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DRC [M-PF -8.6%] - Radial tire expansion likely to prolong earnings slide - Update

We reiterate a MARKET PERFORM rating on DRC as the company has not seen a way out of the current downtrend in ASP amid Chinese competition. The expected start of phase 2 of the radial tire plant in 2017 will exacerbate the deterioration in earnings, while a recovery in natural rubber prices still looms as a substantial threat to future profitability. However, the recent share price decline has been roughly in line with the drop in our target.