Land and Houses Securities (LHS) wrote that Sri Trang Agro-Industry Public Company Limited (SET: STA), a leader in Thailand’s natural rubber industry with a market share of approximately 35%, has a production capacity of 3.72 million tons per year.
The company operates an integrated business model, spanning upstream operations with more than 47,000 rai of rubber plantations and timber across 19 provinces, midstream operations involving rubber processing, and downstream operations through Sri Trang Gloves (Thailand) (SET: STGT), which manufactures rubber gloves.
STA’s primary midstream products include TSR20 block rubber, ribbed smoked sheets (RSS), and concentrated latex (LTX). These products are widely exported to leading tire manufacturers worldwide, with China accounting for more than 60% of the company’s natural rubber business revenue, while its glove manufacturing business exports to over 175 countries globally.
Growth strategy centers on expanding EUDR rubber sales, with traceability ensured by the Sri Trang Friends application and GPS-linked digital mapping across more than 49 raw material collection centers nationwide. STA aims to sell 30,000 tons per month of EUDR-compliant rubber, which typically commands a higher selling price and margin versus standard rubber.
Additionally, reduced rubber output in Indonesia (now at 2 million tons due to leaf disease) and limited supply in Ivory Coast (approximately 1.9–2 million tons) present new export opportunities for Thai producers to fill the global supply gap.
For 3Q26, STA’s normalized profit is expected to increase year-over-year but decline quarter-over-quarter—partly due to a high comparison base in 2Q26 when both sales volume and gross profit margin exceeded expectations. Anticipation of increased future rubber production may put pressure on prices, causing customers to defer orders.
Despite this, SICOM TSR20 rubber prices rose to 230 US cents/kg in 3Q26, up from 220 US cents/kg in the previous quarter. EUDR rubber sales volume is expected to grow to approximately 30,000 tons in 3Q26 from 17,214 tons in 2Q26 and could rise above 60,000 tons in 4Q26.
For 2026, STA’s normalized profit is projected at THB 2,701 million, up by 734.3% from a loss of THB 426 million in the prior year. This sharp turnaround is underpinned by both a recovery in sales and improved margins. Revenue is expected to reach THB 128,517 million, a year-on-year increase of 13.3%, driven by higher sales volumes and selling prices.
The gross profit margin is projected to expand from 6.2% to 9.7% in line with an assumed average annual selling price of 220 US cents/kg. Rubber prices are expected to remain strong, supported by tight supply resulting from El Niño, disease outbreaks in Indonesia, conversions of rubber plantations to palm oil, higher synthetic rubber costs due to geopolitical risks, and global tire manufacturers accelerating inventory build-up.
Following these developments, Land and Houses initiates coverage on STA with a ‘Buy’ recommendation and a target price of THB 23.90 per share, based on a PER of 11.3x (+0.75 SD above the five-year historical average), to reflect the upward momentum in rubber prices and margin improvements. The forecast forward EPS for 2027 is THB 2.12 per share, with a 2026 estimated dividend of THB 1 per share, equating to a dividend yield of approximately 4.8%.
