According to a report published by BOCOM International, Yihe Holdings (00838-HK) is currently undergoing a difficult transition period, and it is expected that financial expenses for 2012 will reach 25.2 million yuan, dragging down performance; the rating was downgraded to “neutral”, and the target price was lowered to 0.85 yuan.

According to BOCOM, due to the company's transformation to automotive molds, it acquired and built plants to develop molds and parts for the automotive industry in Chongqing and Wuhan respectively. The additional investment was mainly bank loans. Since April, the company has signed loan agreements with Hang Seng, Bank of China Hong Kong, DBS, and HSBC respectively, adding a total of HK$720 million in loans, 1.94 times the cumulative amount of bank loans at the end of 2011. As a result, financial expenses will reach 25.2 million yuan in 2012, an increase of 192% over the previous year, which will drag down the company's performance.

According to BOCOM, it lowered the company's full-year earnings per share by 62.5% and 66.5% for this year and next two years to 0.06 and 0.07 yuan. Yihe Holdings issued an interim earnings warning earlier. Net profit for the first half of the year is expected to drop sharply by 60% compared to the same period last year.