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21-11-2017, 02:34 PM
From Maybank KE....
21/11/2017, 3 hours ago
Maybank KE Retail Research
Maybank KE issued an unrated note on specialty rubber chemical producer, China Sunsine Chemical (CSSC), citing its position as an eco-compliant market leader in rubber additives for global tyre makers.
The group is one of the biggest producers of essential rubber additives, rubber accelerators (18% global market share) and insoluble sulphur (top in China), supplying to top tier tyre makers, such as Bridgestone, Yokohama and Michelin.
Despite a temporary industry-wide production shutdown in 3Q17, the quarter's results were in line, bringing 9M17 earnings to Rmb209.3m (+35%) or 75% of the street's full-year forecast. This was supported by higher average selling prices (+25.1%) and steady sales volumes (+0.4%).
Amidst China's recent emphasis on pollution controls, CSSC's eco-compliant facilities have enjoyed greater market share and pricing power, as authorities take enforcement action against competitors which failed to meet regulatory standards.
Accordingly, sales volume of rubber accelerators grew at an average rate of 11.6% p.a. from 108,973 tons in FY14 to 135,791 tons in FY16.
As bulk of the top 75 tyre makers in the world account for more than 80% of its revenue, demand from tyre manufacturers have an outsized impact on CSSC's prospects.
At present, the group is enjoying tailwind from China's growing vehicle population (2016: +12.8% to 194m), continued expansion in tyre manufacturing (2017e: +4.6% to 438m), as well as subsequent replacement demand.
On valuations, the house highlighted that CSSC appears deeply undervalued at 8x FY17e P/E, against industry peers' average at 17x and tyre makers at 13.5x. This becomes even more undemanding on an ex-cash basis at 6.5x for a company which has been profitable since listing, with average earnings growth of 12.6% p.a. over the past 10 years.
Potential upside catalysts include production capacity expansion, extension of its dividend policy beyond FY18, and further accreditation of its insoluble sulphur and anti-oxidants by global tyre makers.
The street has 2 Buy ratings, with an average TP of $1.39 on the counter. CSSC is a constituent of the Market Insight Growth portfolio.
21/11/2017, 3 hours ago
Maybank KE Retail Research
Maybank KE issued an unrated note on specialty rubber chemical producer, China Sunsine Chemical (CSSC), citing its position as an eco-compliant market leader in rubber additives for global tyre makers.
The group is one of the biggest producers of essential rubber additives, rubber accelerators (18% global market share) and insoluble sulphur (top in China), supplying to top tier tyre makers, such as Bridgestone, Yokohama and Michelin.
Despite a temporary industry-wide production shutdown in 3Q17, the quarter's results were in line, bringing 9M17 earnings to Rmb209.3m (+35%) or 75% of the street's full-year forecast. This was supported by higher average selling prices (+25.1%) and steady sales volumes (+0.4%).
Amidst China's recent emphasis on pollution controls, CSSC's eco-compliant facilities have enjoyed greater market share and pricing power, as authorities take enforcement action against competitors which failed to meet regulatory standards.
Accordingly, sales volume of rubber accelerators grew at an average rate of 11.6% p.a. from 108,973 tons in FY14 to 135,791 tons in FY16.
As bulk of the top 75 tyre makers in the world account for more than 80% of its revenue, demand from tyre manufacturers have an outsized impact on CSSC's prospects.
At present, the group is enjoying tailwind from China's growing vehicle population (2016: +12.8% to 194m), continued expansion in tyre manufacturing (2017e: +4.6% to 438m), as well as subsequent replacement demand.
On valuations, the house highlighted that CSSC appears deeply undervalued at 8x FY17e P/E, against industry peers' average at 17x and tyre makers at 13.5x. This becomes even more undemanding on an ex-cash basis at 6.5x for a company which has been profitable since listing, with average earnings growth of 12.6% p.a. over the past 10 years.
Potential upside catalysts include production capacity expansion, extension of its dividend policy beyond FY18, and further accreditation of its insoluble sulphur and anti-oxidants by global tyre makers.
The street has 2 Buy ratings, with an average TP of $1.39 on the counter. CSSC is a constituent of the Market Insight Growth portfolio.