Sunvic

Sunvic: Potential upside as the co. announced stellar 1Q13 performance, with the group on track to triple its FY12 earnings as guided by its CEO in a recent interview. Revenue at Rmb1.47b, +88% y/y and +6% q/q, while net profit at Rmb80.3m, +931.5% y/y and +7% q/q. Robust performance was largely due to an increase in revenue from acrylic acid (AA) & acrylate esters (AE) as well as contributions from PMIDA & glyphosate. The increase in revenue from AA & AE was mainly attributable to higher sale volume which increased from 216,000 tons in FY11 to 348,000 tons in FY12, while the grp also re-commenced the production of PMIDA & glyphosate in FY12 resulting in higher revenue. Going forward, grp note its new Taixing Phase II AA plant, with an annual capacity of 160,000 tons, commenced production in early 2013 and brings its total AA annual production capacity to 525,000 tons. Sales of its main product, AA, is expected to remain robust, as well as that of glyphosate. Add that other various plants are operating at full capacity, with sales volume to match. Due to long term sales contracts already signed with certain major customers, grp sales and profit margins for AA are secured for the next few years. Easing of commercial lending interest rates in the PRC will also improve Group’s profitability. We note that annualizing 1Q13 eps would see Sunvic trade at just 4x P/E., assuming the group does not grow the nxt few qtrs. Although we opine that newsflow recently has been supportive of further upside.