Citigroup: lowers target price for CHINA LESSO (02128) to 6.2 Hong Kong dollars, concerned about the impact of soaring oil prices on gross profit margin.

Citigroup released a research report stating that it recently held an investor meeting with the management of CHINA LESSO (02128). The group's performance in 2025 fell short of expectations, combined with the recent surge in oil prices, leading the bank to take a more cautious view on its gross margin prospects. Therefore, it has lowered its profit forecast for 2026 to 2027 by 30%, reducing its target price from 7 Hong Kong dollars to 6.2 Hong Kong dollars, while maintaining a "buy" rating. However, the bank is more inclined towards companies with higher returns or better profit growth prospects in the Chinese infrastructure sector, such as ZOOMLION (01157)Hangcha Group(603298.SH)CHINA STATE CON(03311). The bank stated that despite the recent US-Iran conflict causing a surge in oil prices, the management expects that due to raw material restocking, the gross margin in the first quarter of 2026 will be on par with the latter half of 2025. This is because demand momentum has been recovering in the three months before the conflict (from October last year to January this year), with overseas channel business being the main growth driver.