(GJTL.JK / GJTL IJ)
20
10 June 2013
Risks
Commodity prices
Natural rubber and synthetic rubber comprise more than 50% of total raw material costs.
Synthetic rubber is positively correlated with oil prices. Thus, fluctuations in prices of
natural rubber, synthetic rubber and oil would have a significant impact on the total cost of
a tyre company.
Competition
A number of tyre companies manufacture four-wheel and two-wheel tyres in Indonesia.
They include Gajah Tunggal (GT Radial, GT, IRC), Goodyear Indonesia (Good Year),
Bridgestone Tyre Indonesia (Bridgestone), Sumi Rubber Indonesia (Dunlop), Multistrada
(Achiles, Corsa), and Suryaraya Rubberindo Industries (specialises in 2W tyres Federal,
FDR).
Gajah Tunggal is the market leader in motorcycle and bias replacement tyres with 50%
and 49% shares, respectively. It is No 3 in terms of market share (24%) in the radial
replacement market, behind Bridgestone (33%) and Dunlop (28%).
Many foreign players, such as Hankook Tyre (South Korea), recently entered the
Indonesia tyre industry. Hankook started the construction of its first factory in Cikarang in
4Q12. This year, total capacity of the Hankook factory in Indonesia is expected to reach
17,000 units/day. Total investment is estimated to reach US$1.1 bn till 2018. Most of the
production is going to be exported to North America, the Middle East, ASEAN and
Australia, while only around 20% of it would be sold in the domestic market.
Figure 57: Tyre companies in Indonesia
Company name
4W tyre
2W tyre
1
2
PT Goodyear Indonesia
PT Bridgestone Indonesia
n.a
n.a
3
4
5
6
7
8
9
10
11
12
PT Gajah Tunggal
PT Industry karet Deli
PT Sumi Rubber Indonesia
PT Suryaraya Rubberindo Industries
PT Elangperdana Tyre Industry
PT Banteng Pratama Rubber Co.
PT Hung-A Indonesia
PT United King-Land
PT Surabaya Kencana Tyre Industri
PT Multistrada
Good Year
Bridgestone, Turanza,
Ecopia, Potenza
GT Radial, GT
Delium Spectra
Dunlop
n.a
EP
n.a
n.a
n.a
n.a
Corsa, Achilles, Strada
IRC
Swallow Deli Tyre
Dunlop
Federal (OEM Honda), FDR
n.a
Mizzle
Thunderbird
King-Land
Skityre
Corsa
Source: APBI (Indonesia tyre companies association), Company data, Credit Suisse
Regulations
The three-year US import tyre tariffs for China expired on 27 September 2012. These
tariffs were enacted in 200935% import tariff in the first year, 30% in the second year
and 25% in the third yearto reduce unemployment in the US tyre industry. After the tariff
expired last September, imported tyre volumes from China have doubled starting OctoberNovember 2012. As a result, we believe the export market would become more
competitive.
Macroeconomic risks
The other risks that the company may face would be macroeconomic risks such as
changes in inflation and exchange rate.
Gajah Tunggal
(GJTL.JK / GJTL IJ)
21
10 June 2013
Appendix 1: Financial summary

Figure 58: GTProfit & loss
(As at 31 Dec 2012)
Rp bn
Volume (mn units)
Radial
2007
2008
2009
2010
2011
2012
2013E
2014E
2015E
CAGR
13E-15E
8.8
9.6
7.5
10.3
11.8
10.9
11.0
11.7
12.1
5%
Replacement
OEM
Export
Bias
0.90
0.04
7.90
3.6
1.00
0.06
8.50
3.7
1.00
0.04
6.50
3.4
1.20
0.04
9.10
4.2
1.30
0.16
10.30
3.9
1.50
0.41
9.00
4.3
1.71
0.57
8.75
4.5
2.11
0.81
8.75
4.7
2.49
0.85
8.75
5.0
21%
21%
0%
5%
Replacement
OEM
Export
MC tyre
2.20
0.30
1.10
14.3
2.30
0.50
0.90
15.9
2.20
0.30
0.90
16.9
2.50
0.60
1.10
21.0
2.60
0.50
0.80
20.2
3.00
0.60
0.70
21.4
3.16
0.63
0.74
23.8
3.31
0.66
0.77
26.3
3.48
0.70
0.81
29.2
5%
5%
5%
11%
Replacement
OEM
Export
Total tyres
9.50
4.80
26.7
9.50
6.40
29.2
10.50
6.40
27.8
13.20
7.80
35.5
12.60
7.60
35.9
15.20
6.20
36.6
16.88
6.88
39.3
18.72
7.57
0.05
42.8
20.75
8.33
0.10
46.3
11%
10%
Net sales
6,660
7,963
7,936
9,854
11,841
12,579
13,628
15,100
16,585
10%
Tyre
Radial tyres
Bias tyres
Motorcycle tyres
Synthetic rubber
Tyre cord
COGS
Gross profit
5,713
2,324
2,167
1,222
503
444
5,485
1,175
6,979
2,892
2,529
1,558
361
623
6,828
1,135
7,244
2,571
2,798
1,875
225
466
6,115
1,822
8,996
3,230
3,435
2,331
318
540
7,915
1,939
10,721
4,560
3,702
2,459
642
473
10,172
1,669
11,702
4,587
4,373
2,742
577
297
10,142
2,437
12,808
4,709
4,866
3,233
613
206
10,891
2,737
14,314
5,114
5,391
3,809
644
142
11,975
3,126
15,867
5,408
5,977
4,482
627
90
13,076
3,508
11%
7%
11%
18%
1%
-34%
10%
13%
304
207
665
308
245
581
473
204
1,145
435
216
1,287
408
252
1,010
479
280
1,677
573
327
1,838
590
335
2,201
648
368
2,493
6%
6%
16%
(524)
140
(1,356)
(774)
129
1,274
(167)
1,120
(153)
857
(220)
1,457
(74)
1,763
(185)
2,016
(147)
2,345
41%
15%
(49)
91
149
(625)
(368)
905
(290)
831
(172)
685
(325)
1,132
(353)
1,411
(403)
1,613
(469)
1,876
15%
17.6%
10.0%
1.4%
14.3%
7.3%
-7.8%
23.0%
14.4%
11.4%
19.7%
13.1%
8.4%
14.1%
8.5%
5.8%
19.4%
13.3%
9.0%
20.1%
13.5%
10.4%
20.7%
14.6%
10.7%
21.2%
15.0%
11.3%
22%
24%
29%
17%
27%
45%
-11%
61%
82%
-40%
-23%
20%
22%
24%
17%
27%
-28%
40%
-3%
-13%
-652%
-788%
0%
4%
-11%
11%
20%
-38%
-25%
60%
97%
-265%
-245%
24%
24%
26%
23%
24%
41%
16%
6%
12%
-12%
-8%
20%
19%
41%
8%
5%
102%
-12%
-14%
-22%
-24%
-18%
6%
9%
1%
18%
12%
-10%
-37%
46%
66%
70%
65%
8%
9%
3%
11%
18%
6%
-30%
12%
10%
21%
25%
11%
12%
9%
11%
18%
5%
-31%
14%
20%
14%
14%
10%
11%
6%
11%
18%
-3%
-36%
12%
13%
16%
16%
Selling expenses
G&A expenses
Operating profit
Other income (charges)
Pre-tax profit
Income tax
Minority interest
Net profit
8%
15%
Margins:
Gross margin
Operating margin
Net margin
%YoY
Net sales
Tyre
Radial tyres
Bias tyres
Motorcycle tyres
Synthetic rubber
Tyre cord
Gross profit
Operating profit
Pre-tax profit
Net profit
Gajah Tunggal
(GJTL.JK / GJTL IJ)
22
10 June 2013
Figure 59: GTBalance sheet

(As at 31 Dec 2012) Rp bn
2007
2008
2009
2010
2011
2012
2013E
2014E
2015E
573
821
936
1,029
3,359
170
670
1,399
818
3,057
815
728
862
970
3,375
843
1,549
1,089
1,007
4,489
587
1,861
1,660
965
5,073
905
2,227
1,479
584
5,194
881
2,155
1,492
530
5,058
1,201
2,388
1,640
587
5,816
1,452
2,623
1,791
995
6,861
Non-trade receivable
Investment in associates
Fixed assets
Other non-current assets
Total non-current assets
760
396
3,270
669
5,095
736
296
3,619
1,005
5,656
850
315
3,609
728
5,502
710
361
4,076
735
5,882
718
713
4,588
516
6,536
648
793
6,122
112
7,676
703
819
7,383
122
9,026
778
848
8,426
135
10,188
855
880
9,420
148
11,303
Total assets
8,455
8,714
8,877
10,372
11,610
12,870
14,084
16,004
18,164
607
117
-
34
1,345
346
-
811
261
483
1,194
244
884
13
1,395
188
885
1,210
178
952
1,332
187
954
1,466
196
1,057
1,602
206
1,161
524
312
1,560
12
334
2,071
263
1,818
98
227
2,647
97
322
2,900
202
478
3,020
215
401
3,090
216
444
3,380
216
488
3,674
3,939
271
4,581
312
4,044
345
3,779
419
3,722
501
3,769
603
4,015
545
4,035
604
4,035
663
299
4,509
100
4,993
4,389
4,198
4,223
4,371
4,560
4,639
4,698
6,069
7,064
6,206
6,845
7,123
7,391
7,650
8,019
8,372
Capital stock
Additional paid-in capital
Diff arising from restructuring trx
Retained earnings
Others
Total equity
1,742
52
(495)
654
433
2,386
1,742
52
(495)
12
338
1,649
1,742
52
(495)
1,330
42
2,671
1,742
52
(495)
2,108
119
3,527
1,742
52
(495)
2,673
514
4,486
1,742
52
(554)
3,770
468
5,478
1,742
52
(554)
5,123
71
6,434
1,742
52
(554)
6,664
81
7,985
1,742
52
(554)
8,459
94
9,793
Total liabilities & equity
8,455
8,714
8,877
10,372
11,610
12,870
14,084
16,004
18,164
Current assets
Cash and cash equivalents
Accounts receivable
Inventory
Others
Total current assets
Non-current assets
Current liabilities
Bank loans
Accounts payable
Sales advances
Dealer's guarantee
Current maturities
Bonds payable
Other current liabilities
Total current liabilities
Non-current liabilities
Long-term debt net of current
Bonds payable
Post-employment benefits
obligations
Others
Total non-current liabilities
Total liabilities
Shareholders' equity
Gajah Tunggal
(GJTL.JK / GJTL IJ)
23
10 June 2013
Figure 60: GTCash flows

(As at 31 Dec 2012) Rp bn
2007
2008
2009
2010
2011
2012
2013E
2014E
2015E
450
571
1,137
1,011
304
1,707
1,985
1,896
1,858
(382)
(669)
(346)
(840)
(913)
(1,973)
(1,720)
(1,553)
(1,553)
(577)
(959)
175
(494)
(48)
(394)
(41)
(882)
407
(506)
624
(1,349)
(35)
(1,755)
(42)
(1,595)
(45)
(1,598)
68
(98)
792
171
(609)
(266)
265
344
306
Net cash used in

financing activities
840
(513)
(50)
(59)
(32)
(48)
(253)
18
(9)
Net increase in cash and

cash equivalents
at beginning of year
Net effects of changes in
exchange rate
at end of year
330
(437)
693
70
(234)
310
(23)
320
251
240
573
170
815
843
587
905
881
1,201
34
(47)
(42)
(22)
573
170
815
843
587
905
881
1,201
1,452
Net cash provided by

operating activities
Acquisition of fixed
assets (capex)
Others
Net cash used in
investing activities
Free cash flows
Gajah Tunggal
(GJTL.JK / GJTL IJ)
24
10 June 2013
Appendix 2: Global industry outlook

An excerpt from our report titled: Auto Parts Sector: Bridgestone & Sumitomo Rubber
Industries have firm grip on profits: initiate coverage of both at OUTPERFORM by
Masahiro Akita (24 October 2012).
Global tyre demand continues to expand

Tyre sector is a defensive growth sector
The tyre sector represents a large market with a large commercial aftermarket business. In
that sense, tyre companies are defensive stocks. At the same time, the continuing
expansion of the global tyre market makes the sector a growth sector. From 1995 to 2011,
the global tyre market witnessed a CAGR of 7.4%. That growth has become even more
pronounced since 2004 amid the motorisation of newly emerging countries. The trend has
not only pushed up annual demand for tyres used in new vehicles but has also contributed
to the progressive growth of the key determinant of aftermarket demand, the total number
of vehicles in operation throughout the world.
Figure 61: Global tyre market has expanded significantly
Figure 62: Increase of vehicles in operation contributing

to expansion of global tyre demand
200
Billion Yen
1200
Million Vehicles
180
1000
160
140
CAGR 7.4%
800
120
100
600
80
400
60
40
200
20
0
Global Tire Market Demand
Source: Tyre Business, Credit Suisse
Vehicles in Operation
Source: Wards, Credit Suisse estimates
Global tyre demand has softened, with demand in Europe and Asia particularly being
weak. Although the tyre sector is a relatively defensive sector, especially within the auto
parts sector, it is not immune to macroeconomic weakness and economic cycles. Indeed,
global tyre demand softened recently, reflecting the impact of weak demand in Europe and
Asia in particular. In 1H 2012, global demand for tyres used in new passenger cars and
light trucks increased 10% YoY, with key contributions from the North American and Asian
markets. However, aftermarket demand in Europe and Asia was weak across all vehicle
types. As a result, global aftermarket sales of replacement tyres used in passenger cars
and light trucks fell 5% YoY, while sales of replacement tyres for trucks and buses
declined 7%.
Global tyre demand should grow steadily over the medium term
Although currently weak, global tyre demand should rebound next year and grow steadily
over the medium term. We expect the global tyre market to witness a CAGR of a bit more
than 3% during 2011-14 (unit sales base). By region, we expect the Japanese and
European markets to be stable or perhaps shrink somewhat, while we foresee a 2-3%
CAGR in the North American market and a more than 8% CAGR in Asia including China.
Gajah Tunggal
(GJTL.JK / GJTL IJ)
25
10 June 2013
Figure 63: Stable growth expected both for OE and
Figure 64: Asia and North America expected to lead
replacement tyre demand
global tyre demand
15%
25%
20%
10%
15%
10%
5%
5%
0%
0%
-5%
-5%
-10%
-10%
-15%
FY09/12
FY10/12
Global
FY11/12
FY12/12E
Replacement
FY13/12E
FY14/12E
OE
2009
2010
Japan
2011
US
2012E
EU
2013E
2014E
Asia / Others
Material prices likely to linger at high levels but

further sharp increases unlikely
Tyre makers have in no small measure been affected by the sharp and sustained climb
since 2002 of prices of their key raw materials, including natural rubber used in tyres
(RSS#3 and TSR20) and butadiene and crude oil used to produce synthetic rubber. While
prices of these materials have plateaued, we expect them to remain at current lofty levels
over the medium term. On a slightly more positive note, we also believe they are unlikely
to rise much from these levels.
According to the International Rubber Study Group (IRSG), global inventories of natural
and synthetic rubber are on the rise. In other words, given lingering uncertainties on the
demand side, the current supply-demand balance makes a sudden sharp rise in materials
prices unlikely. In particular, we believe the current increase in production of natural rubber
by such major producing countries as Thailand will contribute to more stable natural
rubber prices in the future.
For example, Thai natural rubber production statistics show that from 2000 to 2010
planted area expanded at a CAGR of 3.8% but harvested area grew only 2.4% and
production rose only 2.5%. In 2011, however, planted area increased by the same 3.8%
YoY but harvested area expanded 5.4% and actual production was up 8.6% YoY.
In August 2012, Thailand, Indonesia and Malaysia agreed to reduce their exports of
natural rubber by a combined total of 300,000 tonnes beginning this October in an effort to
halt the recent fall in natural rubber prices. At the same time, the three countries agreed to
reduce output by a total of 150,000 tonnes by cutting down older trees at natural rubber
plantations. Natural rubber prices have already reacted to the agreement by the worlds
three leading producers but, while these measures are affecting prices in the near term,
we think they will have limited impact over the medium term. The export restrictions by the
three countries are to be implemented over a two-year period ending in 2014. Considering
the current annual global natural rubber output of about 11 mn tonnes, removing a total of
450,000 tonnes from supply over a two-year span should have little impact on the market.
Gajah Tunggal
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Figure 65: Global natural rubber production &
Figure 66: Global synthetic rubber production &
consumption
consumption
000 tonnes
000 tonnes
3,500
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
3,000
2,500
2,000
1,500
1,000
500
0
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
2010
NR Production (LHS)
2011
2012
NR Consumption (LHS)
3,900
4,300
3,800
4,200
3,700
4,100
3,600
4,000
3,500
3,900
3,400
3,800
3,300
3,700
3,200
3,600
3,100
3,500
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
2010
NR Stock (RHS)
SR Production (LHS)
2011
2012
SR Consumption (LHS)
SR Stock (RHS)
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Appendix 3: Corporate ownership

structure
Figure 67: Gajah Tunggals ownership structure
Denham PTE Ltd
Michelin (France)
Public shareholders
10.0%
49.7%
40.3%
Gajah Tunggal
Tire Business
Synthetic Rubber
Tire Cord
25.6%
Polychem Indonesia
(Chemicals - Textile)
99.0%
Prima Sentra Megah
(External SBR/TC)
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Appendix 4: GJTLs management

Figure 68: Gajah Tunggals management
Name
Positions
Board of Commissioners
Sean Gustav Standish Hughes
Mulyati Gozali
Gautama Hartarto
Benny Gozali
Sang Nyoman Suwisma
Doktorandus Sunaria Tadjuddin
Board of Directors
President Commissioner
Vice President Commissioner
Commissioner
Commissioner
Independent Commissioner
Independent Commissioner
Christopher Chan Siew Choong

Budhi Santoso Tanasaleh
Tan Enk Ee
Irene Chan
Catharina Widjaja
Hendra Soerijadi
Kisyuwono
Ferry Lawrentius Hollen
Michel Dube
Lin Jong Jeng
President Director
Vice President Director
Director
Director
Director
Director
Director
Director
Director
Independent Director
Christopher Chan Siew Choong President Director
Joined the company in 1991 and was appointed as President Director in 2004. Mr. Chan
graduated from Kolej Tunku Abdul Rahman, Kuala Lumpur, Malaysia in 1979. Prior to
joining Gajah Tunggal, he had held positions as internal audit manager, Head of Budget
and Financial Accounting Manager with Nestle Malaysia Berhad, Malaysia.
Budi Santoso Tanasaleh Vice President, Director
Joined the company as an export manager in 2001 and was appointed as a Director in
2004, and currently serves as VP Director of Gajah Tunggal. Mr. Tanasaleh received his
Bachelors and Masters of Science degrees in Electrical Engineering from University of
Texas Arlington in 1983 and 1989, respectively. Prior to joining the company, he worked in
Motorola, Inc, USA for eight years, and PT Motorola Indonesia for six years, last position
as country manager at the pager division. He had also spent one year as VP for marketing
at Citibank, N.A, Jakarta in 1998.
Tan Enk Ee Director
Appointed as Director of the company in 2006. He serves as executive chairman of

GITI Tyre, a position he has held since 2009. Furthermore, he is a member of several
boards, including Conservation International and the MIT Asia Executive Board. Prior
to joining GT, he had served as chief executive director of Gul Technologies
Singapore Ltd., a SGX-ST listed company, for three years. Mr. Tan obtained Master
of Business Administration from the Massachusetts Institute of Technology in 2000.
Mr. Tan is one of the three beneficial owners of the company.
Irene Chan Director
Appointed as Director of the company in 2007. Prior to this, she was director at PT
Polychem Indonesia Tbk from 2004 to 2007. From 1970 to 1974, she served as
auditor staff at Kenden, Mills, Muldon & Browne Public Accountants in New Zealand.
From 1975 to 1976, she was an internal audit manager at Drs. Agus Hanadi Akuntan
and, from 1979 to 1983, she was manager of reinsurance accounts at Central Asia
Insurance. Her career at the Gajah Tunggal group began in 1983 as Finance
Manager of the company.
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Catharina Widjaja Director
Appointed as Director of the company in 2004. Ms. Widjaja was Executive Vice
President, Corporate Communications of the Gajah Tunggal group from 2000 to 2004.
Prior to joining the Gajah Tunggal group, Ms. Widjaja had worked for various
multinational companies including The Hongkong and Shanghai Banking Corporation,
Jakarta, for nine years, where she last held the position of country treasurer, and
Deutsche Bank AG, Jakarta, as a foreign exchange dealer for two years.
Kisyuwono Prawirohardjo Director
Appointed as Director of the company in 2004. He joined the company as Assistant

Accounting Manager in 1992. Prior to joining the company, Mr. Kisyuwono
Prawirohardjo worked as an auditor with the Governments Internal Audit Financial
and Development Supervisory Board (Badan Pengawasan Keuangan dan
Pembangunan, or BPKP) from 1982 to 1992. Mr. Kisyuwono Prawirohardjo graduated
with a Bachelor of Accounting from Sekolah Tinggi Akuntansi Negara.
Ferry Lawrentius Hollen Director
Appointed as Director of the company in 2010. Prior to this, he was General Manager
of Human Resources and General Affairs, beginning in 2006. He had previously held
several managerial positions in the areas of finance and administration, as well as
sales, marketing and operations. Mr. Hollen has a Masters Degree in Management
from the Asian Institute of Management in Manila, Philippines.
Michel Dube Director
Appointed as Director of the company in 2012. Prior to this, he had been Executive
Vice President Manufacturing since 2010. He was also Executive Quality Director for
GITI China from 2007 to 2011. Dr. Dube had previously worked for the Michelin Tyre
group of companies in Europe, North America and Asia from 1983 to 2007. Prior to
this, he was Senior Research Group Manager at American Enka Company in
Asheville, North Carolina, from 1979 to 1983. He holds a Ph.D. in Chemistry from the
University of Montreal in Canada.
Lin Jong Jeng Director
Appointed as Director of the company in 2007. He has been with the company since
1983, starting as Research and Development Manager. He subsequently became
Plant Manager and Executive Vice President Manufacturing and finally the Head of
Production in 2006. Before joining the company, he had worked for Tay Feng
(Federal) Tyre Co. Ltd in Taiwan as research and development manager. He has a
Bachelors Degree in Chemical Engineering from the Chung-Yuan College of Science
and Technology.
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Appendix 5: GJTLs milestones

Figure 69: Gajah Tunggals milestones
1951
1973
1981
1990
1991
1993
1994
1995
1996
1997
2001
2002
2004
2005
2006
2007
2008
2009
2010
Gajah Tunggal was established to produce bicycle tyres and inner tubes.
Technical assistance agreement was signed with Inoue Rubber Company of Japan to produce motorcycle tyres.
Company started producing bias tyres for passenger and commercial vehicles with technical assistance from Yokohama Rubber
Company of Japan.
PT Gajah Tunggal Tbk was listed on the Jakarta and Surabaya Stock Exchange.
PT Gajah Tunggal Tbk acquired GT Petrochem Industries, a producer of tyre cord and nylon filament.
Company started producing radial tyres for passenger cars and light trucks.
PT Gajah Tunggal Tbk received quality certifications such as the E-Mark from the European community and passed the
regulatory requirement of the US Department of Transportation.
PT Gajah Tunggal Tbk acquired Langgeng Baja Pratama (LBP), a steel and bead wire producer.
PT Gajah Tunggal Tbk received ISO 9002 international quality certification for its radial tyre production quality control system, as
well as receiving the TUV CERT quality certification from Germany.
PT Gajah Tunggal Tbk acquired Meshindo Alloy Wheel Corporation, the second largest manufacturer of aluminium alloy wheels
in Indonesia.
PT Gajah Tunggal Tbks main subsidiary, PT GT Petrochem Industries, expanded its operations to include synthetic rubber,
ethylene glycol, polyester filament and polyester staple fibre.
PT Gajah Tunggal Tbk entered into an off-take agreement with Pirelli Tyre to produce Pirelli designed passenger car radial tyres
for North America and Europe. This agreement was mutually terminated in 2001.
PT Gajah Tunggal Tbks radial tyre plant obtained ISO 9001 certification for its quality design, development and installation
systems.
The company entered into a manufacturing agreement with Nokian Tyres Group, a leading tyre manufacturer based in Finland,
to produce a selected range of passenger car tyres, including winter (snow) tyres, for markets outside Indonesia.
The company received QS 9000 quality certification, one of the requirements to supply to US "Big Three".
PT Gajah Tunggal Tbk completed its restructuring, enabling the company to lower its debt burden by more than US$200 mn and
convert debt in to FRN.
Completion of corporate restructuring in which PT GT Petrochem Industries was deconsolidated, and at the same time acquired
the TC and SBR assets.
Divestment of Steel Wire Producer Langgeng Bajapratama.
Start of off-take agreement with Michelin, in which Gajah Tunggal is to produce 5 million tyres per year for Michelin in export
markets by the year 2010. Launch of TyreZone outlets.
The company issued a US$325 mn Maiden Global Bond, and used the proceeds to buy back some of its notes as well as to
finance the expansion.
Divestment of aluminium alloy wheels producer Meshindo Alloy Wheel.
The company received ISO/TS 16949 quality certification, an upgrade form the QS 9000 achieved in 2002.
Start of the production of tyres for the Michelin off-take program.
PT Gajah Tunggal Tbk was awarded Best Managed Company in Indonesia by Euromoney Magazine
Additional US$95 mn Bond re-tap, to finance the remainder of the expansion as well as capital expenditures relating to its
research and development activities.
The company also re-entered the equity market with a 10-to-1 Rights issue, totalling Rp158.4 bn (around US$17 mn) for working
capital needs.
The company received the Primaniyarta award from The President of Republic Indonesia.
Michelin off-take reached 2.8 mn tyres.
The company successfully completed an Exchange Offer of its outstanding bonds. Gajah Tunggal also was the proud recipient of
numerous awards, most notably the Anugerah Produk Asli Indonesia Award 2009 from Bisnis Indonesia. The company also
achieved ISO 14001 certification for its management systems.
The company's net sales surpassed US$1 bn for the first time in its corporate history. Furthermore, Gajah Tunggal receives
three prestigious awards from Museum-Rekor Dunia Indonesia (MURI) for first green/ecological tyre produced in Indonesia, first
studded/snow tyre and first multi-colour smoke tyre made in Indonesia.
Gajah Tunggal
(GJTL.JK / GJTL IJ)
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10 June 2013
Appendix 6: 4W Tyre
Figure 70: Tyre in details
Source: Good Year Indonesia
Gajah Tunggal
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10 June 2013
Appendix 7: HOLT
Figure 71: Gajah Tunggal TerbukaHOLT default showing 37% upside
Relative Wealth Chart
Tires & Rubber
Market Cap: 1.156 USD
Source: Credit Suisse HOLT LensTM
Price: 3,250 (Jun 6, 2013)

Warranted Price: 4,438 IDR (+37%)
Gajah Tunggal
(GJTL.JK / GJTL IJ)
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10 June 2013
Companies Mentioned (Price as of 07-Jun-2013)

Apollo Tyres (APLO.BO, Rs90.95)
Astra International (ASII.JK, Rp6,800)
Bridgestone (5108.T, 3,055)
Cheng Shin Rubber (2105.TW, NT$90.5)
Gajah Tunggal (GJTL.JK, Rp3,100, OUTPERFORM, TP Rp4,300)
Michelin (MICP.PA, 68.4)
Multistrada Arah (MASA.JK, Rp380)
Polychem IDN (ADMG.JK, Rp250)
S Giti Tire (600182.SS, Rmb12.43)
Sumitomo Rubber Industries (5110.T, 1,463)
Disclosure Appendix
Important Global Disclosures
I, Dian Haryokusumo, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and
securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in
this report.
The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's
total revenues, a portion of which are generated by Credit Suisse's investment banking activities
As of December 10, 2012 Analysts stock rating are defined as follows:

Outperform (O) : The stocks total return is expected to outperform the relevant benchmark*over the next 12 months.
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*Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stocks total return relative to the analyst's coverage universe which
consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractiv e, Neutrals the less attractive, and
Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ratings are based on a stocks total
return relative to the analyst's coverage universe which consists of all companies covered by the analyst within t he relevant sector, with Outperforms representing the
most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin Ame rican and non-Japan Asia stocks, ratings
are based on a stocks total return relative to the average total return of the relevant country or regional benchmark; Australia, New Zealand are, and prior to 2nd
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return calculation and a 15% and a 7.5% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and
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based on a stocks total return relative to the average total return of the relevant country or regional benchmark.
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Analysts sector weightings are distinct from analysts stock ratings and are based on the analysts expectations for the fundamentals and/or
valuation of the sector* relative to the groups historic fundamentals and/or valuation:
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Market Weight : The analysts expectation for the sectors fundamentals and/or valuation is neutral over the next 12 months.
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*An analysts coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple se ctors.
Credit Suisse's distribution of stock ratings (and banking clients) is:

Global Ratings Distribution
Rating
Versus universe (%)
Of which banking clients (%)
Outperform/Buy*
42%
(54% banking clients)
Neutral/Hold*
39%
Underperform/Sell*
15%
Restricted
3%
*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely
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definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other i ndividual factors.
Gajah Tunggal
(GJTL.JK / GJTL IJ)
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10 June 2013
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be used, by any taxpayer for the purposes of avoiding any penalties.
Price Target: (12 months) for Gajah Tunggal (GJTL.JK)
Method: We derive our target price of Rp4,300 for Gajah Tunggal by assumming 10.5x FY13E P/E (price-to-earnings), the regional average
implied P/E of tire companies under our coverage.
Risk:
Risks that could impede achievement of our Rp4,300 target price for Gajah Tunggal include: Fluctuation in commodity prices such as
rubber; competition from existing and new players; regulations; and macroeconomic risks.
Please refer to the firm's disclosure website at www.credit-suisse.com/researchdisclosures for the definitions of abbreviations typically used in the
target price method and risk sections.
See the Companies Mentioned section for full company names
The subject company (APLO.BO) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit
Suisse.
Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (5108.T, 5110.T, APLO.BO)
within the next 3 months.
Credit Suisse may have interest in (GJTL.JK, ASII.JK)
As of the end of the preceding month, Credit Suisse beneficially own 1% or more of a class of common equity securities of (2105.TW).
Important Regional Disclosures

Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report.
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APLO.BO, MICP.PA, ASII.JK) within the past 12 months
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PT Credit Suisse Securities Indonesia ....................................................................................................................................... Dian Haryokusumo
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Gajah Tunggal
(GJTL.JK / GJTL IJ)
35
10 June 2013
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10 June 2013
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Gajah Tunggal
(GJTL.JK / GJTL IJ)
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10 June 2013

Share price performance

Rebased Rel (RHS)

The price relative chart measures performance against the JSX

Source: Company data, Thomson Reuters, Credit Suisse estimates.

CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS

Figure 1: Improving auto population

4W tyre (mn units)

Replacement: 12% CAGR 13-15E

4W population (mn units, LHR)

2W population (mn units)

Source: Indonesia Tyre Association, Credit Suisse estimates

Source: Indonesia Tyre association, Credit Suisse estimates

Figure 3: GT has 24% market share in replacement

Figure 4: Tyre revenue to grow at 11% YoY over FY1315E

market, despite having relatively small OEM business

on higher replacement tyre contribution

2012 2013E 2014E 2015E

Source: Company data FY12

Source: Company data, Credit Suisse estimates

Figure 5: Margins to gradually improve on relatively

Figure 6: Undemanding valuation

stable raw material costs

Operating profit (Rp bn, LHS)

NPV (Rp bn)

2012 2013E 2014E 2015E

Source: Company data, Credit Suisse estimates

Implied FY13E P/E (x)

Regional tire peers*

Implied FY13E P/E (x)

Current FY13E P/E (x)

*CS coverage. Source: Credit Suisse estimates

Benefits from the growing auto sector

The largest integrated SEA tyre manufacturer

Initiating with OUTPERFORM and a TP of Rp4,300

Gajah Tunggal GJTL.JK / GJTL IJ

Key earnings drivers

Per share data

Source: Company data, Thomson Reuters, Credit Suisse estimates.

12MF P/B multiple

Benefits from a growing auto sector

Source: Nielsen Media Research, Media Index

Figure 8: along with rising GDP per capita

2012 2013E 2014E

Source: CEIC, Credit Suisse estimates

Potential room to grow in the 4W market

Figure 10: Low 4W penetration

Source: Gaikindo, Credit Suisse estimates

Source: Company data, Credit Suisse estimates

to benefit 4W tyre industry

South Indonesia Mexico

Source: Company data, Credit Suisse estimates

Figure 12: 4W tyre export market still plays a major role

Figure 13: while higher contribution in OEM resulted in

better penetration in the replacement market

2013E 2014E 2015E

Source: Indonesia Tyre Association, Company data, Credit Suisse

2013E 2014E 2015E

Source: Indonesia Tyre Association, Company data, Credit Suisse

Highly penetrated two-wheeler market

Figure 15: Indonesias motorcycle per household (%)

2W per household (%)

Source: AISI, Credit Suisse estimates

Source: CEIC, Credit Suisse estimates