Fitch Ratings has affirmed
The Outlook is Stable.
We rate SIC on a top-down basis under our Parent and Subsidiary Linkage (PSL) Rating Criteria. This reflects the 'Low' legal, 'Medium' strategic and 'High' operational incentives for the ultimate parent,
Our internal assessment of
Key Rating Drivers
State Control, Support of Parent: We assesses
Parent Crucial for Agriculture: We assess the socio-political implications of a default by
Parental Linkages Underpin Rating: SIC's ratings are derived from our internal assessment of the creditworthiness of
'High' Operational Incentive to Support:
'Medium' Strategic Incentive to Support: SIC is a key chemical material production unit of
SIC's leading market positions and presence in product categories with growing demand provide considerable competitive advantage to
'Low' Legal Incentive: We assess the legal incentive to support SIC as 'Low' because of the absence of legal ties between SIC and ultimate parent
Focusing on Chemical Material Production: SIC completed the sale of a 36% stake in
Leverage to Stabilise Gradually: We expect SIC's net leverage, measured by net debt/EBITDA, to stabilise gradually at 5x-6x in 2023-2026 on steady expansion in EBITDA and a controlled investment pace. SIC's net leverage fell to 3.6x in 2022, from 4.5x in 2021, supported by the A-share equity placement and strong performance of its new chemical material segment. However, SIC's net leverage is likely to return to above 5x in 2023 on weakened core businesses amid a retreat in prices and demand for chemical materials and investment in chemical material production facilities.
Derivation Summary
SIC's PSL assessment is comparable with that of
Key Assumptions
Fitch's Key Assumptions Within Our Rating Case for the Issuer:
Revenue to decline by 23% in 2023 and rise by 1.9%-2.3% a year during 2024-2026;
EBITDA margin of 6.5%-7.6% during 2023-2026;
Capex of
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Positive rating action on the Chinese sovereign and/or increased likelihood of state support to
Evidence of stronger linkages between
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Negative rating action on the Chinese sovereign and/or decreased likelihood of state support to
Weakening linkages between
For the sovereign rating of
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Public Finances: A sustained upward trajectory in government debt/GDP or a rise of contingent liabilities, such that debt levels compare less favourably with rated peers.
Macro: The recurrence of abrupt policy shifts that undermine economic performance and keep growth volatility at elevated levels.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Structural Features: A material reduction in macro-financial risks and associated contingent liabilities facing the sovereign, for example, by maintaining credit growth below nominal GDP growth over a multi-year period, which would cause the removal of the -1 QO notch on Structural Features.
External Finances: Widespread adoption of the Chinese yuan as a reserve currency, as reflected in a substantial increase in the share of yuan-denominated claims in the
Best/Worst Case Rating Scenario
International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
Liquidity and Debt Structure
Sufficient Liquidity: SIC had short-term debt of around
Issuer Profile
SIC is a SEO that manufactures and distributes high-performance materials, chemical intermediates and polymer additives. It sells products and services to over 100 countries and regions.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
Public Ratings with Credit Linkage to other ratings
SIC's rating is derived from Fitch's internal assessment of the creditworthiness of parent
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/topics/esg/products#esg-relevance-scores.
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