DJ MARKET TALK: DB Downgrades Maanshan To Sell; HK$4.20 Target
1527 [Dow Jones] STOCK CALL: Deutsche bank downgrades Maanshan Iron & Steel (0323.HK) to Sell from Buy with target at HK$4.20 as says stock looks quite expensive. Notes stock has gained 30% since May 1, though house expects steady margins, earnings recovery.
"The supply response combined with a potential demand weakness on sharply lower FAI growth lead us to expect steel prices to come off in July/August, a seasonally slow season for steel demand." Expects fixed-assets investment to fall sharply to 10% on-year in mid-2010 vs 40% in next 1-2 months.
Notes, steady rebound of steel prices in last nine weeks has attracted considerable idle capacity in operations. Estimates Maanshan to see 1H net income dropping 50% on-year, meaning company could issue profit warning no later than July 14. Stock down 3.6% at HK$4.87. HSI +0.13%.