Jiutian Chemical Group (S$0.445) - Improving macro-environment Recent DMF prices have risen faster than our expectations, as DMF producers successfully raised prices to pass on higher costs of production to customers. On the other hand, methanol prices (key raw material) have started to decline in the past two weeks. As such, we expect Jiutian’s gross margins to improve in 4Q07. We have raised our FY07-08 EPS forecasts by 18-33% to factor in higher DMF ASPs and lower methanol cost assumptions. Accordingly, our target price climbs to S$0.77 from S$0.75, still based on DCF valuation (WACC 14%, LTG 1.5%). Maintain Outperform. We see catalysts from a good set of 4Q07 numbers in Feb 08, and potential M&A announcements.
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