(Agencies)
Updated: 2007-12-20 15:53

China National Materials Co, a cement equipment and engineering services firm, surged 42 percent above its initial public offering (IPO) price on its first trading day in Hong Kong, highlighting continued confidence in the mainland's economic outlook.

Shares of the engineering company, also known as Sinoma, were last trading at HK$6.20, up 37 percent from an IPO price of HKS4.50. The stock reached an intraday high of HK$6.38.

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The company's strong debut amid weak appetite for new listings showed investors' preference for listings backed by strong fundamentals.

Sinoma is known for its patented technology in the production of cement, called the "new dry process". It also provides services for makers of glass fiber, composite materials, synthetic crystals and advanced ceramics.

The company dominates the China market with a 90 percent share and draws nearly 50 percent of its turnover from overseas. It provides services to Asian and Middle East countries, according to securities analysts.

Risks to the company's share price performance include contracting earnings due to competition, analysts said.

Sinoma's growing global exposure poses risks for the company, which relies on the global market for a significant portion of its revenue, as it competes with well-established engineering firms, CIMB analyst Rebecca Tang said.

The company counts as competitors international firms such as FLSmidth, Polysius AG and KHD Humboldt, she said.

Among other risks to earnings growth is the appreciation of the Chinese currency, Tang said.

"It incurs higher selling and marketing expenses for its overseas projects and may experience margin contraction due to appreciation of the yuan," she said.