DRC - Difficult to reach a turning point
DRC’s 2Q 2018 performance saw an improvement from a low base in 2Q 2017. However, we forecast that no significant breakthroughs would happen in 3Q 2018. Regarding 2018 outlook, NPAT is estimated to increase by 7.1% YoY to VND 178 billion, corresponding to EPS of 1,381 VND/share. Regarding the divestment of Vinachem, we expect that if the potential buyer is a car manufacturer, this event could become a positive driver for market sentiment and support stock price in the short term.
We evaluate DRC price at VND 24,300/share and forecast a cash dividend of VND 1,000 per share in the following 12 months, which results in a -2% total return from the closing price on September 5th, 2018. We rate REDUCE for DRC.
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