Wednesday, November 10, 2010

Li Heng - Kim Eng cuts Li Heng to Hold, lowers FY10-12 estimates

Stock Name: Li Heng
Company Name: LI HENG CHEM FIBRE TECH LTD
Research House: Kim Eng


Kim Eng downgrades Li Heng Chemical Fibre Technologies (E9A.SG) to Hold vs Buy, lowers target to 0.24 vs $0.35.



Says, excluding CNY16.6 million forex gain 3Q10 results slightly below expectations, core net profit of CNY54.5 million fell 16.3% on-quarter as gross profit margin came under pressure due to anti-dumping tariffs on imported PA chips by Chinese government in April. 


Cuts FY10F-FY12F EPS estimates 15%-25% to factor in lower gross profit margin assumption. Says sequentially, gross profit margin shrank 3 percentage points to 10.7% as group failed to pass on extra costs to customers. 

Adds, to mitigate impact of rising raw material costs (+39.2% on-year), Li Heng has started building 100,000 capacity PA chip plant; upon completion in 4Q11, group expects to be self-sufficient in PA chips for production of nylon yarn products. 

Shares flat at $0.225. 

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