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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.
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.
