UOB Kay Hian Research Report – 26 March 2025
China Sunsine Chemical Looks to Overseas Expansion and Production Efficiency to Drive Growth
China Sunsine Chemical: Leveraging Global Demand and Cost Savings
UOB Kay Hian maintains a BUY rating on China Sunsine Chemical (CSSC SP) and raises the target price by 9% to S$0.63, citing the company’s strong growth prospects driven by rising overseas sales and improved production efficiency.
Key Highlights:
Expect sales volumes to maintain an upward trend, supported by China’s stimulus measures and growing tyre exports
Gross margins to remain stable around 25% in 1H25 despite lower raw material prices, aided by cost savings from new MBT production
Raised 2025/2026 earnings estimates by 9%/6% on better-than-expected gross margins and lower R&D expenses
Stock trades at an attractive 1.4x ex-cash 2025F PE, with a dividend yield of around 6%
Overseas Expansion Fueling Growth
China Sunsine, the world’s largest rubber accelerator producer, achieved record sales volumes of 214,094 tonnes in 2024, up 3% year-on-year. This was driven by an 11% increase in international sales, as Chinese tyre makers continue to offshore production to access natural rubber, lower costs, and benefit from trade advantages.
Looking ahead, the analysts expect China’s rubber tyre exports to maintain their upward trajectory, which should further boost international sales for Sunsine. Domestic sales are also expected to improve, backed by China’s targeted stimulus measures to aid consumption recovery.
Stable Margins Amid Raw Material Price Declines
While average rubber accelerator prices and aniline prices have declined slightly in early 2025, Sunsine is poised to maintain stable gross margins around 25% in the first half. This is supported by cost savings from the ramp-up of its new 20,000-tonne MBT production facility in Q4 2024, which reduces the company’s reliance on external suppliers.
The analysts have raised their 2025 and 2026 earnings estimates by 9% and 6% respectively, factoring in the improved gross margins and lower R&D expenses.
Attractive Valuation and Dividend Yield
With a strong cash position of Rmb2.07 billion as of end-2024, Sunsine is well-positioned to continue rewarding shareholders. The company recently increased its dividend by 20% for 2024, signaling management’s confidence in the business.
Currently trading at 1.4x ex-cash 2025 PE, Sunsine offers an attractive dividend yield of around 6% – making it a compelling investment opportunity for investors seeking both growth and income.
Conclusion
UOB Kay Hian believes China Sunsine Chemical is well-placed to capitalize on the growing global demand for rubber chemicals and improve its production efficiency. The analysts’ raised target price of S$0.63 represents a 21.2% upside from the current share price, and the stock’s attractive valuation and dividend yield make it a compelling investment proposition.
