Dahua gave CITIC Resources (1205.HK) a purchase rating, with a target price of HK$2.50.

Dahua Jixian believes that the impact of the spin-off of CITIC Resources' manganese subsidiary CITIC Manganese's listing on profits was neutral, even though CITIC Manganese contributed 20% of net profit in the first half of 2010.

Dahua said that after CITIC Manganese completes its initial public offering (IPO), the shareholding ratio of CITIC Resources will be diluted to 39.3%. Despite the dilution effect, the CITIC Manganese Public Offering will bring investment income of at least HK$1.85 billion to CITIC Resources.

Dahua believes that CITIC Manganese's business prospects will be better after an independent listing, because it is supported by the IPO to raise capital; due to pressure from minority shareholders, the company will also be encouraged to perform better.

According to contract details seen by the Dow Jones News Agency, CITIC Manganese plans to raise up to 266 million US dollars and go public in Hong Kong on November 18.

CITIC Resources fell 2.3% yesterday to close at HK$2.12.