China Sunsine Chemical: BUY Rating Maintained – 2025 Outlook, Price Target, and Analysis

UOB Kay Hian Private Limited

Wednesday, 28 May 2025

China Sunsine Chemical: Holding Steady Amid Pricing Pressure

China Sunsine Chemical (CSSC SP) demonstrates resilience amid pricing pressures, supported by China’s robust automotive market. Vehicle sales in 1Q25 and April 2025 increased by 11% and 10% year-over-year, respectively. While average selling prices (ASPs) have decreased due to lower feedstock costs, the company’s market leadership and capacity provide a competitive edge. Earnings forecasts for 2025-2027 have been adjusted down by 1-3% due to ASP weakness, though volume growth remains strong. The company maintains a BUY rating with a target price of S\$0.63, backed by a solid net cash position and a 5.2% yield. [[1]]

Sustained Automotive Growth Boosts Rubber Accelerator Demand

• According to the China Association of Automobile Manufacturers (CAAM), auto sales in 1Q25 reached 7.47 million units, an 11% increase year-over-year. [[1]]
• New energy vehicles (NEV) surged by 47% year-over-year, accounting for 41% of total new car sales. [[1]]
• The strong momentum in vehicle production and electrification continues to drive demand for downstream materials like rubber accelerators. [[1]]
• CAAM projects total vehicle sales of 32.9 million for 2025, a 4.7% year-over-year increase, supporting robust demand for rubber accelerators. [[1]]

Decline in Main Feedstock Aniline Prices

• The ASP of rubber accelerators has declined by around 18% year-over-year, in tandem with a 39% year-over-year fall in aniline prices, its key feedstock. [[2]]
• This decline is largely due to lower crude oil prices, as aniline is derived from benzene, a petroleum-based input. [[2]]
• Increased aniline supply from resumed production capacity has further weighed on prices. [[2]]
• While lower raw material costs may offer some cost relief to Sunsine, the decline in ASPs is expected to offset most of the margin gains. [[2]]

1Q25 Performance Review

• Sunsine reported earnings of Rmb108 million (+27% year-over-year), forming 25% of the forecast and in line with expectations. [[2]]
• Revenue came in at Rmb839 million, slightly missing expectations by 2%, due to a 2% decline in ASP to Rmb15,592/tonne. [[2]]
• Sales volume increased marginally to 53,093 tonnes (+1% year-over-year). [[2]]
• The lower ASP was attributed to both lower raw material costs and Sunsine’s continued flexible pricing strategy. [[2]]
• Gross margin improved 0.7ppt year-over-year to 24.1% in 1Q25, supported by lower input costs. [[2]]

Key Financials

The following table summarizes the key financials for China Sunsine Chemical:

Stock Impact

• Sunsine is the world’s largest producer of rubber accelerators, with an annual capacity of 117,000 tonnes. [[2]]
• This scale advantage enables greater pricing flexibility and cost efficiency, supporting its leading 35% share of the China market and 23% globally as of 2024. [[2]]
• The company operates on a “sales and production equilibrium” model, expanding volume to drive scale and competitiveness. [[2]]

Attractive Dividend Yield

• Sunsine provides an attractive yield of 5.2%, supported by its strong cash position of Rmb2,074m (+23% yoy) as of end-24. [[2]]
• This translates to Rmb2.18/share (S\$0.40/share) or around 70% of its market cap. [[2]]
• This provides ample room for Sunsine to potentially raise its dividend and continue to perform share buybacks. [[2]]

Earnings Revision/Risk

• Revenue forecasts for 2025-27 have been revised downward by 4-6% to reflect continued pressure on ASPs. [[2]]
• Volume growth remains intact, but pricing weakness from intense competition and lower raw material costs has weighed on top-line assumptions. [[2]]
• R&D expenses forecast was trimmed per management’s latest guidance, which partially offsets the earnings impact. [[2]]
• As a result, earnings estimates for 2025-27 are lowered by 1-3%. [[2]]

Valuation/Recommendation

• Maintain BUY with an unchanged target price of S\$0.63, pegged to a PE multiple of 7.5x 2025F earnings, or 1SD above the mean PE. [[2]]
• The stock trades at an attractive valuation of 1.3x ex-cash 2025F PE. [[2]]

Share Price Catalysts

• New manufacturing capacities commencing production. [[2]]
• Higher ASPs for rubber chemicals. [[2]]
• Higher-than-expected utilisation rates. [[2]]

Peer Comparison

The following table compares China Sunsine Chemical to its peers:

Profit & Loss

The following table presents the Profit & Loss statement:

Balance Sheet

The following table presents the Balance Sheet:

Cash Flow

The following table summarizes the Cash Flow:

Key Metrics

The following table presents the Key Metrics: