In the previous article, I analysed why I thought the price of rubber will go up in the next few years. Today, we will look at China Hainan Rubber Industry Group Co., Ltd (601118).
I do not play futures, because they are dangerous. And of all the companies, for now I prefer to look at Hong Kong or Chinese stocks. The US stock market is a big bubble, and I have previously analysed that the Chinese government will prop up their stock market with the collapse of their property market. In addition to their new policies, their recent money printing will enable the stock market to reach greater heights. If a Chinese company lists its stock on both the HK and the Chinese market, generally I will choose the HK market because it is cheaper. In this case, it is only listed on their Shanghai Stock Exchange.
Hainan Rubber’s Background
Established on 31 March 2005 and listed on the stock exchange on 07 January 2011, it is the only natural rubber company listed on the Chinese stock exchange. Its largest shareholder is Hainan State-Owned Assets Supervision & Admin Commission, meaning that like COFCO Sugar, it is government-backed. While not exactly required for basic survival, rubber is also considered one of the strategic resources of China.
On 15 April 2025, the Chinese government has also mentioned 5 measures to ensure their strategic resources sufficiency and safety, of which natural rubber is one of them. With the backing of the country and dealing with such an important resource, Hainan Rubber is like COFCO Sugar – it will not fail. It cannot fail.
The Rubber Supply Chain
Like COFCO Sugar, Hainan Rubber owns the whole rubber supply chain in its own production cycle. According to its website, it has 29 natural rubber production bases, 7 seedling breeding bases, 59 rubber processing plants and 30,000 employees worldwide. Its rubber plantations account for 2% of the world’s plantation. Do note that in the last article we said that small time farmers account for 85% of the world’s rubber supply, hence for a single company to own 2% is considered a pretty big deal. Not only that, its rubber processing capacity accounts for a significant proportion of the world’s supply.
Wood Processing And Latex Foam Products
Rubber comes from latex, which comes from rubber trees. Rubber trees have a lifespan, after which the trees can be chopped down and its wood processed. Other than its latex and rubber processing business, Hainan Rubber also has a wood processing business. It is able to process 40,000 cubic metres of wood annually, with its products being supplied to companies all over the world, for example IKEA.
Like the tomato business of COFCO Sugar, though Hainan Rubber does not have a totally different business, it is able to branch out an extra business after the rubber tree reached the tail end of its lifespan. Additionally, Hainan Rubber also has a subsidiary which is one of the largest suppliers of latex foam products in the Asia-Pacific region. Currently its production capacity of latex mattresses reaches 37 million square meters, and the production capacity of pillows totals 3.3 million.
Financial Report
Hainan Rubber is currently operating at a loss, because the price of rubber fell so drastically. While many other smaller farmers had already switched to other crops or cleared off their rubber trees, Hainan Rubber has been consistently doing this business, because that is what it is supposed to do.
Numbers are not so great, the PE ratio is horrible, the dividends is horrible, there is not a single number that is good, perhaps except for its P/B ratio of 2.02. But that is mainly because of the bigger environment, not the company itself.
My Plans
This is the monthly stock chart of Hainan Rubber. As we can see, the stock is not doing so great at the moment, having been in the pits for the past 10 years. However, just as I had predicted the Chinese stock market will rally up after more than 10 years in the pits, it is the same for this stock. The rubber price cycle is reaching a turning point soon. It may be next month, or within the next 6 months, or even next year. I do not know when, but I do believe that we should buy when others are fearful of it now, and wait patiently. Investors of this stock should only put in money that they are prepared not to use for a period of time.
If all goes well, I expect this stock to have a decade of uptrend. I would not say a bull like Bitcoin, but a rise to 15 to 20 RMB per share within the next 10 years should be doable. It will not make you rich overnight like wallstreetbets, but for a safe investment by a responsible investor, I do think this stock offers a lot of potential.
Just as a side note, unlike my other investments, if one is to invest in this stock, it will be aiming for capital appreciation instead of dividend yield.
Disclaimer
This post as well as my previous post on my analysis of rubber is not meant to be financial advice. It simply notes down the homework I have done and my intended plans, which I am sharing with everyone. All investors should do their own due diligence and make their own decision as I cannot be responsible for both your winnings and losses.
Showing 1 - 2 out of 2
Page 1 out of 1
| - | Resources | Price | |
|---|---|---|---|
|
|
 |
$5.00
|
|
|
|
 |
$1.00
|