DRC - OUTPERFORM - All eyes on radial segment - Update
1H NPAT slid 1.5% YOY despite revenue improved 12.1% YOY (boosted by radial tires). Blended GM did not improve despite considerably lower natural rubber price since: (1) average selling price (ASP) decreased accordingly and (2) low GM from radial segment negatively skewed GM. We rate DRC as OUTPERFORM based on 5-year-DCF method with a forecasted CAGR EPS growth of 7.8%. Looking forward the focus is exclusively on radial and we’re believers though we’re less sanguine in our projections.