China Sunsine Chemical has had an “incredible start for the year,” Phillip Capital said, noting first quarter net profit beat its forecast by around 14 percent.
The specialty rubber chemicals producer reported last week that its first quarter net profit climbed 161 percent on-year to 149.5 million yuan as revenue rose 49 percent to 856.9 million yuan; the gross profit margin rose to 34.9 percent, up 10.5 percentage points on-year.
The company has previously noted that it was a beneficiary of China’s crackdown on pollution, which resulted in some competitors being shutdown and creating supply shortages.
Phillip Capital raised its 2018 and 2019 earnings per share forecasts by 45 percent and 26 percent respectively on higher margin assumptions.
“The enforcement of environmental protection policies and regulation will be strengthened moving forward. Thus, we expect that more rubber chemical plants to shut down before new capacity from large companies enter the market,” the Phillip Capital note on Monday said. “The shortage of supply will persist in 2018 and be benefiting Sunsine.”
It raised its target price to S$1.97 from S$1.60, keeping a Buy call.
The stock ended Monday up 1.35 percent at S$1.50.