Sanjiang Chemicals (2198 HK) Largest private EO producer in China

To summarize…

- 3rd largest producer with 20% production market share in China in a concentrated space (top 3 producers account for 85% of production). Sanjiang is the largest private enterprise producing EO in China.

- Entry barriers are extremely high. New entrants need to have minimum production capacity of 200,000MT, requiring significant upfront investment. 

- All EO produced in China are sold in advance. There is a demand/supply gap of around 30%. This supply gap is presently met by importing of downstream surfactant products, which is cost ineffective.

- Continuing growth in demand expected. According to management, China currently produces around 300 products which uses downstream surfactants. In contrast, the US/Europe produces around 3,000 applications.

- Stock is depressed due to market conditions and exit of pre-IPO investors post listing.

Sanjiang Chemicals (2198 HK) Largest private EO producer in China