Dongying Asia proposes to sell Victory Pipeline (1080.HK) with a target price of HK $1.60, equivalent to 10 times fiscal 2011 earnings.

Previously, Shengli pipeline expected mid-2010 net profit to fall by about 50% from a year earlier, or about 72.5 million yuan, accounting for only 22% of Thomson Reuters' full-year profit forecast of 329 million yuan. Shengli Pipeline said that the government's regulatory measures led to a decline in demand for its products, but this was very disappointing because the company did not go public until December 2009. Dongying Asia Securities expects sales of spiral submerged arc welded pipes in Shengli Pipeline to fall by about 10 per cent in fiscal 2010 because of delays in domestic projects. The bank said that spirally submerged arc welded pipes are mainly used in long-distance natural gas pipeline projects with high selling prices and profit margins. Shengli Pipeline's profits are expected to fall 35 per cent to 217 million yuan in fiscal 2010 compared with the previous year.

Victory Pipeline rose 2.00 per cent to HK $2.04 on Friday.