China Sunsine Chemicals Holdings

[Curiousparty]

although very capital intensive, sunsine is helped by having a much greater EOS (economy of scale) compared to the other much smaller players. Hence, sunsine has a much lower cost structure and it can afford to play down the prices for the last few years to drive out and suffocate its competitors.

it is a virtuous cost cycle for sunsine. As more companies die out, EOS will get higher and cost structure (per unit volume) will be further lowered.
if everything pans out as pointed out by Portuser, sunsine share price should hit a new high over the next few quarters.

Based on the 1Q2014 announcement by Sunsine, that some competitor had suspended their operations due to Government action on environmental protection, resulting in a decrease in supply of rubber accelerators, Sunsine may not be a price taker in the current situation. The ability to raise ASP of accelerator in 1Q also indicates that Sunsine has some pricing power.

Are these competitors able to make a come back? Is it a simple matter of installing new environmentally friendly equipment and reconfiguring their existing production lines? At what cost and is re-accreditation by tyre manufacturers required?

GPM on the following periods.

The average selling price of accelerators was as follows:
1st 9 months of 2011 (before
Price cut to grow market share)….…..RMB 21,150 - 25.2%
4Q 2011……………………………………………..RMB 19,600 - 20.54%
2012……………………………………………………RMB 18,610 - 17.2%
2013……………………………………………………RMB 18,480 - 18.16%
4Q 2013........................................RMB 18,230 - 19.83%
1Q 2014………………………………………………RMB 19,330 - 19.19%

For a price taker company in the chemical industry, ASP is just half of the story. GPM depends on input raw materials and utilisation as well.