Rubber Stocks Jump on Anticipated Prices Rise above ฿70/Kg. 

Rubber stocks jumped in the morning session on May 27, 2021, led by the increment of Thai Rubber Latex Group (TRUBB), rising 2.56% or 0.08 baht per share to 3.20 baht, with a trading value of 29 million baht.

North East Rubber (NER) rose 2.36% or 0.15 baht per share to 6.50 baht with a trading value of 238 million baht.

Sri-Trang Agro-Industry (STA) rose 2.25% of 1.00 baht per share to 45.50 baht, with a trading value of 248 million baht.

 

KTBST Securities (KTBST) reiterated a BUY rating on NER but raised the target price to 8.50 baht per share from 7.00 baht while maintaining 2021E PER at 9.0x, which implies +1.0 SD above its 3-yr average. KTBST was increasingly positive about NER’s earnings outlook following the company’s bullish guidance. 

First, the company has raised its 2021E sales volume target to 440,000 tons from 410,000 earlier, while the existing orders have been queued until October. Second, gross profit margin has been forecasted to remain a high of 10-14%. Last, management believes natural rubber prices will continue to stay elevated on the back of growing demand amid adequate supply.

KTBST upgraded 2021E/22E net profit forecast by 23%/13% to 1.77 billion baht (+106% YoY)/1.94 billion baht (+10%) as it revised up 1) sales volume assumption to 440,000 tons from 410,000 earlier (in line with the company’s target) and 2) gross profit margin forecast to 12% from 11%. 

 

Apart from that, KTBST also has a positive view toward STA because rubber prices are rising, but preferred NER because earnings are likely to consistently increase in line with improving rubber demand. According to the Rubber Authority of Thailand, Standard Thai Rubber (STR) price in 2021 (Jan-May) is at 69.12 baht per kg. Analysts expect the price could rise above 70 baht per kg.