Citigroup downgrades Asia Cement China to Sell from Buy after changing its valuation methodology to EV/ton from P/E. The house cuts its target price to HK$2.96 from HK$7.99, despite raising FY11-12 net profit forecasts by 27% and 7% respectively on stronger-than-expected prices.
"We forecast margin to stabilise as its major markets have well balanced demand/supply. However, we think investors would shift their focus from profit to asset, in a risk reverse environment," the house said.
It expects the company to show almost zero volume growth in FY12. "In a market with high risk-aversion, we prefer large cap names with strong balance sheets."