CICC: Raise target price of CHINA LESSO (02128) to 5.9 Hong Kong dollars, last year's performance fell short of expectations.

China Securities released a research report stating that CHINA LESSO (02128) is expected to underperform in 2025. Revenue dropped by 10% year-on-year to 24.3 billion RMB, and net profit declined by 25% year-on-year to 1.26 billion RMB. The company's profit is lower than expected, possibly due to non-operating items such as impairment of goodwill, impairment of assets, exchange losses, etc. being provisioned in the second half of last year; as well as the decline in PVC raw material prices leading to a higher-than-expected drop in company sales prices. The company's overseas business may gradually contribute to additional growth points. Based on the profit forecast for 2027, the target price is raised by 40% to 5.9 Hong Kong dollars, equivalent to a forecasted PE ratio of 11 times and 6 times for 2026 and 2027, respectively, with a rating of "outperform industry". The report points out that considering the significant increase in prices of some raw materials PE/PPR for CHINA LESSO in 2026, as well as some impairment releases by the company, the earnings per share forecast for the company in 2026 is lowered by 40% to 0.48 RMB, while the earnings per share forecast for 2027 is maintained at 0.83 RMB. Considering China's investment in underground pipeline networks during the 14th Five-Year Plan period may exceed 5 trillion RMB to support the company's core business demand in the medium term; in addition to the gradual release of subsequent impairment risks by the company.