Yongfeng Gold Securities believes that it is reasonable for Honglin Technology (1087.HK) to enjoy a predicted price-earnings ratio of 13 times in FY10. The corresponding target price is HK$3.17. This is based on the predicted profit of RMB 0.21 per share in FY10.

According to the bank, Honglin's advantage is that it dominates the business of signal line components, power line components, wires and cables, signal transmission lines and cables. The company has strong R&D capabilities, but the risk is that it is greatly affected by changes in the global economic cycle. The company mainly relies on several large customers, and a large part of its revenue comes from these large customers.

HongLin Technology was listed on the first day and closed at 2.42 yuan for the full day, down 13.57% from the prospectus price of 2.8 yuan.