Dahua maintains its 3399.HK buy rating, with a target price of HK $3.80, based on a price-to-earnings ratio of 7 times forecast earnings for fiscal year 2010, a 30 per cent discount to its regional counterparts.

Dahua said that South Guangdong Logistics will benefit from the infrastructure construction boom in Guangdong Province, and the accelerated construction of highways will boost its profits. Dahua expects the material logistics business to be the first driving force, with a net profit compound annual growth rate of 30% in the 2009-2011 fiscal year. It is expected that the growth of the highway service station business will follow, and the net profit may decline by 10% in the 2009 fiscal year. Then the net profit compound annual growth rate reached 60% in the fiscal year 2010-2011. Dahua pointed out that because there was no one-time income, the net profit for fiscal year 2008 fell 6% from the previous year to 150 million yuan. The bank said the valuation of the stock was attractive, equivalent to 4.9 times forecast earnings for fiscal 2009, while regional logistics companies were valued at 10 times, with a dividend yield of 6.1 per cent for fiscal 2009, with a share price below net cash of HK $2.38.

The stock rose 5.05 per cent to HK $2.08 on Friday.