Following Dahua's first purchase rating for Mongolian Mining (0975.HK), the target price was HK$13.00.

The bank said that MMC is engaged in open pit coking coal mining business at the Tavan Tolgoi deposit in South Gobi; the company owns two coal mines with a total coal reserve of 480 million tons and a mining period of 20 years.

The bank said that with the opening of the road leading to China in the second half of 2011 and the commissioning of MMC's first coal processing and washing plant, the company is expected to achieve the highest profit growth rate in the industry in 2011-13, driven by increased production and profit margins.

Dahua Jixian pointed out that the current price of MMC is equivalent to 11 times the price-earnings ratio of FY2012, the ratio of enterprise value to reserves in FY2012 was HK$15 per ton, and the ratio of enterprise value to profit before interest, taxes, depreciation and amortization in FY2012 was 8 times. The compound annual growth rate of the company's 2011-13 profit could reach 70%, the highest among coal stocks, and the company has high-quality coking coal reserves. These factors all made the stock's valuation attractive.

The stock rose 0.42% yesterday to close at HK$9.65.