Becoming a dominant galvanized steel manufacturer S$1.52S$1.52

28 February 2007

Price Target: S$2.50

(james.s.tan@jpmorgan.com

J.P. Morgan Securities Singapore Private Limited

See page 4 for analyst certification and important disclosures, including investment banking relationships.

JPMorgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm

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making their investment decision.

Company data

Price (S$) 1.52

52-Wk Range (S$) 0.51-1.77

Mkt Cap. (S$ MM) 587

? FY06 results above consensus and JPMorgan estimates. FY06

net profit rose 84.1% Y/Y to Rmb269MM, underpinned by strong

revenue growth of 73.3% Y/Y to Rmb3.8B. Excluding the RCPS

financial expense of Rmb55.8MM, net profit would have been

9.5% above our FY06 forecast.FY06 results above consensus and JPMorgan estimates. FY06

net profit rose 84.1% Y/Y to Rmb269MM, underpinned by strong

revenue growth of 73.3% Y/Y to Rmb3.8B. Excluding the RCPS

financial expense of Rmb55.8MM, net profit would have been

9.5% above our FY06 forecast.

? Potential share price catalyst. The company is looking for

growth opportunities and aims to be a significant global steel

processing player. There are several options available to

management: (1) increase its associate, Changshu Everbright; (2)

acquire its outsourcing partner, Tianjin Huaxin and other steel

processing plants; (3) venture into higher-margin steel products,

such as building automobile steel spare parts, via a joint venture.Potential share price catalyst. The company is looking for

growth opportunities and aims to be a significant global steel

processing player. There are several options available to

management: (1) increase its associate, Changshu Everbright; (2)

acquire its outsourcing partner, Tianjin Huaxin and other steel

processing plants; (3) venture into higher-margin steel products,

such as building automobile steel spare parts, via a joint venture.

? Factoring outsourcing and JV with Baotou into our estimates.

Given its strong growth momentum and adding the contribution

from its outsourcing partner and Baotou venture, we raise our

earnings estimates by 1.6% for FY07 and 4.6% for FY08.Factoring outsourcing and JV with Baotou into our estimates.

Given its strong growth momentum and adding the contribution

from its outsourcing partner and Baotou venture, we raise our

earnings estimates by 1.6% for FY07 and 4.6% for FY08.

? We raise our target price to S$2.50. We reiterate our

Overweight rating and raise our Dec. ?07 price target to S$2.50

based on our DCF valuation (WACC at 11% and terminal growth

of 1%). Key risks to our price target are: (1) Susceptibility to steel

and zinc raw material fluctuations; (2) execution of its high

growth strategy; (3) leveraged financials.We raise our target price to S$2.50. We reiterate our

Overweight rating and raise our Dec. ?07 price target to S$2.50

based on our DCF valuation (WACC at 11% and terminal growth

of 1%). Key risks to our price target are: (1) Susceptibility to steel

and zinc raw material fluctuations; (2) execution of its high

growth strategy; (3) leveraged financials.