The share price of North East Rubber Public Company Limited (NER) closed the morning session on Tuesday at ฿4.66/share, increased ฿0.14/share or 3.10% with a trading value of 482 million baht.
Maybank Kim Eng has given a “BUY” recommendation on NER with a target price at ฿5.00/share on 7.0x P/E, citing that the healthy 4Q20 outlook is expected to continue into 2021.
4Q20 earnings outlook remains bright, (+143.9% QoQ +199.4% YoY). Hence, the 2020-2021 outlook should meet Maybank’s target. Normalized profit is forecast to grow +41.5% YoY in 2021. Management confirmed the sale of 6.19% of shares is the allocation within the group and the operation is still normal.
Regarding the issue that the US is to raise tariffs on Chinese tires, management unveiled that only some customers (less than 11%) were affected. However, the US tire market has already raised prices due to high demand. Consequently, Chinese operators continue to compete in such markets, leading NER’s orders to remain intact.
In addition, NER’s management revealed to Maybank that the cow-sleeping pad project may be delayed by 6-12 months due to the COVID-19 outbreak, affecting the overseas target market. However, Maybank stated that it does not see this as a concern as it accounts for only 3% of 2022’s revenue, while product prices remain positive in 2021.