After Shengli Pipeline announced that it expected its comprehensive profit to fall by 50% in the first half of the year, Macquarie issued a report downgrading Shengli Pipeline from "neutral" to "outperforming the market" with a target price of 1.2 yuan to reflect the price-to-earnings ratio of 9 times earnings in the coming year.

Macquarie reported that Victory Pipeline said that due to the continued tightening policy on the mainland, Macquarie believes that sales of SSAW pipelines for some infrastructure and pipeline projects will fall by 20 to 30 per cent, while sales next year will remain at expected levels this year, and that gross profit margin per tonne of SSAW pipeline will fall by 20 to 30 per cent per tonne.

At the same time, Macquarie said that the management of Shengli Pipeline said at the end of April that the group's expansion plan had been delayed by three to six months, so the bank also cut its profit by 27%.

In view of this, Macquarie expects Victory Pipeline to earn 198 million and 481 million yuan this year and next, 8 cents and 19.3 cents per share, 9.4 per cent and 20 per cent return on equity.

Victory Pipeline fell 16.67% yesterday to close at HK $1.70.