China Sunsine Chemical - UOB Kay Hian 2022-12-08: Cautious Outlook As ASPs Trend Downwards

• Sales volume is falling as a result of lower consumer confidence, amid lower ASPs for rubber accelerators expected in the coming term. However, capacity expansion efforts are still ongoing by China Sunsine.
• - Read this at SGinvestors.io -

Sales volumes fell amid economic slowdown.

• Due to the rising interest rate environment and unprecedented European energy crisis, the economy is slowing down, leading to lower demand for tyres. This is worsened by China’s zero-COVID policy, which has impacted most Chinese tyre manufacturers’ production utilisation rates as well as consumer confidence.
• According to McKinsey & Co, optimism about China’s economy has dwindled to below 50% on China’s COVID-19 control measures, and consumers are spending more conservatively. This is in line with the fall in sales volume in 3Q22 to 48,268 tonnes (-6% y-o-y).

Lower ASPs expected in the near term.

• - Read this at SGinvestors.io -
• The better-than-expected ASP was from the higher prices of aniline, the major feedstock for rubber accelerators, stemming from rising oil prices in the same period. However, the reduced demand for tyres will likely drive down prices of China Sunsine’s rubber accelerator products. This will negatively impact the group’s earnings going forward.

Continuous expansion projects undertaken during the year.

• Read more at SGinvestors.io.

Heldi Mo UOB Kay Hian Research | John Cheong UOB Kay Hian | https://research.uobkayhian.com/ 2022-12-08 SGinvestors.io

---