It's a rare phenomenon: Two brokers initiated coverage of an S-chip in the past 2 weeks -- China Sunsine. While one cannot totally ignore the S-chip stigma, China Sunsine has a remarkable profitability record and a perceived wide business moat and market dominance.
The company is just weeks away from announcing its FY2107 results which, going by the analysts' forecasts, are record numbers. Phillip Securities forecasts RMB344 m in net profit for FY2017, up from RM222 m in FY2016. CIMB's forecast is RMB291 m.
If you take the average profit forecast, then the PE of the stock ($1.11) currently is 8-9X. Looks attractive, which is why the analysts say 'buy' and have set target prices with significant upside.
Excerpts from the analysts' reports
Phillip Securities analyst: Chen Guangzhi
Full 17-page report here.
|CIMB analyst: Colin Tan
■ Sunsine trades at 5.1x CY18F ex-cash P/E, at a 48% discount to its Chinese rubber chemicals peer Shandong Yanggu Huatai Chemical.
■ ASPs for accelerator products rose 25% yoy in 9M17 amid crackdown on pollution in China.
■ Boost in production capacity to kick in by 1H18F, fuelling 7% growth in total capacity.
■ Earnings have tripled since FY13, and we believe the company is set for continued earnings growth as the industry consolidates.
■ Initiate coverage with Add and a TP of S$1.50, based on 9.8x CY19F P/E (20% discount to global peers’ average
Full 20-page report here.