Finansia Syrus Securities (FSS) stated regarding the outlook for Sri Trang Agro-Industry Public Company Limited (SET: STA), following a recent Finansia Exclusive Talk. The firm sees a continued global decline in rubber supply, which is expected to drive rubber prices into an upward trend, with prices likely to remain elevated over the next three years.
According to Finansia Syrus, STA’s management remains confident in achieving its 2026 sales target of 1.6 million tons, an increase of 13% from the previous year, while the company already has sufficient orders to cover the first half of the year. Although overall demand is not particularly strong, STA’s position is bolstered by customers’ low inventory levels and tight supply conditions. This allows the company to sell its products at SICOM market reference prices plus a premium.
Looking ahead, rubber prices are forecast to remain high or even climb over the next one to three years due to declining rubber production in Thailand, Malaysia, and Indonesia. Thailand’s rubber output has already dropped by about 30% since 2018 and could decrease by up to 50% within the next three years.
The main factors include the expected impact of El Niño starting in the second half of 2026 and becoming more pronounced in 2027, and a consecutive seven-year reduction in rubber plantations as farmers switch to more lucrative oil palm cultivation. This shift is driven by rising demand for biodiesel.
As declining supply poses a risk of raw material shortage, STA has developed the Sri Trang Friends Application, enabling the company to source raw materials directly from farmers and strengthen long-term relationships. The company now procures up to 99% of its raw materials through this platform.
At the same time, rising synthetic rubber prices have led to increased demand for natural latex. The latest price of concentrated latex stands at THB 72.6 per kilogram—a 37.8% increase year-to-date—providing a positive catalyst for STA. Approximately 80–90% of the company’s latex sales are to its affiliate, Sri Trang Gloves (Thailand) Public Company Limited (SET: STGT), giving STGT a competitive edge, especially as Malaysian manufacturers face synthetic rubber shortages.
STGT has also been able to adjust its production capacity, increasing the proportion of natural rubber gloves produced from 70% previously to 85–90%, while reducing its reliance on nitrile gloves, which account for about 30% of revenue. This flexibility has improved cost management and mitigated the impact of raw material constraints.
In the short term, SICOM rubber prices are expected to trade in the 190–210 cents per kilogram range, considered balanced for both buyers and sellers. Finansia sees limited downside risk for prices, as production costs in Africa—the world’s lowest-cost producer—are at 175–180 cents per kilogram. Conversely, if prices exceed 210 cents per kilogram, tire manufacturers could be negatively impacted.
Further rubber price increases are broadly possible due to the war-driven jump in SBR synthetic rubber prices, which have reached 220–240 cents per kilogram, coupled with seasonal declines in natural rubber supply during Thailand’s tapping-off period from February to May.
Finansia maintains a short-term ‘Speculative Buy’ recommendation on STA as long as SICOM rubber prices stay within this range. However, if the war subsides and oil prices fall, STA could see profit-taking actions in line with commodity price movements, before potentially rebounding when rubber prices recover based on fundamentals. These factors are seen as supportive of the stock’s price in the longer term.
