DMG starts Leader Environmental (LS9.SG) at Buy with a $0.53 target. It says the China-based industrial waste treatment equipment maker is set to grow steadily in the next few years, driven by “favourable regulatory policies in China, its strong presence in the heavily polluted Northern China, and popular desulphurisation systems.” 

It says, backed by expected strong new order wins of RMB400-450 million during FY10F-FY12F, “we believe LET is able to achieve PATMI CAGR of 36% in the period.” 

 

Its target is based on 8.7x FY11F earnings. The house says China’s IWT equipment market is estimated at US$5.2 billion ($6.68 billion) in 2008, and is forecast to grow at 15% CAGR in 2009-2013 to US$9.6 billion. "This bodes favourably for IWT equipment makers such as LET. 

 

It adds, earnings will continue to be bolstered by desulphurisation system manufacturing which is expected to have a sustainable 40% gross margin medium-term. Its shares rise 12.8% to $0.265.