Citigroup - Stretched vs. Stressed: Mid-cycle Valuations

· 17 out of 34 (50%) covered stocks are trading above our mid-cycle valuation. We compare mid-cycle EBITDA/t with current share prices for our Asian metals & mining coverage. Regionally, mining is the most stretched of the sectors with 58%of stocks above mid-cycle vs. 46% in steel and 44% in cement. The median valuation is a 1% premium.

· Median premium +27%, median discount -15%. The median premium of stocks trading above mid-cycle is 27%, while the median of those below is -15%. This implies that the stocks that are up are up more relative to those at a discount.

· 31% of China coverage is trading above mid-cycle valuation.

· A gauge rather than an absolute indicator. We conduct this analysis to provide a gauge of relative valuation of sectors versus our mid-cycle assumptions. We acknowledge that valuations and fundamentals may be of little consideration at present. However, this analysis should be useful to bulls and bears alike.