Citi downgraded the rating of Hengding Industrial (1393.HK) from holding to selling, and lowered the target price from HK$4.60 to HK$2.00. Previously, it lowered its earnings forecast per share for the 2012-2013 fiscal year by 20%-30% to reflect the assumption that the price of coking coal fell by 9%-14% in the context of a slowdown in steel production growth in China's 2012-2013 fiscal year. Citi believes that due to the large scale of the business of fertilizer coal and one-third of coking coal, Hengding Industrial is more likely to be affected by the slowdown in steel production growth. As the credit market became tighter, Citi also adjusted the stock's risk rating from low to high to reflect concerns surrounding the company's financial issues. Citi said that although Hengding Industrial has plans to increase production in the next three to five years, the bank believes that falling coking coal prices and rising financial expenses will offset the impact of production growth in the 2012-2013 fiscal year until the company can cut financial expenses. According to Citi, it favors Fukuyama Energy (0639.HK). However, the bank added that despite weak fundamentals, if Hengding Industrial announced better than expected operating results for the third quarter of fiscal year 2011, then there is still room for the stock to rise in the short term. Hengding Industrial plummeted 10.5% throughout the day to close at HK$2.05.