China XLX: DBS downgrades to Hold on limited upside, lowers TP from $0.40 to $0.34. Posted FY11 results largely in line; 4Q11 net profit fell 73% q-o-q to RMB28m as expected. Target price is lowered after adjusting for CB conversion dilution. Key risks are stretched balance sheet and persistent industry overcapacity. China XLX’s net gearing of 0.5x as of end 2011 is expected to rise to c.1x by end 2012 and 1.3x by end 2013 to fund capex of RMB1.5bn per year for the 4th plant.
CIMB maintains Outperform with TP$0.43 with results meeting forecasts. FY11 core net profit was due to higher ASPs as well as shift in sales mix to compound fertilizers. House expects strong government support for the industry in the form of welfare promotions for the agriculture sector, and high food prices to raise farmers’ purchasing power. ASPs could surprise positively in FY12 with lower coal prices as supply of coal increases in the mkt.
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