China Sunsine Chemicals Holdings

[Bluechipfan]

NRA expects Sunsine to have RMB 926m in cash by the end of year 2021, after RMB 1,000m in capex as well as RMB 369m in dividends between 2017 and 2021.

Future dividend payout much higher than the 20% set for 2017 and 2018 therefore cannot be ruled out.

NRA itself was conservative in projections. It forecasts RMB 256m being Sunsine 2017 profit. But with the strong profit in the first half (RMB 57m in 1Q and RMB 75m in 2Q), profit for the whole of 2017 will not be less than 271m unless Sunsine under-performs in the second half.

Sunsine has been consistent in achieving high return on equity (ROE) -- 2016 profit of RMB 222m was 17.5% on average equity of RMB 1,268m.

For the 12-month period ended 30 June 2017, Sunsine's ROE was 19.7%, based on the trailing profit of RMB 271m, and average equity of RMB 1,385m.

ROE would have been higher if Sunsine does not keep so much cash that brings paltry interest income. For example, 2016 ROE would be 21.5% (instead of 17.5%) if cash were excluded. 

It would appear that between financial security and efficient capital structure, Sunsine management has opted the former. I do not mind this. It is prudent management that has brought Sunsine to its present comfortable financial position.

I agree with your analysis especially on full FY17's net profit and the last paragraph. On the former, 3Q being the traditionally strong net profit quarter, we could even see rmb100m net profit in upcoming 3Q results. I know you are being cautious and conservative so i will say it. On the latter, it also show that the management didn't play accounting trick, if they want high ROE, they can simply give high dividend and keep less cash. That way, figure look good and shareholders happy but like you said, I also like their prudent approach in managing company's finance.