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Zoomlion Slumps After Forecasting Lower Profit: Hong Kong Mover

Zoomlion Heavy Industry Science & Technology Co. (1157), China’s second-biggest construction equipment maker, fell to the lowest level in almost 19 months in Hong Kong after forecasting profit may slump as much as 80 percent.

Zoomlion declined as much as 9.8 percent to HK$7.49, the lowest price since September 2011. It was the third-worst performer on the MSCI Asia Pacific Index. The stock has dropped 34 percent this year, compared with a 4 percent fall for the benchmark Hang Seng Index.

The company, based in Changsha, Hunan province, expects first-quarter net income to fall 60 percent to 80 percent as a slower economic recovery damps demand for construction machinery. China’s economic growth unexpectedly lost momentum in the quarter, data released today showed, as gains in factory output and consumption weakened.

“It will be difficult for Zoomlion to meet its guidance of a 15 percent increase in 2013 sales,” analysts Joseph Ho and Winston Cao at Daiwa Securities Group Inc., wrote in an April 12 note. “We expect the market to remain skeptical and we now see lukewarm interest from investors to accumulate the stock.”

Daiwa lowered its recommendation on Zoomlion shares to hold from outperform.

Zoomlion said April 12 that it expects first-quarter profit, based on Chinese accounting standards, to fall to between 417.8 million yuan ($68 million) and 835.5 million yuan. That compares with a 2.09 billion-yuan profit in the year- earlier quarter, according to the statement.

The company’s profit last year missed analyst estimates as government measures to cool the property market damped demand. The machinery maker is also seeking to boost investor confidence after its shares slumped following a January report in Hong Kong’s Ming Pao newspaper that the company’s sales may have been exaggerated. Zoomlion has repeatedly denied the allegations.

China’s economy expanded 7.7 percent in the January-March period, the National Bureau of Statistics said in Beijing. That compares with the 8 percent median forecast in a Bloomberg News survey of 41 analysts and 7.9 percent in the fourth quarter.

To contact the reporter on this story: Kyunghee Park in Singapore at kpark3@bloomberg.net

To contact the editor responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net

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