China Liansu 2128

China Liansu 2128

Postby winston » Wed Dec 08, 2010 11:56 am

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DJ MARKET TALK: UBS Starts China Liansu At Buy; HK$6.75 Target
Nov 29, 2010

1127 [Dow Jones] STOCK CALL: USB starts China Liansu (2128.HK) at Buy, target price pegged at HK$6.75.

Says Liansu China's largest manufacturer of plastic pipes, pipe fittings in 2009 in terms of revenue, market share; attributes its 11% market share, almost 4X that of nearest competitor, to "unparalleled production capability, brand name, nationwide sales network, and superior R&D."

Although expects Liansu's gross margin to fall from 26% historical high to more sustainable 24%, still forecasts FY10-12 EPS to increase 37%, 32%, 28% on-year in to CNY0.39, CNY0.52, CNY0.67 respectively, driven by over 30% on-year volume growth in next 3 years.


Source: Dow Jones Newswire
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Re: China Liansu 2128

Postby winston » Wed Dec 08, 2010 11:57 am

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DJ MARKET TALK: JPM Cuts China Liansu To Neutral Vs Overweight
Nov 10, 2010

1556 [Dow Jones] STOCK CALL: JPMorgan downgrades China Liansu (2128.HK) to Neutral vs Overweight, given strong performance of shares over past 3 months (+80%).

But house raises target to HK$5.40 vs HK$3.60 after raising FY10-FY11 net profit estimates by 0.6%, 5.8% respectively to reflect higher sales assumptions.

Adds, Liansu largest maker of plastic pipes in China with approximately 10%-11% market share.

"The company is undergoing an aggressive expansion plan and targets 20% market share in 3-4 years."


Source: Dow Jones Newswire
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Re: China Liansu 2128

Postby winston » Fri Jan 07, 2011 9:53 am

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DJ MARKET TALK: Liansu Set To Fall; Major Holder Cuts Stake

0822 [Dow Jones] China Liansu (2128.HK) is likely to fall given a deeply discounted share disposal by its major shareholder; the company announces that its chairman and major holder Wong Luen Hei is placing 150 million shares (5.0% stake) at HK$6.28 each, representing an 8.2% discount to Liansu's Thursday close of HK$6.84.

Liansu only listed on June 6, but it's hard to blame the major holder for wanting to cash out given the share price has more than doubled from the IPO price of HK$2.60.

Still, the shares are likely to end the day above the placement price on fundamental support, as the plastic pipes manufacturer is expected to post strong earnings growth, benefiting from China's infrastructure buildup and demand from affordable housing.


Source: Dow Jones Newswire
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Re: China Liansu 2128

Postby winston » Wed Feb 02, 2011 1:56 pm

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Risk

Surging raw materials prices.

In China's plastic pipe industry, product pricing is typically determined either through competitive bidding process or individual negotiations with the distributors or direct customers.

Product pricing is dependent upon production costs and the prevailing market prices for similar products. Raw material costs is the largest component of Liansu's cost of sales, according for about 90% of the cost of sales, fluctuations in raw material prices can have a significant effect on the pricing policies of Liansu.

The principal raw materials for plastic pipes and pipe fittings are plastic resins such as PVC, PE and PP-R. Prices for plastic resins are generally subject to cyclical fluctuations and other market disturbances, including as a result of refinery capacity.

In China, where PVC resins are primarily manufactured using coal and limestone, as opposed to petrochemicals that are primarily used in other parts of the world, PVC prices have been impacted by changes in PVC manufacturers` electrical and labor costs, changes in coal prices and fluctuations in the price of petrochemical based PVC resins on the global market.

In short term, due to the continuous improvement in global economies and surging inflation in emerging market, especially in China, we believe the price of plastic resins is going to elevate in 2011. There will be a bigger pressure on Liansu's profit margin and net margin in 2011 due to the raising costs.


Uncertainty about policy risk in China.

China government is intensifying efforts to fight inflation and excess liquidity by raising the reserve requirement ratio (RRR) and interest rate hikes. China Liansu derived almost 100% of its sales from China's domestic markets in 2009.

The nature of plastic pipes and pipe fittings is that demand correlates highly with construction activity (residential, commercial and infrastructure). Construction activity reached a high level in 2009, partly due to the government's Rmb four trillion stimulus package.

However, China government's contraction monetary policy will have an adverse effect on FAI and real estate investment and hence a decreasing demand of Liansu's product.


Valuation

For the year 2010, Liansu is benefited from an expanded production scale and a continued improvement in production efficiency and productivity. Liansu is constructing an additional production bases in Changchun, Jilin.

It is expected to begin operation in the first quarter of 2011, with production capacities planned to reach 66,300 tonnes. Liansu additionally plans to identify suitable land in Sichuan and Shaanxi to further enhance its coverage over these regions.

Our forecast is mainly base three assumptions,
1. Robust historical growth of Liansu will be sustainable in future
2. Liansu's expansion plan will be implemented on schedule
3. Rebounding on ASP of Liansu's products.

We use the multiple comparables approach for the valuation of Liansu. The target 2011 P/E is calculated from the average P/E of the peer companies minus a 10% margin of safety which protect the investment when Liansu's performance fall short of our expectations.

We rate Liansu a BUY with a 12-month target price of HK$9.1, based on 15x P/E for 2011. Currently Liansu is trading at HK$7.6, implying a 20% upside potential.


Source: Phillips
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Re: China Liansu 2128

Postby winston » Tue Feb 15, 2011 10:17 am

Parrot on CNBC touting this counter now ..

Not vested. Just to remind you of some risk:-

Local plastic manufacturers are struggling to keep costs in check in the wake of surging oil prices that are making their raw materials more expensive.

Crude has risen by about 20% yoy and now hovers at US$101 per barrel. As plastic is a byproduct of oil, it has seen similar increases.

Some manufacturers are unable to completely absorb the price rise as the raw materials form a higher percentage of their overall costs. Thus, consumers will have to pay more for plastic products.

Source: DBS
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Re: China Liansu 2128

Postby winston » Tue Aug 21, 2012 11:32 am

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China Liansu (2128) is a leading plastic pipe and pipe fittings maker and will likely maintain healthy sales as long as new houses are being built in the mainland.

After falling from HK$5.50 to around HK$3.10, it is now trading at HK$3.88, or seven times historical earnings.

Most brokerages have put a HK$5.50 target on the stock.


Source: Dr Check, The Standard HK
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Re: China Liansu 2128

Postby winston » Thu Dec 13, 2012 7:44 am

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Back in August, I suggested making a bargain on China Liansu (2128) as the valuation was cheap.

It was HK$3.88 or seven times historical earnings at the time and closed at HK$5.08 yesterday, or 9.8 times its price-to-earnings ratio.

China Liansu is a leading mainland manufacturer of plastic pipes and pipe fittings. It should benefit so long as the authorities are keen to build more homes.

Brokers have given it a target price between HK$5.50 and HK$5.80. Any dip near HK$4.80 is a level to buy.


Source: Dr Check, The Standard HK
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