Zhen Mingli: Strong LED demand maintains Buy rating

Zhen Mingli (1868.HK) rose 6.5% to HK$10.86, recovering some of the lost ground on the two trading days after the announcement (down 33%).

However, Industrial and Commercial East Asia maintains a Buy rating on the stock as it is expected to have strong demand for environmentally friendly LED lighting products; it is noted that the monthly production capacity of its LED bulbs will increase when the new plant is put into operation in April this year. Doubled, but strong orders still make the operating rate 100%; added that by the end of this year, the monthly capacity of LED bulbs could be further increased by 25% to 250 million. On the whole, ICBC East Asia lowered its earnings estimates for fiscal 2007 and FY08 by 12% and 11%, respectively, to reflect higher sales costs and margin pressures from rising wages. Industrial and Commercial East Asia lowered its target price from HK$19.70 to HK$15.70. The turnover was still as high as HK$114.6 million.
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