Tangshan Sanyou Chemical Industries:Strong sales boost earnings growth;industry leading position further consolidated

Company Profile

    Tangshan Sanyou Chemical Industries Co., ltd (hereinafter referred as Sanyou Chemical) is thekey construction projects of National “Seven-five” plan, and now is the Vanguard of the nationalsoda ash industry. (Source: company’s official website)

    Tangshan Sanyou Chemical Industries released its 17Q3financial report, stating that itmade operating revenue of CNY 14.9billion in the first three quarters of 2017, up 32.61%YoY.

    The company reported operating profit of CNY 199billion, up 146.68% YoY.

    The net profit attributable to shareholders was CNY 1.46billion, up 156.71% YoY. The net profitafter non-recurring items was CNY 1.45billion, up 148.25% YoY. Given the latest total sharecapital of 2.06billion, the diluted EPS was CNY 0.71(CNY 0.70after deducting non-recurringitems). The net operating cash flow per share was CNY 0.41.

    Specifically, the operating revenue for the third quarter was CNY 4.9billion, up 26.2%YoY. The net profit attributable to the parent company was CNY 502million, up 81.5% YoY. TheEPS for 17Q3was CNY 0.24(CNY 0.25after non-recurring items). The net operating cash flowper share for the third quarter was CNY 0.11.

    Comment

    Tangshan Sanyou Chemical Industries enjoyed fast YoY earnings growth in the firstthree months 2017, mainly because of positive outlook of viscose staple fiber, soda ash,caustic soda, PVC, and silicone industries. The average product price increase YoY, withimproving gross margin.

    Revenue continued to grow rapidly.

    The gross profit margin for the single quarter hit a new high in recent years. The cost-incomeratio decreased significantly, and the earnings increased remarkably year on year. De-capacityof the company's main products progresses smoothly. Tightening of environmental regulation insome industries leads the number of companies that kick off product to drop. The overallindustry supply and demand dynamics improve. Product prices rose sharply YoY, pushingSanyou?s revenue for the first three quarters to CNY 14.9billion, up 32.61% YoY. As the gapbetween products prices and main material prices widens, the company?s gross profit for thefirst three quarters increased by 2.44percentage points to 27.28%. The gross profit for the thirdquarter was 28.58%, up 2.54percentage points YoY, hitting a new high since 14Q1.