CGS-CIMB Research has maintained its ‘add’ rating for China Sunsine Chemical Holdings with a higher target price of 61 cents from 55 cents previously due to an upward trend in average selling prices (ASPs).
This comes following China Sunsine’s “solid set of results” for the 2HFY2020. The company’s earnings of RMB 136 million ($234 million) for the period were in line with analyst Ong Khang Chuen’s expectations and up 11% y-o-y on the back of higher revenue from better ASPs.
SEE:Continue to 'add' China Sunsine as negatives priced in: CGS-CIMB
Ong expects ASPs to continue rising in the coming year, which bodes well for the company’s performance for FY2021.
“Post a two-year downtrend, average prices in the rubber accelerator and anti-oxidant industries had recovered 40% and 38% respectively since September 2020 to date. We see further upside in the coming months, supported by robust downstream demand and rise in raw material costs,” he says.
Ong believes downstream demand will be driven by tyre manufacturers catering to China’s growing auto industry. He also notes that export volumes for China’s rubber accelerators to remain buoyant as economic activities resume in overseas markets, and is forecasting China Sunsine’s sales volumes to grow by 13% in FY2021.
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His increased target price of 61 cents is based on higher EPS forecasts of 4.8% - 6.1% for FY2021 and FY2022 to reflect higher ASP assumptions.
As at 3.05pm, shares in China Sunsine are trading flat at 49.5 cents.
