CGS-CIMB Research has recommended investors to continue accumulating shares in China Sunsine Chemical Holdings despite the rubber chemicals producer’s poor half-year performance.
The brokerage reckons that China Sunsine could do better ahead as it believes that the near-term challenging outlook for the company has been priced in.
“Potential re-rating catalyst is a recovery of Sunsine’s margin spreads,” CGS-CIMB analyst Ong Khang Chuen writes in a note dated Aug 13.
Moreover, CGS-CIMB believes that China Sunsine had likely gained market share in 1H20 by leveraging its superior product quality.
This is because smaller industry peers are operating at much lower utilisation rates, according to the company.
The brokerage notes that China Sunsine plans to further invest in capacity expansion to consolidate its market leadership position.
CGS-CIMB has kept its “add” call for the stock with an unchanged target price of 38 cents. Ong has also lowered the company's earnings per share (EPS) for FY20-22F by 10.9-11.6%.
As at 3.46 pm, China Sunsine was flat at 32 cents with 471,300 shares changed hands.
