SRI TRANG AGRO-INDUSTRY PCL (SGX:NC2)
Sri Trang Agro-Industry - 3Q20 Earnings Up Y-o-y & Q-o-q; Downgrade To HOLD
- Sri Trang Agro-Industry's 3Q20 net profit jumped 1,443% y-o-y and 91% q-o-q to Bt2,084m, driven by the glove business. Its natural rubber business incurred losses due to slim margins and hedging loss.
- We cut our 2021-22 net profit projections by 19% and 26% respectively due to our more cautious outlook on its glove ASP and natural rubber earnings.
- Downgrade Sri Trang Agro-Industry to HOLD and cut target price to Bt30.00. Entry price: Bt23.00.
Sri Trang Agro-Industry's 3Q20 earnings up y-o-y and q-o-q.
- Sri Trang Agro-Industry (SGX:NC2)’s (STA) 3Q20 net profit jumped 1,443% y-o-y and 91% q-o-q to Bt2,084m, driven by the glove business (Bt2,470m) while the natural rubber business incurred a Bt385m loss. Net profit was lower than our and consensus estimates by 5% and 7% respectively.
- Sales grew 7% y-o-y and 8% q-o-q, driven by strong glove sales (+179% y-o-y, +68% q-o-q). Natural rubber sales declined 32% y-o-y and 20% q-o-q.
- Overall gross margin was 34% (2Q20: 16%, 3Q19: 6%), driven by the strong glove margin of 60%.
- Glove ASP was US$36.30/1,000 pieces (+89% y-o-y, +73% q-o-q).
- Sri Trang Agro-Industry reported forex gains of Bt255m and derivative hedging loss of Bt446m. Cost-to-income ratio was 6.1%, down form 7.0% in 3Q19 and 7.7% in 2Q20.
Selling companies and land with buildings to Sri Trang Gloves (STGT), a subsidiary of the company.
- Sri Trang Agro-Industry informed SET that it will complete the following transactions by Jan 21:
- Sale of Premier System Engineering (PSE) for Bt1,120m in a business restructuring as PSE’s core business is to provide construction services and produce and install machinery for Sri Trang Agro-Industry’s operations.
- Sale of Sadao P.S. Rubber (PS) at a par value of Bt100. Sri Trang Gloves (STGT) has been searching for land in Songkla province to construct a new production facility.
- Sale of land with buildings from Anvar Parawood (ANV) in Songkla province for Bt69.2m
- Sale of land with buildings from Sri Trang Agro-Industry in Chumphon province for Bt177.47m.
Downgrade to HOLD with lower target price at Bt30.00, based on SOTP valuation.
- We cut our Sri Trang Agro-Industry's 2021-22 net profit projections by 19% and 26% respectively due to our more cautious outlook on its glove ASP and natural rubber earnings.
- We value the natural rubber business at 6x 2021F PE (below the stock’s 10-year mean of 13x) and the glove business at 6x 2021F PE (-3SD of its competitor Top Glove (SGX:BVA)’s 5-year forward PE mean of 13.0x). We think earnings would normalise in 2022.
- Entry price is Bt23.00.
- We forecast 2020 dividend yield at 7.3%. Sri Trang Agro-Industry has just announced an interim dividend of Bt0.50 per share, Ex-dividend is on 26 Nov 20.
- See Sri Trang Agro Share Price; Sri Trang Agro Target Price; Sri Trang Agro Analyst Reports; Sri Trang Agro Dividend History; Sri Trang Agro Announcements; Sri Trang Agro Latest News.
- Share price catalyst: Resumption of global automobile demand
Thunya Sutavepramochanon
UOB Kay Hian Research
|
https://research.uobkayhian.com/
2020-11-16
SGX Stock
Analyst Report
1.337
DOWN
2.090
