CSM_The hopeful light_BSC_Vietnam company update_EN

Valuation
We recommend Tracking CSM shares. CSM shares were traded at 14,700/share, equivalent to P/E of 27.9x (higher than the regional average is 21.1x), P/B of 1.2x (lower than the regional average is 1.7x)

Earning forecast
In 2018, CSM plans to increase the production of the truck buses radial (TBR) by 25%, Passenger car radial (PCR) reach 1 million tires, revenue reach VND 3,800 billion (+ 8% yoy), EBT of over VND 100 billion (> + 81% yoy), equivalent to EPS of 2018 at VND 965, dividend rate around 3%.

Catalyst
- CSM would put the stage 2 of the Passenger car radial into operation, which expected to export to Tireco 1 million tires this year. (Demand of tires is 1.5 million annually)
- Radial tire demand grows sharply.
- Vinachem would divest capital from CSM to 36%.

Investment Risks
The fluctuation of input material prices.

Company update
Highly competitive market. Chinese products accounted for 50% of the market, being the biggest competitor.
Profit was negatively affected by raw material prices situation. In 2017, the average price of rubber in the world increased 36% compared to 2016 which drop the CSM’s profit sharply as 50% of tire’s price from rubber.
Radial loss of VND 130 billion. In particular, PCR had a loss of VND 100 billion, TBR lost about VND 30 billion.
Selling price in 2018 will increase 3-5%. In 2017, CSM increased prices by 2-3%. In 2018, CSM have increased the price of motorbike tires to 5% at the beginning of the year and expected to increase 3% of car tires price in March.
Vinachem is planning to divest capital. Vinachem is owning 51% of CSM and will divest capital at CSM to 36%.


Technical Analysis
CSM is in the long downtrend since 2016 and continuously losing support levels. CSM are in the short uptrend, approaching the resistance at 15.1. CSM is expected to continue the short-term uptrend.