- We raise our target price (TP) for DRC by 53% to VND35,400/share but downgrade our rating to MARKET PERFORM from OUTPERFORM as the share price has rallied 62% over the past one year.

- Our higher TP is due to extending our explicit forecast period to end-2030 (vs end-2029 as previously) to reflect the anticipated long-term contribution of the radial tire factory expansion to 2 million tires p.a. in 2027 (from 1 milion tires in 2024 after utilizing the phase 3 expansion). We also roll our TP horizon forward to end-2024 (vs mid-2024 as previously).

- We forecast earnings to recover by 18% YoY to VND291bn in 2024 from a low base in 2023, which is driven by a 20% YoY increase in radial tire sales volume. We expect (1) new capacity from the radial tire factory – phase 3, utilized in 2024, and (2) potential positive impacts from the US anti-dumping duty investigation on truck and bus tires exported from Thailand to bolster DRC’s radial tire sales volume growth.

- Downside risks: Lower-than-expected export volume due to slow global economic recovery; intensifying competition in the tire market; higher-than-expected input costs.

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