Excerpts from analysts' reports following the 3Q18 results of China Sunsine (CSSC):
|Phillip Securities Research (analyst: Chen Guangzhi)
CSSC is facing a bit headwind of ASP correction currently. However, we believe there is a limited downside since overall supply within the market has not increased substantially.
At the moment, the dip in both finished products and materials resulting from softened demand is cyclical. We ought to concentrate on the ramp-up of capacity and production which will be realised in the near term.
Maintain BUY with a lower TP of S$1.68 We revise up FY18e EPS by 17.5% to 26.9 SG cents and FY19e EPS by12.7% to 23.9 SG cents.
Due to expected softer ASP, the required rate of return was changed from 8% to 10% based on an updated Beta.
We maintain our BUY recommendation with a lower target price of S$1.68.
Full report here.
|CGS-CIMB (analyst: Colin Tan)
Closer to getting approval for 13% expansion in capacity
The new lines will expand Sunsine’s annual capacity to 172,000 tons and would provide an additional boost to sales volume for FY19F as Sunsine is already running at c.98% capacity utilisation.
Upgrade from Hold to Add with unchanged TP of S$1.41
We think the negatives have been priced in following the c.30% decline in share price over the last 3 months. We thus upgrade our call to Add as we see declines in ASPs could possibly slow down ahead.
Our TP remains unchanged at S$1.41, pegged to 7.7x FY19F P/E. The stock is currently trading at 5.7x FY19F P/E, c.30% discount to its rubber chemical peers. Re-rating catalysts could come from ASPs rebounding.
Key risks include a sharper fall in ASPs and production halts amid stringent environmental inspections from the authorities.
Full report here.