VALIN Steel Co closed 8 percent higher in Shenzhen trading yesterday on a news report that its parent seeks a Hong Kong listing and aims to double profit next year.

Its parent, Hunan Valin Iron and Steel Group, plans to raise between 8 billion yuan (US$1.2 billion) and 10 billion yuan by listing its raw material, logistics, research and development, e-commerce and financial services assets on the Hong Kong Stock Exchange, said Chairman Li Xiaowei at a local government meeting as quoted by Hunan Province-based Xiaoxiang Morning Herald yesterday.

Li was also cited as saying Valin Group targeted 19 million tons in annual steel production and 90 billion yuan revenue in 2010, compared with an 11.3 million ton output and 68.3 billion yuan revenue last year. The group is aiming to double profit to nearly 6 billion yuan next year.

Hunan Valin Steel Co surged as much as the 10 percent daily cap during trading yesterday and closed 8.1 percent higher at 7.75 yuan. The Shenzhen Composite Index gained 1.54 percent.

"The fundraising may help the group secure its raw material supply by buying further into an overseas iron ore mine," said Sun Jiqing, a Dongxing Securities Co analyst.

The Valin Group acquired a 17.3 percent stake in Australian miner Fortescue Metals Group Ltd for A$1.3 billion (US$1.1 billion) this year. The group also has set up a 1 billion yuan investment fund with China Huarong Asset Management Corp to seek mergers and acquisitions in the sector.

"The listing could better integrate its upstream raw material business and the steel-making sector, which suffered a loss in the first three quarters due to high costs," said Wang Lihua, a Xiangcai Securities Co analyst.

Valin Steel Co, the group's steel-making unit, lost 225 million yuan in January to September and estimated a full-year loss of around 220 million yuan.