China Fire & Security (CFSG) has been recognized as the largest player in the design and installation of fire safety systems in China. Its leading position in the industry has enabled the company to win 60-70% of bids in the iron and steel industry.
However, its dependence on the iron and steel industry might slow the execution process of the projects, hampering its profitability. China Fire’s second quarter earnings per share plunged to $0.20, missing the Zacks Estimate of $0.23.
Therefore, we are downgrading our recommendation on the stock to Underperform from Neutral, and reduce our price target to $6.50 from $6.75.