NER Expands 4%, Analyst Raises a TP to ฿7 following an Outstanding 2020 Profit

NER Expands 4%, Analyst Raises a TP to ฿7 following an Outstanding 2020 Profit

The share price of North East Rubber Public Company Limited (NER) rose ฿0.20/share or 3.92% to ฿5.30/share with a trading value of 797 million baht following a spike in 2020 profit. 

 

KTBST Securities recommended “BUY” on NER with a rising target price of ฿7.00/share and 2021E PER multiples to 9.0x (+1 SD above its 3-yr average) from 8.0x following earnings forecast upgraded. 

 

NER reported 4Q20 earnings results that beat the Bloomberg consensus and KTBST forecast by 10%. Net profit skyrocketed +240% YoY to 422 million baht, as 1) sales volume rose +55% YoY and 2) gross profit margin widened YoY to 9.3%.

 

KTBST upgraded NER’s 2021-22E net profit forecast by 24% to 1.43 billion baht (+67%)/ 1.71 billion baht (+20%). Gross profit margin is expected to remain stable at a high level. Sales volume will likely continue to increase after capacity increased to 460k tons/year in 3Q20, and as NER has a plan to boost its capacity by 50k tons/year in 2021.

 

In addition, KTBST saw the stock advancing further as 1) net profit is expected to hit higher highs in the next 2-3 years, 2) the stock currently trades at an undemanding 2021E PER of 5.7x, which is well below 6.7x, the mean of its 3-year historical level and 3) the current share price offers a dividend yield of 7%.

 

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