20170223_BSC_Vietnam Sector Research_EN_Rubber Sector_ICB1353

Continuous improvement in rubber production results
Rubber stocks had a strong bullish period in the beginning of 2017, before a sharp increase in the global rubber price. rubber sector is currently trading at average P/E trailing of approximately 15x (excluding bonus and welfare fund).
The global rubber price fluctuated in 2M2017. Rubber price climbed by 70% yoy and then decreased by 20% in the last 2 week. Based on 2010-2015 statistics, the rubber price could maintain downward trend toward year-end and closed the year at the price of approximately 60 - 80% of the price at the beginning of the year.
BSC noted that short-term rubber price development can hardly affect business results of rubber companies due to uptapping season; and sale output, from now until May, only accounts for about 10% of annual output.
Vietnam Rubber Group sets 2017 plan of VND 35 million/ton ASP and VND 30 million/ton of average cost. BSC believes the planed ASP was conservative, expects ASP will range between VND 42-44 million/ton, based on the rubber price development statistic during the 2011-2015 period.

Updates on listed companies
TRC – BUY– 38,000 VND/share (upside 20.2%)
With the assumed ASP of VND 40 million/ton, BSC expect profits from rubber production to surge by 104% to VND 64.6 billion, and the PAT to be VND 102.3 billion (+46.7% yoy), corresponding to 2017 EPS of 2,823 VND ( excluding welfare and bonus fund). P/E forward is currently at 11.2x
DPR – BUY – 48,800 VND/share (+upside 11%):
With ASP assumed at VND 40 million/ton, BSC expects  profit from rubber operations to reach VND 120 billion  (+150% yoy), and PAT of the parent company in 2017 to be VND 201.5 billion (+ 26.7%), with a respective EPS of 3,523 VND/share in 2017 and a P/E forward of 13x.
PHR – HOLD - 31,000 VND /share (upside 4.4%)
With ASP assumed at VND 40 million/ton, BSC forecasts PAT of PHR can be VND 228 billion (+5% yoy), leading to 2017 EPS of 2,249 VND and a P/E forward of 13.8x. PHR should not yield a strong growth in profits due to (1) Cultivation output is reduced by 15% due to reduction in cultivation area; (2) Profit from Insdustrial Zone transfer decreased from VND 106 billion (2016) to  VND 20 billion.