DRC – Rising input costs and competition squeeze margins
DRC – Rising input costs and competition squeeze margins
January 25, 2017
■ A steep rebound in rubber prices and intensified competition from Chinese tyre makers lifted DRC’s input costs, and put pressure on its ASP last year. ■ Rubber accounts for about half of DRC’s COGS, and world rubber prices have rebounded 60% from their Sep 2016 bottom. ■ The factors outlined above prompted us to lower our FY17-18 EPS estimates by 27- 28%, cut our target price by 24%, and downgrade DRC from Add to Hold.
