Sunvic leaves analysts speechless

Phillip Securities Research notes the chemical manufacturing company’s “spectacular ascent” as its net profit exceeded the estimate by 91.1% and revenue by 22.2% for 3Q10.

The research firm’s statement was peppered with superlatives to describe Sunvic’s growth. “Revenue for 3Q10 more than doubled from the same period a year ago to RMB981.4 million (+123.9% y-y) and net profit reversed from a loss of RMB6.1 million to hit an astounding RMB193.4 million!! “ it said, adding, “For the record, both 3Q10 revenue and net profit were the highest in the company’s operating history and 9M10 net profit was higher than any previous full year net profit.”

Phillip Securities said the strong set of numbers is underpinned by strong demand for AA&AE as well as high average selling price (ASP). AA&AE is used in wide ranging applications from the consumer to the industrial sectors. Some examples of usage are diapers, detergents, water treatment, automotives and textile.

“Truth be told, we were awed by both top- and bottom- line figures. In our analysis of the historical financial data, profitability of Sunvic is determined not by product demand, but by margin expansion or compression,” the research firm said.

“We remain optimistic in the outlook of Sunvic given that there is earnings visibility into FY12E. To the uninitiated, the new cracking plant that produces a key raw material for AA will be commissioned in first quarter next year and in FY12E, the planned expansion of 320,000 ton of AA will begin operations with the output of 160,000 tons already committed to a third party. In view of the strong demand backed by persistently high ASP, we are revising upwards our revenue and net profit forecast for FY10E-FY12E by 12-25% and 28-50%.”