China Sunsine Chemical - UOB Kay Hian 2021-09-30: Positive ASP Trends To Drive Strong Earnings Growth

CHINA SUNSINE CHEM HLDGS LTD (SGX:QES) | SGinvestors.io CHINA SUNSINE CHEM HLDGS LTD (SGX:QES)

China Sunsine Chemical - Positive ASP Trends To Drive Strong Earnings Growth

  • ASPs of China Sunsine's two key products, rubber accelerators and anti-oxidants, are on the rise again after correcting during May-Aug 21. This supports our positive view on China Sunsine’s 103% y-o-y EPS growth for 2021. We believe the following trends should drive ASP strength in the medium term:
    • tighter production supply due to more stringent environmental regulations,
    • elevated ASP of aniline, the key raw material, and
    • growing demand from tyre makers.
  • Maintain BUY rating on China Sunsine.



Rising ASPs of rubber accelerators and anti-oxidants support our positive view.

  • Data from Sublime China Information (SCI) shows that ASPs of two of China Sunsine Chemical (SGX:QES)’s key products, rubber accelerators and anti-oxidants, are on the rise again after correcting from May-Aug 21. The increase in ASP is mainly attributable to reduced production supply in the industry due to tight environmental regulations and higher raw material ASPs for rubber accelerators and anti-oxidants.
  • The positive ASPs support our positive view on China Sunsine’s 103% y-o-y EPS growth for 2021.


Positive trends driving increase in ASPs in medium term to benefit Sunsine.

  • We believe the following trends should drive ASP strength in the medium term:
    1. With a tighter production supply due to more stringent environmental regulations, China Sunsine should be the main beneficiary given its strong emphasis on and substantial investments in minimising waste emissions over the years. To recap, China Sunsine was able to capture supernormal earnings in 2018 when China’s government ordered an industry-wide shutdown of manufacturing plants to reduce air pollution.
    2. The elevated ASP of aniline, the key raw material for rubber accelerators, will enable China Sunsine to enjoy better earnings as it makes a profit on a cost-plus basis.
    3. There is growing demand from global tyre makers, with replacement tyres accounting for around 70% of the tyre demand.

Not affected by power crunch.

  • China Sunsine is not impacted by the current 60% of energy consumed, on top of backup generators on standby.


Vehicle numbers growth in China outweighs global auto chip shortage.

  • In Jun 21, trade group China Association of as government efforts to stimulate the automobile industry through subsidies.


China Sunsine - Valuation & Recommendation






Clement Ho UOB Kay Hian Research | https://research.uobkayhian.com/ 2021-09-30
SGX Stock Analyst Report BUY MAINTAIN BUY 0.695 SAME 0.695



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