Q3 earnings improved slightly.
   
Net profit rose slightly QoQ to Rmb16m in Q3, which we believe was largely in linewith market expectations.
   
Spandex struggled; MDI could be a new area of focus.
   
Spandex struggled in Q2, with sales volume and prices up slightly. We expect MDIprices to rise substantially in Q4, which could cause a sequential profit pull-back.
   
Full-year earnings forecast is lower than we expected.
   
The company released its full-year earnings forecast, expecting net profit to be Rmb50-60m, lower than our full-year estimate. That is mainly because the aramid (for defenceapplications) business is progressing more slowly than we expected and toughcompetition in the aramid (for industrial use) market is leading to lower profit.
   
Valuation: Maintain Sell.
   
We maintain our Sell rating. Our price target is based on 3x 2017 P/B.