UBS upgraded Baihong Industrial's (2299.HK) rating from selling to neutral. The stock's performance has been weak since listing (2011/5/18) and is currently 16.0% lower than its initial public offering price of HK$5.18.

UBS said that it is currently unable to take into account the risk that earnings per share expectations will be further lowered due to the worsening macroeconomic environment, but the bank believes that the current valuation has already taken into account the main risk.

From a business perspective, UBS still has a positive view on Baihong Industrial. More than 60% of the company's revenue comes from differentiated products, which have higher profit margins than ordinary yarn; the bank kept Baihong Industrial's target price unchanged at HK$4.60.

The stock rose 1.16% yesterday to close at HK$4.35.