China Sunsine Chemicals Holdings

[Bluechipfan]

Hi weijian, appreciate you view. Sunsine lower the price and attracted customers and the competitors need to lower price as well if they can, if they can't, they will fold eventually. So in this scenario isn't sunsine a price setter? Doesn't this is what you exactly described? Price lower-er? I detect sarcasm here but on the account of your previous direct advice to me (you may have forgotten but I will remember all good advice) which I appreciate, I would disregard the sarcasm and move on.

[weijian]

hi bluechipfan,
Generally, it might be a bit optimistic to use that term really. But let's not dwell on technicalities and move on. VBs are having a good discussion on China Sunshine here and i shouldnt interrupt further!

(i assure you i don't have any sarcasm intention in the previous reply, and apologize if you felt so)

[tiongkokgor]

Latest draft prospectus of Kemai can be found at http://pdf.dfcfw.com/pdf/H2_AN201704070484162524_1.pdf

1st paragraph in Page 351 of 373 of the prospectus mentioned:

Kemai would take 37 months to complete the construction of the Inner Mongolia plant, 1st year utilization 0%, 2nd year 10%, 3rd year 15% and 4th year 20%.

Looks like Sunsine has a very good lead over Kemai. Sunsine can also increase its capacity faster than Kemai. Capturing more market share is easy for Sunsine.

[gongkia]

Sunsine just announced its 1st quarter results.

Net profit increased 70%.

One-off wonder or can sustain performance?

[Bluechipfan]

Latest draft prospectus of Kemai can be found at http://pdf.dfcfw.com/pdf/H2_AN201704070484162524_1.pdf

1st paragraph in Page 351 of 373 of the prospectus mentioned:

Kemai would take 37 months to complete the construction of the Inner Mongolia plant, 1st year utilization 0%, 2nd year 10%, 3rd year 15% and 4th year 20%.

Looks like Sunsine has a very good lead over Kemai. Sunsine can also increase its capacity faster than Kemai. Capturing more market share is easy for Sunsine.

Thanks for the link to the Kemai IPO prospectus. Good read. On completion KM's capacity will be 130,000 tons, with almost 120,000 tons dedicated to accelerators. KM will be challenging Sunsine's market leadership position on accelerates. However, by year end Sunsine's capacity on accelerators will be 97,000 tons and could scale up to 117,000 tons within next 24 months. Look like it will be hard for KM to catch up as the Mongolia plant will take 37 months to complete. That's provided that their IPO is successful as they don't have the finance to expand without the IPO. 

I attended the AGM and one of the takeaway is that Sunsine could be challenging Flexsys for the market leadership on Insoluble Sulphur. Flexsys is current leader with 200,000 tons yearly sales as compare to Sunsine's 20,000 tons and 30,000 tons by year end. It's not easy for Sunsine to mouth the challenge but the margin for Insoluble Sulphur is much higher and worth a try. Sunsine is already the largest producer of Insoluble Sulphur for PRC market and it can leverage on this and growth. 

Interestingly, KM also compare itself with Yangu Huatai and Sunsine in its prospectus. Various ratios such as receivable turn over, inventory turn over, quick ratio etc clearly show Sunsine in the lead. Sunsine is indeed a quality s-chip and maybe the market is coming to this realisation slowly. The pe is still not even 10 and with the company still growing, it is still under valued the by market.

[Bluechipfan]

Sunsine just announced its 1st quarter results.

Net profit increased 70%.

One-off wonder or can sustain performance?

I don't think Sunsine is a one trick wonder. Sunsine is the market leader in accelerators with 31% PRC market shares and 18% world market shares. They are also the largest Insoluble Sulphur producer for PRC market. Their wide range of products are also well received by the market. RMB 57.2 million net profit in the traditional weaker 1Q is also beyond my expectation.If the trend keep up, there may be outside chance for RMB 100 million net profit for 3Q, the strongest quarter traditionally.

[portuser]

The fate of rubber chemical industry is inextricably intertwined with the fortune of tyre industry. 

Tyre is not a discretionary consumer item because old tyres have to be replaced regulary. As the vehicle popuplation grows, replacement tyres form a rising proportion of overall tyre sale. Consequently, the impact of lower new vehicle sale during economic downturn is diminishing. 

Shandong Linglong Tires (山东玲珑轮胎), a leading tyre maker in China listed on the Shanghai Stock Exchange, stated in its IPO prospectus that 70% of tyres produced are currently for replacements, and the percentage will rise further as vehicle population grows.    

According to Goodyear, 1,766 million tyres were sold in 2015 worldwide, 21.3% higher than 2010, or a compound annual growth rate of 3.9%. 

Goodyear's projection is that 29.2% more tyres will be sold in 2020 than in 2015, or a compound annual growth rate of 5.2%.  

Goodyear has also stated that the trend among car manufacturers towards larger rims will create demand for larger tyres, and of the tyres expected to be sold in 2020, 19% are 17 inches and above, up from 13% in 2015 and 7% in 2010.




If Goodyear is correct, rubber, and rubber chemicals as a consequnce, for tyre production will grow more than 5.2% a year. Given that around 450,000 tonnes of rubber accelerators are produced a year now, the yearly increment will be in excess of 20,000 tonnes.   

Rubber accelerators are Sunsine's mainstay. Utilisation of its 87,000-tonne rubber accelerator production capacity was 95% in 2016. Sunsine is going to add 30,000 tonnes, and the necessary infrastructure for another 24,000 tonnes is in place to boost rubber accelerator capacity to 141,000 tonnes. 

Kemai and Yanggu Huatai are looking for money (RMB 890m and RMB 1,200 m respectively) to expand to meet rising rubber accelerator demand. They will take three years to build.   


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Page 1-1-141, 142 of the IPO prospectus, 山东玲珑轮胎股份有限公司首次公开发行股票招股说明书 ( http://www.cninfo.com.cn/finalpage/2016-06-21/1202379925.PDF)

轮胎不是一种可选消费品，而是一种必需消费品，其需求的刚性大于汽车 行业。就新车而言，轿车与轮胎的配套比例为 1:5，载重车与轮胎配套比例平均 约为 1:11；在替换市场，每辆轿车每年需替换 1.5 条轮胎，工程机械与载重机械 的替换系数高于轿车，轮胎行业 70%以上的需求由汽车保有量创造。在汽车保有量依然保持正增长的前提下，即使汽车销量出现负增长，依然会创造出持久 的换胎需求。

[Bluechipfan]

Thanks Portuser for the sharing of the objective information that would help investors in making an informed decision. I shared and have expressed the same view (if not in this forum maybe at other forum). I have no doubt Sunsine has pricing power and is gaining market share at the expense of competitors. However, it will be better that the industry is in fact expanding. No wonder Yanggu and KM are eager to expand.

PS: thanks for replying my PM.

[Young Investor]

An article of CSS in Businesstimes. Anyone know the price of TBBS?



"China Sunsine has been investing to expand its capacity in making TBBS rubber accelerators, with commercial production of a Phase I 10,000-tonne line expected to begin in the second half of the year.
These accelerators are in demand due to an increase in popularity of radial tyres in China, chief  financial officer Tong Yiping said. Asked about the likelihood of overcapacity in this segment, he said TBBS accelerators are harder to make, discouraging competitors."

http://www.businesstimes.com.sg/companie...-delisting

[Bluechipfan]

An article of CSS in Businesstimes. Anyone know the price of TBBS?



"China Sunsine has been investing to expand its capacity in making TBBS rubber accelerators, with commercial production of a Phase I 10,000-tonne line expected to begin in the second half of the year.
These accelerators are in demand due to an increase in popularity of radial tyres in China, chief  financial officer Tong Yiping said. Asked about the likelihood of overcapacity in this segment, he said TBBS accelerators are harder to make, discouraging competitors."

http://www.businesstimes.com.sg/companie...-delisting

Read somewhere the selling price of TBBS is much higher than the rest of the accelerators, at about 20,000 rmb/t. I stand corrected as it is based on memory. If the figure is right, 10,000 tons will bring in additional rmb 200 millions this year.