DRC [OUTPERFORM +13.2%] - 2023F earnings growth supported by lower logistics costs

- We cut our target price (TP) by 1.7% to VND23,100/share and reiterate our OUTPERFORM rating.

- In this Update Report, we raise our aggregate 2023-2025F NPAT-MI by 3% as we expect profitability to improve in the short term thanks to (1) lower input costs following their peak in 2022 and (2) lower-than-previously-projected logistics expenses. However, we cut our aggregate 2026-2028F NPAT-MI by 10% as we expect DRC’s fading competitive edge in exports will weigh on the company’s radial tire segment. As such, we forecast DRC’s NPAT-MI to grow at a 3% CAGR in 2023-2028F vs previously 8%. The negative impact of DRC's lower earnings growth is partly offset by rolling our TP horizon forward to mid-2024.

- For 2023F, we forecast revenue of VND5.0tn (USD215mn; +2.9% YoY) and NPAT-MI of VND361bn (USD15mn; +17.5% YoY). We maintain our outlook for sluggish revenue growth, which is driven by weak demand in 2023F due to global economic turbulence. However, we expect 2023F NPAT-MI to improve thanks to lower logistics expenses that will outweigh higher promotion expenses.