CHINA LESSO (02128) experienced a significant rise of over 6%, bringing its cumulative stock price increase since the start of the year to more than 30%. At the time of writing, the stock was up 6.15%, trading at HK$6.21, with a turnover of HK$97.15 million.

According to a recent research report from Citigroup, the bank engaged with the company's CFO and deputy CFO prior to the quiet period for CHINA LESSO's financial results. Citigroup has lowered its profit forecasts for LESSO for the years 2026 to 2028 by 11% to 18%, reflecting impairments on non-core projects.

However, the report indicated that the company's core domestic business is showing signs of stabilization, with reduced drag from the residential sector being offset by robust growth in non-residential segments such as agricultural, industrial, medical, and municipal projects.

Using a valuation basis of 9 times forecasted price-to-earnings ratio for this year—which is 0.5 standard deviations above the historical average—Citigroup has correspondingly raised its target price from HK$6.5 to HK$7, maintaining a "Buy" rating.

Citigroup believes that LESSO's overseas piping business holds the potential to become a primary driver of future growth, with sales expected to surge by over 50% this year.

The bank anticipates that CHINA LESSO's core net profit for the second half of last year fell 10% year-on-year to 938 million yuan, representing a 13% decline compared to the first half, and expects the net profit margin for the latter half to have slightly decreased to 7.4% from 8.7% in the first half of last year.

Having accumulated a rise of approximately 20% recently amid positive sentiment, the bank views any potential pullback in the stock as an opportunity for market entry.