Executive Summary

• Record quarterly sales volume: 60,916 tonnes sold in Q1 2026, up 15% year-on-year.
• Sales revenue increased by 6% to RMB 890 million.
• Gross Profit Margin (GPM) declined by 2.7 percentage points to 21.4%.
• Net profit reported at RMB 69.5 million.
• Surge in crude oil prices due to geopolitical events led to higher raw material costs.
• Average Selling Price (ASP) decreased by 7% year-on-year, but up 4% quarter-on-quarter.
• Capacity expansion projects progressing; new commercial productions expected in 2026.
• Ongoing industry oversupply and competition; Group focuses on production-sales equilibrium and efficiency improvements.

Key Developments & Market Context

• China’s GDP grew 5.0% year-on-year in Q1 2026, exceeding expectations and indicating economic resilience.
• Automotive sector saw a 5.6% drop in total sales due to withdrawal of government incentives and expectation of industrial restructuring.
• Domestic car sales declined, but overseas sales increased, with New Energy Vehicles (NEVs) accounting for 42% of new vehicle sales (2.96 million units).
• China Sunsine adopted a flexible pricing strategy to boost order volumes amidst challenging market conditions.
• The war in Iran and shipping disruptions in the Strait of Hormuz triggered a surge in crude oil prices, significantly raising raw material costs for Sunsine.
• ASP dropped 7% year-on-year to RMB 14,511 per tonne due to pre-agreed lower quarterly prices, which affected approximately half of Q1 2026 orders. However, ASP increased 4% quarter-on-quarter, and further ASP increases are expected in the next quarter.
• Sales revenue grew to RMB 890 million (up from RMB 839 million in Q1 2025), but GPM fell to 21.4% as higher sales volume was partially offset by lower ASP.
• Net profit reached RMB 69.5 million, showing resilience despite margin compression.

Industry & Economic Risks

• Global economic risks persist: rising geopolitical tensions, international conflicts, trade protectionism, and supply chain disruptions.
• China’s domestic market faces strong supply but weak demand, with market expectations remaining subdued.
• The rubber chemicals sector continues to experience oversupply and intense competition.
• Sunsine’s management responds by maintaining “Sales and Production Equilibrium” and improving internal efficiency, productivity, cost control, and management processes.
• Despite these headwinds, the Group expresses confidence in profitability and future growth, underpinned by its market leadership position.

Capacity Expansion Updates

• Phase 2, 40,000-tonne per annum Continuous Production of High-Quality Solvent MBT project (Henghsun plant): Commercial production commenced.
• 20,000-tonne per annum Continuous Production of High-Quality Solvent MBT project (Weifang plant): Trial run to start May 2026; commercial production expected by end 2026.
• Transformation of TBBS2 workshop to CBS workshop (Shandong Sunsine plant): Construction phase ongoing; trial run targeted for 1H2026.
• Annual production capacity expected to rise to 272,000 tonnes in FY2026e (from 254,000 in FY2025), mainly through accelerator capacity expansion.

• Capacity figures exclude intermediary materials such as 4ADPA and MBT.
• Expansion should strengthen Sunsine’s competitive position and support future growth.

Investor Considerations & Potential Price Sensitivity

• Record sales volume and ongoing capacity expansions indicate strong market demand, which could positively impact share value.
• Margin pressure from rising raw material costs and lower ASP is a risk; however, expected ASP increases in coming quarters could support profitability.
• Geopolitical risks (Iran conflict, Strait of Hormuz disruptions) have direct impact on Sunsine’s input costs and may affect future earnings.
• Management’s confidence in profitability and growth despite industry challenges is a positive signal for shareholders.