Finansia Syrus Securities (FSS) wrote that Sri Trang Agro-Industry Public Company Limited (SET: STA) posted better-than-expected normalized profit in the first quarter of 2026, exceeding forecasts by 26%. Meanwhile, the outlook for the second quarter is anticipated to remain positive, supported by higher rubber prices and a stable supply of raw materials.
For the first quarter of 2026, STA recorded a net profit of THB 645 million, reversing from a net loss of THB 326 million in the fourth quarter of 2025. However, this represents a 6.3% year-on-year decline.
After adjusting for non-operational items—including insurance compensation for flood damage (THB 343 million; net after tax THB 274 million), reversal of flood-related impairment (THB 64 million), derivative losses (THB 166 million), and foreign exchange gains (THB 54 million)—the normalized profit stands at THB 419 million, an increase of 82.6% quarter-on-quarter yet a decrease of 42.9% year-on-year, outperforming estimates by 26%.
The outperformance was primarily driven by the natural rubber business, which reported a better-than-expected gross margin of 9.6% compared to the previous forecast of 8.0%. The year-on-year decline in profit was attributed to lower sales volume and lower rubber prices compared to the prior year.
Despite a quarter-on-quarter drop in total sales volume to 341,000 tonnes (down 5.5% quarter-on-quarter and 13.9% year-on-year), with declines particularly in EUDR rubber products and stable performance in non-EUDR products, the adverse effect was offset by a 5.5% quarter-on-quarter increase in average selling price to 191.4 cents per kilogram. Furthermore, the gross margin for the natural rubber business improved to 8.7%, versus 5.7% in 4Q25 and 8.0% in 1Q25.
According to STA, rubber prices are currently on an upward trend, increasingly reflecting the underlying fundamentals of production. Rubber supply is gradually returning to normal seasonal patterns. In the medium to long term, supply is expected to decline due to contractions in plantation areas across Thailand, Indonesia, and Malaysia.
On the demand side, growth remains stable, with no significant increases observed. The International Rubber Study Group (IRSG) projects global rubber demand to grow by 2.1% year-on-year in 2026, similar to the growth rate seen in 2025.
STA is expected to manage raw material sourcing effectively, as supply returns to seasonal norms and impacts from El Niño on the southern region appear to be less severe than in other regions. Additionally, there is no indication of extraordinary stockpiling by customers.
Normalized profit for 1Q26 accounts for approximately 25% of FSS’ full-year forecast. The outlook for 2Q26 remains robust, with the figure expected to grow both quarter-on-quarter and year-on-year, driven by a reported 8% quarter-on-quarter and 23% year-on-year increase in rubber prices for the second quarter to date.
STA’s sales, conducted one to two months in advance, will allow the company’s selling prices to quickly reflect market movements. Following these, Finansia maintains its ‘Buy’ recommendation on the company with a target price of THB 22.00 per share.
As of 11:27 AM (Bangkok time) on Monday, the share price of STA surged by 2.12% or THB 0.40 to THB 19.30, with a trading value of THB 110.27 million.
