China Sunsine

China Sunsine: ($0.48) A good year to expand China Sunsine provided updates on its capacity expansion plans: 1) Shandong Sunsine has completed its antioxidant 6PPD facility under Phase 2 at a cost of Rmb80m. The new facility will double its production capacity to 30k tpa of 6PPD. 2) Weifang Sunsine has completed its expansion of another 4k tpa MBTS facility at a cost of Rmb3.5m, bringing total capacity ot 16k MBTS pa. 3) Shandong Sunsine is reactivating its DCBS facility and building a new DCBS facility with combined 8k tpa capacity. The budget for this facility is ~Rmb9m, with construction to be completed by year end. The above expansions will be funded by internal sources. Management says that the group has already received accreditation for its 6PPD product from most of its major customer, with more orders continuing to stream in. Management believes this product has great potential and expects it to contribute positively to the group’s performance. Meanwhile, with the increase in DCBS and MBTS production, Sunsine continues to retains its rank as the world’s largest producer of rubber accelerator products. By end FY14, Sunsine will boast a total annual production of 152k mt, comprising 87k mt of accelerators, 45k mt of antioxidants, and 20k mt of insoluble sulphur. Backed by the positive profit guidance issued in late Oct, the upcoming 3Q14 results (due before 14 Nov) are expected to be strong and could be a catalyst to prompt a further re-rating of Sunsine shares. The stock currently trades at 4.5 annualized 2Q14 P/E, representing a sharp 36% discount to its Singapore-listed peers.