Investment Recommendation

DRC_BUY_TP 32,800VND_Upside 25_Back On the Track_BSC Company Update

Date

18/05/2021
Language

Tiếng Việt
Number of Downloads

150

Detailed report

VALUATION

We recommend BUY DRC stock with a target price of VND 32,800, +25% compared to the price on May 18, 2021, based on P/E method.

FORECAST OF BUSINESS PERFORMANCE

We forecast that DRC’s net revenue and NPAT in 2021 will reach VND3,926 billion (+7.7% YoY) and VND371 billion (+44.6% YoY) respectively, equivalent to 2021 fw P/E of 8.5x and 2021 EPS of VND9,197/share with our assumptions: (1) Radial tire and Bias tire sales volume reached 553,045 units (+9% YoY) and 648,537 units (+3% YoY), (2) Average selling price of products increased slightly +2% YoY and (3) Gross profit margin is at 20%.

INVESTMENT OUTLOOK

High growth potential in the long term thanks to (1) Road transport continues to grow, contributing to the growth of truck and bus tire consumption and (2) Radialization trend increases tire consumption demand Radial instead of Bias tires.
Benefit in the short term due to (1) the strong recovery of many markets and (2) Anti-dumping duties imposed on competitors.

TECHNICAL ANALYSIS

Investors should reduce the proportion of stocks and monitor DRC’s performance until DRC shows more positive signs, consider cutting losses if the support level 24 is penetrated.

RISKS

COVID-19 continues to develop complicatedly, reducing the demand for tires and tubes.
Increase in raw material and rubber prices reduces profit margin.

COMPANY UPDATE

In Q1/2021, DRC recorded net sales and NPAT of 912 billion VND (+12.6% YoY) and 64 billion VND (+70.1% YoY) respectively thanks to the recovery of key markets and reduction of depreciation expense.