China Sunsine Chemical - Solid Performance But Uncertainties Arise
- China Sunsine (SGX:QES)'s 1Q22 net profit came in strong at RMB157m (+11% q-o-q, +26% y-o-y), above expectations on the back of better-than-expected profit spreads.
- With its production base and key domestic customers mainly based in Shandong Province, China Sunsine’s operations are not directly impacted by the multiple outbreaks of COVID-19 cases in China currently. That being said, with China’s economy facing increasing pressure relating to shrinking demand and supply disruptions, China Sunsine’s volume weakness could persist in the coming quarters.
- While China Sunsine’s profit spread should remain healthy in the near-term, we think China’s COVID-19 woes may pose downside risk to its sales volumes.
- Reiterate ADD call on China Sunsine given undemanding valuations at 1.5x FY23F P/E (ex-cash), but we lower target price to S$0.67 due to the near-term challenging outlook.
- Despite the near-term challenging outlook, we continue to like China Sunsine for its consistent profitability and positive free cash flow generation track record.
Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @ https://www.itradecimb.com.sg/.
ONG Khang Chuen CFA CGS-CIMB Research | https://www.cgs-cimb.com 2022-04-29 2022-04-29
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