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DRC [UNDERPERFORM -18.0%] - At inflection point but still fundamentally unattractive - Update

We raise our target price but maintain our UNDERPERFORM rating as DRC has rallied recently on M&A rumors that a potential buyer will acquire a 14.5% stake in DRC in late 2018. We increase our target price by 16% to reflect (1) lower-than-expected SG&A expenses as DRC has demonstrated good control of its headcount and wages and (2) higher-than-expected bias tires margins as rubber prices have stabilized and are expected to stay flat in H2 2018.