Supplying Rubber Accelerators To The World’s Top Tire Makers

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Background

China Sunsine Chemical Holdings Limited is the top manufacturer globally and in China of rubber accelerators and other specialty chemicals used in rubber production, mainly to improve car tire functionality.

[REITs]

See 2017 Hedge Fund Letters.

Rubber Accelerators

It has a 20% global market share and supplies 2/3 of the world’s top 75 tire makers from its five plants located in China.

Business Description

The company has a global market share of 20% and 33% in China in rubber accelerators, which accounts for nearly 3/4 of sales, insoluble sulfur 1/4, and the rest antioxidants, chemicals needed for strengthening and improving the function of rubber used mainly in car tires.

CSSC supplies 2/3 of the top 75 global tire makers. Total capacity expansion is planned for 2018, up to 172,000 tonnes from 152,000 tonnes annually; in 2017 accelerator production accounted for 83,000 tonnes, antioxidant chemicals 33,000 tonnes and insoluble sulfur 22,000 tonnes.

Rubber Accelerators

China has dominated the niche rubber chemical market for some years, and the country accounts for 76% of global output. While demand has remained healthy, tougher environmental regulations in China are steadily phasing out smaller producers in favor of the leading manufacturers, such as CSSC, which are more efficient. This has led to firmer pricing trends.

The group plans to ramp up accelerator capacity by a third to 117,000 tonnes by 2020.

Leadership

Xu Chung Qui is the Chairman of CSSC and has served in this position since 1998. He joined the Group in 1977 and has received numerous awards throughout his career such as the “Outstanding Entrepreneur” award, from the Heze City Economic and Trade Committee and the “Excellent Leader in Technological Innovation” by China Rubber Industry Association. He received his Bachelor’s degree in Rubber Chemical Engineering from Shandong Chemical College, China and later became a qualified senior engineer.

Rubber Accelerators

Liu Jing Fu was appointed the CEO of CSSC in 2013. Before joining CSSC in 2006, he served as the deputy chairman of Heze Petroleum Chemical Association and the Deputy Chairman of Heze Electrical, Mechanical and Petrochemical Association. In a similar manner to the Chairman, he obtained his Bachelor’s degree in Chemical Engineering from Shandong Chemical College and later became a qualified senior engineer.

World Class Benchmarking

Profitable Growth has improved since 2013 and has maintained its excellent ranking at #1 in the past 12 months. CSSC ranked among the top 85 of 850 medium Materials companies worldwide.

Profitability has had identical performance to Profitable Growth in term of rankings. Growth fell in 2015 but has been improving since.

Rubber Accelerators

Asset utilization has consistently ranked in the top-two deciles over the years and Profit margin has ranked at #3 since 2014.

Both Sales growth and Margin change exhibit similar trend to Growth with recovery in rank being faster in Sales growth compared to Margin change.

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About the Author

Dr. Andrew Stotz, CFA
Dr. Andrew Stotz, CFA is the CEO of A. Stotz Investment Research, a company providing institutional investors with ready-to- invest portfolios in Asia that aim to beat the benchmark through superior stock selection. The company also provides buy- and sell-side clients with financial models to value any company in the world and World Class Benchmarking to determine what companies are financially world class. Previously, as Head of Research at CLSA, Andrew was voted No. 1 Analyst in Thailand in the Asiamoney Brokers Polls for 2008 and 2009. He was also voted No. 1 Analyst in Thailand in the 2009 Institutional Investor magazine All-Asia Research Team Report. Andrew earned his PhD in finance at the University of Science and Technology of China in Anhui province, with a focus on answering questions raised by fund managers and analysts during his career about picking stocks and managing portfolios. In addition, Andrew has been a lecturer in finance for 22 years at various universities in Thailand. Since 2013, he has been the president of the CFA Society of Thailand. He is also the author of How to Start Building Your Wealth Investing in the Stock Market.

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