It was within the expectation that the 2020 earnings of North East Rubber Public Company Limited (NER) came out at 858 million baht, representing an increase of 59.35% from 538 million baht in 2019.
NER’s total sales revenue was at 16,349 million baht, increased 25.71% from 13,005 million baht in 2019, which is in line with an increase in rubber price. The company also handed out a generous dividend payment of Bt0.15 as well.
What makes NER interesting is the fact that the company reported only a 25.71% increase in revenue, but its net profit grew as much as 60%, which is not common in the stock market whereas the revenue and profit often grow at the same pace.
Without a one-time gain shown in the financial statement that means the increase in net profit was contributed by NER’s operating results.
Primarily, the main factor would be a significant increase in rubber price from 35-45 baht early 2020 to around 70 baht in late 2020, which could be the result of lower supply when rubber-glove producers require more material as they are pumping their productions amid rising demand for rubber gloves.
Meanwhile, NER has had a huge stockpile of rubber since late 2018 at a lower price, resulting in a wider gross profit margin in 2020, coupled with a new production plant, creating an economy of scale to boost its gross profit by 1.95% to 1,726 million baht, representing a margin of 10.56%.
The company recorded a sales volume in 2020 at 358,820 tonnes, increased 78,703 tonnes from 280,117 tonnes in 2019.
Analysts expected NER to extend its gain for the next 2-3 years, estimating a net profit of 1,433 million baht and 1,715 million baht in 2021 and 2020, respectively, representing an increase of 67% and 20%, respectively.
Mr. Chuwit Jungtanasomboon, Chief Executive Officer of NER, estimated a revenue of 22,000 million baht in 2021, seeing constant demand for rubber from both domestic and international.