Analysts estimate that Sri Trang Gloves (Thailand) PCL (STGT)’s profit will hit the highest peak in the third quarter of 2020 after it has had a strong performance throughout the year and while the rubber gloves market is still rising.
Asia Plus Securities predicted that the rubber gloves demand would continue to grow remarkably. In the third quarter, STGT will increase product sales by 70 per cent compared to the second quarter of 2020 and 86 per cent year-on-year.
The last quarter will increase as much as 12 per cent from the third quarter, 118 per cent increase year-on-year. The number was much higher than expected.
Asia Plus revised the 2020-2021 earnings forecast to rise 558.8 per cent on sales volume and 7.4 per cent on rubber glove prices. Meanwhile, the current share price is still attractive with a PER of 25 times more than Malaysian rubber glove stocks.
Asia Plus adjusted their STGT target price to 90 baht per share.
Maria Lapiz, the managing director and head of institutional research at Maybank Kim Eng Thailand, said in a note to clients that the rubber gloves continue to be a strong seller market and STA’s volumes are already committed until late 2021 and early 2022.
Maybank Kim Eng Management said that prices are locked in up until the second quarter of 2021. The ASP will also rise by 70 per cent in the third quarter of 2020 and 12 per cent in the fourth quarter of 2020 compared to the last quarter.
Maybank Kim Eng rate ‘BUY’ on STGT shares at the target price of 76 baht.
Amidst ups and downs
The STGT share price fell by 15 per cent in the past five days. The possible reason behind the sharp fall is the news that Russia succeeded in making a coronavirus vaccine.
While the effectiveness and the production capability of the vaccine are still questionable, Enquistock has said that a vaccine will not reduce the demand for gloves for a long time.
Last Friday, STGT reported an outstanding profit of 1.01 billion baht of profit for the second quarter. This is a blowout result compared to the average estimate of 650 million baht.
If the profit run rate remains the same as of the second quarter, STGT will earn at least 3.5 billion baht for 2020, according to Enquistock.
The market knows that STGT production capacity will increase in the third and fourth quarter – and its productions are sold out until the middle of 2021.
Jarinya Jirojkul, the president of STGT, said the outlook for the second half of the year is expected to see good growth.
“COVID-19 is the catalyst for the rising demand for products that are becoming a necessity for everyday use. We have adequate production capacity to deliver rubber gloves to customers both in Thailand and abroad,” said Jarinya.
After the morning session closed on Wednesday, STGT share stood at 75 baht per share, staying at the same level of the opening price with the transaction value of 708 million baht.
