<ET Net News Agency, 31 March 2011> Citigroup upgraded China National Building Material
(CNBM, 03323) to "buy" from "hold", and raised its target price to HK$47.37 from HK$23.59.
It said CNBM's bottom line is the most sensitive to a price lift. To reflect the strong
pricing momentum, Citi revised its price assumption from 10% yoy growth to 30%. Gross
profit/t should double, rising from Rmb55 to Rmb110, and net profit/t may jump from Rmb25
to Rmb68.
Since the company has an ambition to acquire 20 Mt more capacity, Citi expects equity
financing if the acquisitions happen within a year. If the company waits till year end,
strong earnings could help alleviate gearing to roughly 120%, and reinforce its financial
position.
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