Citi published a report stating that the initial rating of Pearl River Steel Pipe was set as a purchase, with a target price of HK$4.20. According to the report, China will spend huge sums of money to build oil and gas pipelines in the next ten years, and Pearl River Steel is likely to benefit from this. Industry growth will be driven by natural gas pipeline construction. 60%-80% of the new pipelines added in 2010-2020 will be main line pipelines. The bank believes that China also needs to build quite long-distance feeder pipelines and urban gas networks. The total tonnage of steel required is 3.8 times that of the main pipeline. The business cycle of Pearl River Petroleum and Natural Gas Steel Pipeline followed the trend of oil prices, but it was delayed by a long period of time. This is because it takes time to adjust capital expenditure for large-scale infrastructure projects. The expected price-earnings ratio for the 2011 fiscal year corresponding to the current stock price is 5.7 times. The bank believes that the Pearl River oil and gas steel pipe contains value and has huge potential for long-term growth. Pearl River Steel Pipe closed at HK$2.72 yesterday.