NER Gains 5%, Analyst Upgrades TP to ฿8.50 on Expected New High Earnings

The share price of North East Rubber Public Company Limited (NER) rose ฿0.30/share or 4.76% to ฿6.60/share as of 11:38 local time in Thailand, with a trading value of 354 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 per share 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.

2021E/22E net profit forecast has been upgraded by 23%/13% to 1.77 billion baht (+106% YoY)/1.94 billion baht (+10%) as KTBST 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%. 

NER’s share price appreciated by 26%/32% over the past one/three months, thereby outperforming the SET Index by 24%/28%. KTBST viewed the company’s strong earnings performance and the bright business prospects as the catalysts to the share price while forecasting net profit to make a series of new highs over the next 2-3 years. NER currently trades at 6.9x 2021E PER and PEG of 0.17x based on KTBST 2020-22E EPS CAGR estimate of 41%, and sports a dividend yield of 5-6%.

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