Citi has its first sell rating on Rongsheng heavy Industries (1101.HK), with a target price of HK $1.05.

Citi said that although Rongsheng had fallen sharply recently, the stock lacked the fundamental catalyst to drive valuations higher. Citi said Rongsheng had secured record orders and succeeded in expanding its business overseas, but the bank believed that implementation risks remained and that structural headwinds in the shipbuilding industry would have a greater impact on its profits than expected.

Citi added that 30 per cent of private shipbuilders on the mainland had a tight capital chain, but industry consolidation would not significantly improve the industry environment because capacity was concentrated in state-owned and large private shipbuilders.