OCBC downgraded Yangzijiang to Hold from Buy after the stock ran up around 48 percent from mid-July.
“While the momentum may continue in the near term, the upside potential for the stock is diminishing,” OCBC said in a note on Wednesday.
It noted Yangzijiang’s shares are trading at 9.5 times forward price-to-earnings, above its five-year historical average of 8.8 times, and at 0.85 times price-to-book, which is around its five-year historical average of 0.9 times.
OCBC called those valuations “fair,” as the street is expecting earnings to fall 3 percent in 2019.
Yangzijiang’s share buybacks, which had started at the end of May and continued through mid-July at S$0.86 to S$0.98 per share appear to have been put on hold, OCBC noted.
The bank also pointed to some headwinds.
While the weaker Chinese yuan was a plus for the company, higher steel prices could weigh on margins, it said.
“After a significant fall in the first quarter of this year, prices have been creeping up and are now close to this year’s highs,” OCBC said.
But it raised its fair value for Yangzijiang shares to S$1.32 from S$1.23.
The stock was up 1.59 percent at S$1.28 at 14:24 SGT.