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China Sunsine Chemical’s latest half-year results may not look spectacular at first glance. Net profit for 1H2026 rose just 5% to RMB254.3 million. But KGI Securities argues that behind this headline number is a much stronger story — one built around higher selling prices, record volumes, growing overseas sales and a surprisingly strong contribution from the sale of insoluble sulphur. This is used by tyre manufacturers to help cure rubber and improve the bonding of tyre components. KGI reiterated its Outperform call and S$1.145 target price, which is ~70% upside from a recent share price of S$0.66. Why the bullishness?
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| Insoluble sulphur steals the show |
The surprise star was insoluble sulphur, whose sales volume rose 16.8% to 26,007 tonnes, but revenue surged 87.4% to RMB268.5 million because realised selling prices jumped around 60%.
Even more striking: KGI estimates that insoluble sulphur accounted for roughly 39% of China Sunsine’s total year-on-year revenue increase in 1H26. Its contribution to group revenue also rose from 8.5% to 13.4%.
That is why KGI now describes insoluble sulphur as a “second earnings engine”, alongside the company’s core rubber accelerator business which also supplies to tyre producers.
The industry dynamics help here. Global insoluble-sulphur leader Flexsys has announced two Asian price increases and is under considerable financial pressure due to its debts.
KGI isn’t assuming today’s high prices last forever.
It forecasts insoluble-sulphur ASP falling from RMB10,500 a tonne in FY26 to RMB7,500 in FY27 and RMB6,800 in FY28.
KGI forecasts net profit easing by about 15% in FY27.
Sunsine's 1H2026 product mix:
|
Product |
Revenue, RMB million |
Revenue growth YoY |
Share of group revenue |
|
Rubber accelerators |
1,233.6 |
+22.0% |
61.4% |
|
Anti-oxidants |
448.1 |
−9.5% |
22.3% |
|
Insoluble sulphur |
268.5 |
+87.4% |
13.4% |
|
Other rubber chemicals |
39.4 |
+133.1% |
2.0% |
Source: Company Data, KGI Research
| Overseas growth may be the bigger long-term story |
Another encouraging development is where the extra volumes are coming from.
| Only 2.4x PE ex-cash |
 "At current price levels, the revised FY26E earnings imply about 6.8x P/E, while reported net cash covers roughly two-thirds of the equity value. The discount still prices in Chinese industrial cyclicality, low trading liquidity, cash-location risk and a reversal in current IS economics."-- Chong Ting Shuo, KGI analyst |
Domestic sales volume rose only 4%, but international volume increased 17%, reaching 43.6% of total shipments.
European revenue increased 32%, while Rest-of-Asia sales rose 17%.
Management says Chinese tyre manufacturers expanding overseas are buying from Sunsine, while global customers such as Bridgestone and Pirelli have also increased orders.
Meanwhile, production capacity continues to expand.
Year-end annual capacities:
|
Tonnes |
FY24 |
FY25 |
end-FY26F |
|
Accelerators |
117,000 |
117,000 |
135,000 |
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Insoluble Sulphur |
60,000 |
60,000 |
60,000 |
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Anti-oxidant |
77,000 |
77,000 |
77,000 |
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Total |
254,000 |
254,000 |
272,000 |
If there is one number investors should watch closely, it is cash flow. Operating cash flow plunged from RMB431.5 million in 1H25 to just RMB78.3 million in 1H26 as receivables and inventories absorbed RMB267 million.
Management attributes the build-up mainly to higher raw-material costs and stronger sales near the period-end. KGI's FY26 forecast assumes operating cash flow eventually reaches RMB482 million — implying a very strong recovery in 2H. Still, China Sunsine has a formidable financial cushion: around RMB2.22 billion of cash, no debt and roughly S$0.44 of net cash per share. KGI forecasts FY26 net profit of RMB511 million, equivalent to EPS of 9.93 Singapore cents, putting the stock at roughly 6.7 times P/E. It also expects dividends of 3.97 cents a share, which is a 6% yield. The more interesting question is whether 1H26 marks the start of something bigger: Will China Sunsine be able to turn its scale into stronger pricing and earnings? Can 2H cashflow catch up with the stronger sales? |
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→ See the full KGI report here.
