While Goodyear Indonesia and Multistrada Arah Sarana both showed a weakening export performance in 2016, Gajah Tunggal still managed to post a modest improvement in terms of 2016 exports. But all three tire manufacturers reported a significant growth of earnings stemming from sales on the domestic market. As such, the Indonesian market has become a more important source of corporate earnings for all three companies.

Goodyear Indonesia's domestic sales grew 8.2 percent year-on-year (y/y) to USD $84.7 million in full-year 2016, while its international sales fell 8.6 percent (y/y) to USD $69.8 million. Domestic tire sales now contribute 54.83 percent to the company's total tire sales.

Gajah Tunggal's domestic sales in full-year 2016 rose 7.8 percent (y/y) to IDR 8 trillion (approx. USD $602 million). Last year domestic sales contributed 58.8 percent to the company's total sales, up from a ratio of 57.3 percent in the preceding year.

Meanwhile, domestic sales of Multistrada Arah Sarana surged 17.1 percent to USD $80.6 million in 2016. However, although the significance of domestic sales rose sharply, the company still earns most from its exports. In 2016 domestic sales contributed 35.1 percent to total sales of Multistrada Arah Sarana, up from a ratio of 29.0 percent in the preceding year.

Arief Sadikin, Director of Multistrada Arah Sarana, said the domestic market has become a growing force because domestic demand for tires is rising at a faster pace compared to foreign demand. This shows bleak growth of car and motorcycle production in Indonesia's main tire export destinations (which is in line with the bleak world economy). Meanwhile, in Indonesia car sales showed a modest improvement in the first quarter of 2017. However, the generally falling tire exports from Indonesia are also attributed to US tariff protectionism.

Read more: Analysis of Indonesia's Automotive Industry

So far this year shares of Gajah Tunggal fell 2.34 percent, shares of Multistrada Arah Sarana fell 14.07 percent, while shares of Goodyear Indonesia fell 11.46 percent. Main reason why investors are not eager to invest in these stocks is currency risks. Considering the US Federal Reserve is expected to tighten its monetary policy further this year, there will emerge new pressures on the Indonesian rupiah exchange rate. With Multistrada Arah Sarana and Gajah Tunggal having outstanding US dollar-denominated bonds, this constitutes a financial weakness.

Stock Quotes Gajah Tunggal (GJTL), Multistrada Arah Sarana (MASA) and Goodyear Indonesia (GDYR):*

* normalized stocks, 1 January 2016 = 100

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