Daming International, a large independent Chinese stainless steel processing company, is in the process of offering 250 million shares, 90 per cent international placement and 10 per cent public offering. The share price ranges from 2 to 2.70 yuan, with a median of 2.35 yuan. The net fund raised is about 532 million yuan.

Yu Junming, an analyst at Jinghua Mountain, said that Daming is the largest stainless steel processing company in the mainland, with an annual production capacity of 736000 tons. The company purchases different steel plates and then processes them into various shapes and sizes according to customer requirements. The company's interest rate largely depends on the price of nickel. Although the valuation is not expensive, it holds a "neutral" view of the stock because of its low profit visibility.

Yu Junming also said that Daming's mid-term gross profit margin and net profit margin were only 4.5 per cent and 2.1 per cent respectively, while raw material stainless steel accounted for 98.9 per cent of sales cost and 94.5 per cent of income during the period. Management expects a profit of not less than 190 million yuan for the whole of 2010, which means a profit of 104 million yuan in the second half of the year, a year-on-year decline of 27%, which may be due to a shrinking gross margin.

Yu Junming pointed out that Daming's industry is fierce and the industry threshold is low. although demand weakens, with the expansion of production capacity, Daming's sales increased by 6.9% in 2008 and further expanded by 23% to 420000 tons in 2009. although China's largest stainless steel processor, compared with China's total stainless steel consumption of 8.22 million tons in 2009, the company's market share is only about 5%, while there are many small competitors in the stainless steel industry. Including industrial and commercial and logistics operators In addition, there are few or almost zero technical access barriers to stainless steel processing, there are no patents, copyrights or any other intellectual property rights, and potential competitors do not need older technologies to enter the market.