DRC - A Steady Growth through a Difficult Period
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Da Nang Rubber JSC (DRC – HSX) is a leading domestic manufacturer in the tire and tube industry in Vietnam. In recent years, the company's new product - the Radial tire is still in the process of market penetration so that the result has not been as expected. In the short term, we think DRC is still experiencing the difficulty of the industry including the volatility of raw material prices, especially the radial tire sector with additional accelerated depreciation resulting in negative profit margins. However, considering better sales results and rubber price expected to be stable in the low price range, we believe that DRC's business performance will prosper quickly in the following quarters of 2017. Notably, based on the domestic and foreign consumption in the first six months as well as the existing orders, we estimate the output of radial tires will reach 100% of the first phase designed - capacity (equivalent to 300,000 tires), and this segment will return positive margins.
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