STGT Jumps 5.5% as Analysts See Profit to Continue Expanding in 2021
STGT rose 5.5% in the morning session as analysts expected 2021 earnings to continue growing, but warned of a decline in selling price in 2Q.
The share price of Sri Trang Gloves (Thailand) rose ฿2.50/share or 5.49% to close the morning session on May 14, 2021, at ฿48.00/share with a trading value of 4,358 million baht, the highest in the Thai stock market this morning.
Asia Plus Securities (ASPS) has given a “BUY” recommendation on STGT with a target price at Bt65.00 per share, expecting earnings in 2021 to continue in positive direction.
After the earnings announcement by STGT, ASPS maintained its net profit estimation at 114.5% YoY from higher average selling price (ASP) and volume. 2Q21 earnings would also continue to expand from 1Q21 as well.
However, ASPS expected 2022 earnings would fall by 37.7% YoY due to a decline in ASP by 33.5% YoY.
ASPS gave a fair value in 2021 at Bt65, based on DCF (WACC 10.7%). The current share price has PER at 4x, while the company also announced an interim dividend payment of Bt1.50, representing a dividend yield of 3.3%.
On the other hand, KTBST Securities (KTBST) maintained its “BUY” recommendation on STGT but lowered its target price from Bt58 to Bt51 per share to reflect the management’s statement, saying that the ASP in 2Q21 might drop by 10-15%, following the decline in global price. The ASP in April grew 5%, while expecting to maintain its level in May and starting to drop in June.
Nevertheless, STGT affirmed its target volume in 2021 at 32 billion pieces from the increasing production capacity in 2Q21 around 12% or approximately 5,000 million pieces per annum.
In the meantime, KTBST revised down 2021-22 earnings estimated by 3% and 10%, respectively, in response to the drop in ASP that was faster-than-expected. Also, the Covid-19 situation had a tendency to get better in 2022 from the urge in vaccination.
STGT’s share price outperformed SET Index by 14% in the last three months from the resurgence of Covid-19 in April, along with more than 2,000 new daily cases, resulting in a positive sentiment on STGT. Currently, STGT is trading at a PER of 4x and would increase to 6x in 2022 that the earnings were expected to return to normal.