China Sunsine Chemical - A Record Half Despite A Challenging Backdrop
- Excluding a one-off RMB36m refund for over-payment of FY21 tax expenses, China Sunsine Chemical (SGX:QES)’s 1H22 core net profit came in at RMB391m (+48% y-o-y), a record high and accounted for 87% of our previous full-year forecast.
- While sales volume declined 3% y-o-y in 1H22 due to supply chain interruptions from the Winter Olympics and strict COVID-control measures in China, this was more than offset by its higher ASPs (+18% y-o-y) and favourable gross profit spread during the period. This was further boosted by a lower effective tax rate as China Sunsine Chemical was awarded the “High-Tech Enterprise” status in May 2022, which entitles it to a concessionary tax rate of 15% for three years.
- China Sunsine Chemical declared a special interim dividend of S$0.005 per share in celebration of the 15th anniversary of its IPO.
- Rubber accelerator prices remained relatively stable on a m-o-m basis in Jun/Jul, while aniline prices eased slightly. As China Sunsine Chemical typically locks in the quarterly pricing of its rubber accelerator products with major customers (while taking spot prices for raw materials), we believe its near-term gross profit spread is likely to remain healthy in 3Q22F.
- However, we expect China Sunsine Chemical’s sales volume could trend weaker in 2H22F, in view of
- weakening economic growth, coupled with uncertainties from the COVID-19 pandemic situation in China, and
- high inflation and a rising interest rate environment threatening to throttle global economic growth.
- As China Sunsine Chemical’s key products are used mainly in tyre production, weaker consumer sentiment dampening the demand for automobiles could have a negative impact on its sales. We project 2H22F net profit of RMB202m (-16% y-o-y).
- We raise our FY22-24F earnings per share (EPS) forecast by 16-31% to account for higher ASP and margin assumptions. With the EPS hikes, our target price for China Sunsine Chemical rises to S$0.70, still pegged to 0.90x FY22F P/BV, its 10-year historical mean.
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 2022-08-15 2022-08-15
Previous report by CGS-CIMB:
2022-04-29 China Sunsine Chemical - Solid Performance But Uncertainties Arise
China Sunsine Analyst Report,
China Sunsine Target Price,
China Sunsine Share Price History,
China Sunsine Announcements,
China Sunsine Dividends/ Corp Actions,
China Sunsine News Articles