• We attended DRC’s analyst meeting and annual general meeting (AGM) in Da Nang on April 24 and 25, 2025.
• Shareholders approved the company’s 2025 guidance including net revenue of VND4.9tn (USD195mn; +4% YoY; 92% of our full-year forecast) and NPAT-MI of VND228bn (USD9mn; -1% YoY; 80% of our full-year forecast). While DRC has historically exceeded its PBT guidance by an average of 25% over the past six years, management expressed concerns on the 2025 guidance amid uncertainties stemming from the US reciprocal tariffs.
• The AGM approved a FY2024 cash dividend of VND1,100/share (5.8% yield). The advance FY2024 cash dividend of VND500/share was paid in January 2025.
• Shareholders approved a bonus share issuance of 30% (i.e., shareholders will receive 3 additional shares for every 10 shares held), expected to be executed in H2 2025.
• DRC aims to (1) ramp up exports to Brazil, along with Russia, Egypt, the Middle East, and SEA, and (2) strengthen its focus on the domestic market to sustain volume amid uncertainties stemming from the US reciprocal tariffs. However, the concern lies in the profitability of these alternative markets. In addition, on the input side, rubber prices have remained elevated for longer than we expect. We thus see potential downside risks to our 2025-31F forecasts.

1. Demand outlook:

* Domestic market:

- Demand outlook: Management expects domestic tire demand in 2025 to be supported by (1) Vietnam’s targeted GDP growth of 8%, underpinned by increased public investment, (2) Government support to promote the use of domestically manufactured products, and (3) potential cooperation with VinFast, following their ongoing discussions. In line with this, DRC plans to strengthen its focus on the domestic market in 2025, with an emphasis on niche segments such as agricultural and off-the-road (OTR) tires that face less intense competition compared to the truck and bus radial tires (TBR) and passenger car radial (PCR) tire segments, which are dominated by FDI players in Vietnam.

- Competition landscape: DRC noted a potentially more competitive domestic market in 2025, as FDI tire manufacturers in neighboring countries may redirect supply to Vietnam if they encounter challenges in exporting to the US due to reciprocal tariffs. However, DRC’s broad product portfolio and focus on niche segments should help mitigate competitive pressure.

- Potential cooperation with VinFast: DRC is exploring supplying two product lines to VinFast including e-scooter tires and PCR tires for EVs. For e-scooter tires, DRC’s offerings already meet VinFast’s specifications, and both parties are currently negotiating pricing. In addition, DRC plans to launch PCR tires for EVs in June 2025 and may offer its products to VinFast, subject to VinFast’s demand.

* Export markets:

- The US:

+ Management anticipates a temporary slowdown in tire exports to the US if the US reciprocal tariffs come into effect, though the impact is expected to be moderate. Amid uncertainties around US reciprocal tariffs, DRC plans to strengthen exports to alternative markets, primarily Brazil, as well as Russia, Egypt, the Middle East, and SEA markets. Management believes the company can sustain sales volume but expresses concern about the profitability of this alternative demand.

+ If blanket tariffs are imposed on Vietnam and peer exporters (Indonesia, Thailand, Cambodia, and Malaysia), DRC sees potential long-term opportunities in the US market, given its heavy reliance on imports (estimated to account for over 70% of total demand).

- Brazil: In Q1 2025, DRC successfully regained its sales volume to Brazil despite the 16% tariff imposed on imported tires since March 2023. This recovery was driven by (1) robust demand and (2) the addition of four new partners in Brazil, comparable in size and reputation to DRC’s old partners. DRC also believes these partnerships should support volume recovery in this market in 2025.

2. Input costs & pricing:

- Rubber prices: Management expects natural rubber prices to remain elevated through 2030 due to a declining cultivation area of natural rubber in Vietnam. However, if global economic activity slows, resulting in lower oil prices, synthetic rubber prices may decline. This could, in turn, ease pressure on natural rubber prices.

- Selling prices: DRC increased its average selling prices (ASP) by 3%-5% for select domestic product lines effective January 1, 2025. However, to stay competitive, the company has also applied selective sales discounts, as competitors have not raised their ASPs.

3. Radial tire factory – phase 3 project:

- DRC completed construction, machinery installation, and inspection for the Phase 3 expansion of the radial tire factory. The project is currently awaiting approval for its fire prevention system.

- Management expects to recognize the project’s accounting settlement in Q3 2025, with total capex estimated at VND600bn (USD23.5mn).

4. Foreign ownership limit (FOL):

- In response to shareholders’ concerns regarding the recent adjustment to DRC’s foreign ownership limit (FOL) from 49% to 0%, management explained that the change was driven by regulatory requirements tied to one of its business activities: “technical inspection and analysis.” This includes testing the mechanical and physical properties of raw rubber materials, rubber products, and the durability of automobile and motorcycle tires, conducted at DRC’s in-house laboratory. Management emphasized that (1) this laboratory is a key asset, supporting DRC’s ability to meet export specifications and attract foreign clients and (2) DRC must comply with regulatory requirements on FOL.

- As of April 24, 2025, foreign investors held 6.85% of DRC’s shares, according to HOSE, while Vinachem remains the largest shareholder with a 50.5% stake.

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