DRC_BUY_TP 40,000_UPSIZE 25_Keep Rolling_BSC Company Update

We recommend BUY for DRC shares  with a target price  of  VND 40,000 defined by the P/E valuation method with the 2022 target P/E = 12.5x to shine (1) Strong growth in profitability in 2022 comes from very large demand and attractive selling prices and (2) Long-term growth prospects with Radial 3 factory It will be fully operational from 2024.

 

The BSC forecasts  drc wood business results  in 2022 as follows:

- In 2022:  Net revenue and profit after tax- noncontrolling interests reached VND 5,012 billion (+14.4% YoY) and  VND 377 billion (+29.5% YoY), EPS FW2022 = 3,172 VND/ SHARE, respectively, corresponding to P/E FW2022 = 10. 1x.

Key assumptions for DRC business results include (1) Good growth in DRC product consumption: Radial +18% YoY, Bias +5% YoY, (2) Average selling price of products slightly increased +3% YoY and (3) Gross margin increased by 40 bps, reaching 17.5%.

 

Output continued to grow strongly thanks to (1) good market demand, (2) taking advantage of competition and (3)  improved adverse conditions.

Gross margin continues the upward trend, reaching 17.5% (+40 bps vs 2021)

 

The price of raw materials, especially rubber, rose more sharply than expected.

 

In 2021, DRC recorded net revenue and profit after tax reaching VND 4,380 billion (+20.1% YoY) and VND291 billion (+13.4% YoY) respectively  thanks to the growth of all types of products.