Sunresin New Materials Co Ltd Report Interpretation

Overview

This report reviews Sunresin New Materials' 2Q26 results. Morgan Stanley believes the results were broadly in line with its forecasts and market consensus: the water treatment business returned to growth and drove a recovery in revenue momentum, but higher styrene prices, foreign exchange losses, and a slowdown in the metal resources business constrained profit performance. The report maintains its Equal-weight rating and Rmb55.00 price target.

Core views

Overall 2Q26 results were largely in line with Morgan Stanley's forecasts and market consensus. The company generated revenue of Rmb771mn, up 15% YoY and 27% QoQ; net profit was Rmb239mn, down 5% YoY and up 31% QoQ. Quarterly revenue momentum therefore improved markedly, but profit performance remained weaker than revenue on a YoY basis. The report believes the current results leave its existing investment thesis and the direction of consensus EPS over the next 12 months broadly unchanged. The revenue improvement mainly came from renewed growth in the water treatment business, whose 2Q26 revenue increased by more than 15% YoY. The system equipment business also delivered solid growth, with the increase coming from non-lithium-extraction projects, indicating that growth in system equipment during the quarter did not depend solely on lithium-extraction demand. The life sciences business continued to expand rapidly, with revenue rising approximately 28% YoY. In contrast, growth in the metal resources business slowed, with Morgan Stanley estimating very limited YoY revenue growth in 2Q26. The company's overall growth mix was therefore divergent: water treatment and life sciences were the main growth drivers, non-lithium-extraction system equipment provided additional growth, while the contribution from metal resources weakened. Profitability was disrupted by cost and exchange-rate factors. The 2Q26 gross margin was 52%, flat YoY but down 3 percentage points QoQ. Morgan Stanley believes this was mainly due to a sharp increase in the price of styrene, a raw material, during the Middle East conflict in 2Q26. Meanwhile, approximately Rmb40mn in foreign exchange losses continued to weigh on net profit. Excluding these foreign exchange losses, the report estimates that 2Q26 core net profit increased by more than 15% YoY and 26% QoQ, indicating that the reported YoY decline in net profit largely reflected foreign exchange volatility rather than a concurrent deterioration in core operating profit. Morgan Stanley ModelWare forecasts show EPS of Rmb1.77, Rmb2.05, Rmb2.59, and Rmb3.31 for 12/25, 12/26e, 12/27e, and 12/28e, respectively; the Refinitiv consensus EPS figures in the table are Rmb1.86, Rmb2.23, Rmb2.79, and Rmb3.72, respectively. Revenue forecasts for the same periods are Rmb2,786mn, Rmb3,235mn, Rmb3,891mn, and Rmb4,700mn; EBITDA forecasts are Rmb1,161mn, Rmb1,346mn, Rmb1,678mn, and Rmb2,120mn; and ModelWare net profit forecasts are Rmb897mn, Rmb1,041mn, Rmb1,314mn, and Rmb1,679mn. The corresponding P/E ratios decline from 34.9x to 31.5x, 25.0x, and 19.5x, while EV/EBITDA declines from 25.2x to 22.3x, 17.6x, and 13.6x, reflecting that the valuation estimates are based on earnings growth in each future year. The price target is derived from a 2026e P/E-based SOTP valuation. Traditional adsorption and separation resins are assigned a 15x P/E due to increased uncertainty over revenue recognition; life sciences is assigned a 50x P/E, with a PEG ratio above 1x used as a reference to reflect the potential for orders from domestic innovative drug companies to drive renewed acceleration in medium- to long-term earnings; and system equipment and technical services are assigned a 10x P/E because the order backlog is sufficient, but the timing of revenue recognition is difficult to assess. This framework yields a price target of Rmb55.00. The report assigns the company an Equal-weight rating and an In-Line industry view. At the scenario level, upside factors include strong orders for lithium extraction, continued market share gains in the water treatment business despite macroeconomic challenges, and limited competition in the SPS carrier and chromatography media businesses. Downside factors include a decline in new lithium-extraction orders, weak demand for water treatment resins, competition from new entrants in SPS carriers, or competition from existing participants in chromatography media. The report's neutral stance therefore reflects both the growth potential of water treatment and life sciences and the sufficient order backlog, as well as uncertainties related to raw materials, exchange rates, orders, and competition.

Analysis framework

Morgan Stanley first compares 2Q26 revenue, net profit, and gross margin with its own forecasts and market consensus, then breaks down revenue momentum across water treatment, system equipment, life sciences, and metal resources, while excluding foreign exchange losses to assess core profitability. The report subsequently uses ModelWare to forecast future revenue, profit, and valuation metrics, and finally conducts a SOTP valuation of the different businesses based on 2026e P/E ratios, while presenting upside and downside risks involving orders, demand, and competition.

Methodology notes

• Valuation MethodSOTP Valuation

  2026e P/E-based SOTP valuation

  The report separately values traditional adsorption and separation resins, life sciences, and system equipment and technical services, and then aggregates them to derive the company's price target, reflecting the different growth prospects and revenue recognition uncertainties of each business.

• Valuation MethodP/E and PEG Valuation

  Segment P/E multiples and PEG reference

  Traditional adsorption and separation resins, life sciences, and system equipment and technical services are assigned P/E multiples of 15x, 50x, and 10x, respectively; life sciences also uses a PEG ratio above 1x as a reference to reflect its potential for renewed acceleration in medium- to long-term earnings.

• Corporate Fundamentals and Financial FrameworkEarnings Quality Analysis

  Core net profit excluding foreign exchange losses

  The report excludes approximately Rmb40mn in foreign exchange losses from reported net profit to distinguish operating performance from the impact of exchange-rate fluctuations; adjusted 2Q26 core net profit increased by more than 15% YoY and 26% QoQ.

• (Out-of-Vocabulary Method)

  Morgan Stanley ModelWare

  The report uses Morgan Stanley ModelWare to generate forecasts for revenue, EBITDA, net profit, EPS, and related valuation metrics, using them as the financial basis for assessing results and conducting the SOTP valuation.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Sunresin New Materials Co Ltd (300487.SZ, 300487 CH)

  The core company covered by this report; 2Q26 revenue momentum improved, but profit was weighed down by higher styrene prices and foreign exchange losses.

  Strengths

  Water treatment recovered to growth of more than 15% YoY, life sciences grew by approximately 28%, and non-lithium-extraction system equipment projects delivered solid growth; the system equipment order backlog is sufficient, while competition in the SPS carrier and chromatography media businesses is limited.

  Weaknesses

  The metal resources business delivered very limited YoY growth, the timing of revenue recognition for system equipment is difficult to assess, gross margin declined QoQ, and foreign exchange losses weighed on net profit.

  Comparison

  2Q26 results were largely in line with Morgan Stanley's forecasts and market consensus.

  Risks

  A decline in new lithium-extraction orders, weak demand for water treatment resins, higher raw material prices, and intensifying competition in SPS carriers and chromatography media.

Key data

• 2Q26 RevenueRmb771mnUp 15% YoY and 27% QoQ
• 2Q26 Net ProfitRmb239mnDown 5% YoY and up 31% QoQ
• 2Q26 Gross Margin52%Flat YoY and down 3 percentage points QoQ
• 2Q26 Foreign Exchange LossesApproximately Rmb40mnContinued to weigh on net profit for the quarter
• 2Q26 Core Net Profit GrowthUp more than 15% YoY and 26% QoQMorgan Stanley's estimate excluding foreign exchange losses
• Water Treatment Business GrowthUp more than 15% YoYReturned to growth and became the primary driver of the recovery in revenue momentum
• Life Sciences Business GrowthUp approximately 28% YoYMaintained rapid growth in 2Q26
• ModelWare EPSRmb1.77 / Rmb2.05 / Rmb2.59 / Rmb3.31Corresponding sequentially to 12/25, 12/26e, 12/27e, and 12/28e
• Refinitiv Consensus EPSRmb1.86 / Rmb2.23 / Rmb2.79 / Rmb3.72Corresponding sequentially to 12/25, 12/26e, 12/27e, and 12/28e
• Revenue ForecastRmb2,786mn / Rmb3,235mn / Rmb3,891mn / Rmb4,700mnCorresponding sequentially to 12/25, 12/26e, 12/27e, and 12/28e
• EBITDA ForecastRmb1,161mn / Rmb1,346mn / Rmb1,678mn / Rmb2,120mnCorresponding sequentially to 12/25, 12/26e, 12/27e, and 12/28e
• ModelWare Net Profit ForecastRmb897mn / Rmb1,041mn / Rmb1,314mn / Rmb1,679mnCorresponding sequentially to 12/25, 12/26e, 12/27e, and 12/28e
• P/E34.9x / 31.5x / 25.0x / 19.5xCorresponding sequentially to 12/25, 12/26e, 12/27e, and 12/28e
• P/B7.1x / 6.2x / 5.4x / 4.6xCorresponding sequentially to 12/25, 12/26e, 12/27e, and 12/28e
• EV/EBITDA25.2x / 22.3x / 17.6x / 13.6xCorresponding sequentially to 12/25, 12/26e, 12/27e, and 12/28e
• ROE22.9% / 23.7% / 25.0% / 27.5%Corresponding sequentially to 12/25, 12/26e, 12/27e, and 12/28e
• Dividend Yield0.6% / 1.4% / 1.8% / 2.3%Corresponding sequentially to 12/25, 12/26e, 12/27e, and 12/28e
• Price TargetRmb55.00Based on a 2026e P/E-based SOTP valuation

Impact & implications

The report believes that the company's quarterly revenue momentum has recovered, with renewed growth in water treatment, continued rapid expansion in life sciences, and incremental contributions from non-lithium-extraction system equipment projects. However, growth in metal resources was limited, while higher raw material prices and foreign exchange losses constrained profit performance. Future earnings growth and valuation realization still depend on order conversion across the businesses, the timing of revenue recognition, and the competitive environment. Therefore, the 2Q26 results did not materially alter Morgan Stanley's existing investment thesis or neutral rating.

Risks

• An upside risk is strong orders for the lithium-extraction business.
• An upside risk is that the water treatment business remains unaffected by macroeconomic challenges and continues to gain market share.
• An upside risk is that the SPS carrier and chromatography media businesses maintain a limited-competition environment.
• A downside risk is a decline in new orders for the lithium-extraction business.
• A downside risk is weak demand for water treatment resins.
• A downside risk is that SPS carriers face competition from new entrants or the chromatography media business encounters more intense competition from existing participants.