For the first time, Guoyuan Hong Kong gave Yuanhe Holdings (00838-HK) a purchase rating. The target price is HK$5.44, which is equivalent to 14.3 times that of PE in 2010 and 9.4 times PE in 2011, with room for 35.7% increase from the current price.

According to Guoyuan, in the first half of 2010, the company recorded a total operating income of HK$82 million, an increase of 66.3% over the previous year; attributable to equity holders

Net profit was HK$140 million, up 811.8% year over year. Gross margin increased 11.8 percentage points year over year to 31.1%, basically returning to pre-financial crisis levels. Of the company's turnover, sales revenue of metal stamping products accounted for 63.7%; plastic injection molding revenue accounted for 36.3%

Guoyuan also pointed out that as the world's top OA equipment manufacturers increase their investment in China, the company's trend of replacing foreign manufacturers is becoming more obvious.

Yihe Holdings rose 5.80% yesterday to close at HK$4.01.