high quality and competitive prices of its products.

Multi-prong growth strategies to meet sustained growth in demand

has adopted an ambitious expansion plan to ride on the growing demand for

galvanised steel, which is underpinned by growing consumption in downstream

industries such as construction, automobile and home appliances manufacturing.

Increasing acceptance by overseas customers also bolsters demand for

FerroChina's products. Production capacity and revenue are forecast to grow

at a CAGR of 42% and 37% respectively in 2006-09. Earnings are expected to

grow at a CAGR of 50% in 2006-09.. FerroChina

Extracting greater value from value chain.

(M&A), FerroChina aims to expand its capacity and geographical coverage to

achieve greater economies of scale, thereby becoming the biggest galvanised

steel player in China. Upstream expansion into cold roll production will give

access to feedstock for galvanised steel production and allow FerroChina to

extract greater value from the galvanised steel supply chain.Through mergers and acquisitions

Deep discount to peers.

12.3x. Given FerroChina's higher growth rate and ROE, such a deep discount is

not justified. We assign a 2008 PE of 8x and a target price of S$2.35 to compensate

for FerroChina's aggressive expansion plan, leveraged balance sheet and

relatively short operating history. This is also supported by the our DCF valuation