Sunvic

Sunvic: Announced strong 2Q11 results, which was slightly below expectations.

Rev at Rmb934.7m, +13.9% yoy and -5.6% qoq, while net profit at Rmb171.5m, +65.7% yoy and -22.4% qoq. Gross margins at 30.4% vs 26.2% yoy and 35% qoq.

Strong rev led by an increase in rev from acrylic acid (AA) and acrylate esters (AE) as well as other chemical product, which saw ASP increased yoy but down slightly qoq. Margins decline was led by rising costs of raw materials.

Going forward, grp confident of prospects and tip outlook for wide application core products, AA and AE products to be stable. For FY12, additional AA production capacity in the PRC may have some effect on ASP of AA. Rising raw material costs may also impact on cost of production. Grp’s new Taixing Phase 1 AA plant with an annual capacity of 160,000 tonnes is expected to commence production as scheduled. Valuations are very compelling at 1.9x FY11E P/E.