Li Heng

UOB KayHian starts Li Heng Chemical Fibre Technologies at Buy with $0.845 target, implying 5.6X FY08 P/E, 5.2X FY09 P/E. Notes, maker of high-end nylon fibre products emerged as one of biggest players of its kind in China, with annual production capacity of 92,400 tons in '07, earnings CAGR of 107.6% over FY04-07. Expects company to benefit from sound domestic presence, strong brand image, economies of scale, high bargaining power. But forecasts lower earnings CAGR of 21.3% over '07-'10, based on assumption gross margin will gradually weaken due to rising raw material costs, more intense competition.