Credit Suisse (CS) has initiated coverage on Sri Trang Gloves (Thailand) Public Company Limited (STGT) with an “Outperform” rating and a 12-month target price at ฿142.00/share, stating that the stock is the cheapest proxy to the glove sector.
CS stated that the global shortage in rubber gloves has led to STGT’s unprecedented sales volume, profits and margins. STGT reported a 488% growth in 2Q20 sales, compared to the same period last year and an increase of 150%, compared to the previous quarter, however, the average selling prices (ASP) in the bulk of sales were much lower due to the orders being contracts locked-in.
STGT expects its ASP in 3Q-4Q/20 to increase by 70% and 12% QoQ, respectively. Despite lower ASP compared to its peer, CS pointed out that it will give upside to STGT, while reducing the impact to a minimum if the trend reversed.
Aside from being at an advantage of rich resources for latex and support by STA as the largest Thai upstream producer, STGT topped its peers by having lower fuel cost and the 3% interest rate subsidy from the government measure throughout 2026.
More importantly, STGT planned to expand its production capacity to 66 billion pieces p.a. by 2026 and will continue to focus on latex gloves, while other producers mostly focused on nitrile space for their expansion instead. CS noted that the demand upside from low usage, emerging countries like China and India should benefit STGT more than others.
CS forecasted STGT’s 2020-2022E revenue at 25,998 million baht, 33,441 million baht and 28,658 million baht, respectively. Its net profits for 2020-2022E were forecasted at 8,682 million baht, 13,436 million baht and 6,444 million baht.