Upturn in the Shipping Industry, Sustained Profit Recovery, Maintain Accumulate

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1 Sinotrans Shipping (368 HK) Shipping & Logistics Sector Equity Research 股 票 研 究 公 司 报 告 证 券 研 究 报 告 航运物流行业 Equity Research Report Company Report Company Report: Sinotrans Shipping (368 HK) 公司报告 : 中外运航运 (368 HK) Spencer Fan 范明 (86755) fanming@gtjas.com Upturn in the Shipping Industry, Sustained Profit Recovery, Maintain Accumulate 航运景气仍向上, 盈利复苏可延续, 维持 收集 217 results were in line. Revenue rose 19.6% YoY to US$1,6 mn, while shareholders profit reversed from a loss to US$32.27 mn. Continued recovery of dry bulk freights was the main reason for profit reversal. Dry bulk shipping industry likely to sustain recovery. Due to insufficient building orders from the past 3 years, we estimate supply growth of the industry in 218/219 to be 2.%/1.5%, outperforming Clarksons' projected demand growth of 3.8%/3.%. Iron ore imports from China are expected to stay robust. The Company is expected to maintain its 8%/2% dry bulk capacity for price locked-in/trade-on-spot. We estimate 218 revenue from the dry bulk segment to grow at around 16.5% YoY. Sino-U.S trade war should have little impact on container income. The Company operates intra-asia routes only; volume has been stable due to complimentary features of trade lines. As average box price has stabilized, we expect Sinotrans Shipping's container revenue to grow 4.1% YoY in 218. LNG JV launched in 218 and profit may reach US$3 mn/year by 22. By 1Q18, two LNG carriers had been delivered and put into operation for the Yamal project, with the remaining three LNG carriers to be delivered in 1Q19. Accordingly, each vessel may contribute US$6 mn/year before-tax profit. Adjust TP to HK$2.36 and maintain "Accumulate" rating. Synergy with CMES could be a catalyst for Sinotrans Shipping's share price. The Company's valuation has a high safety margin against its net book value, with upward potential. Our TP reflects.66x/.65x/.64x PBR. 217 年业绩符合预期 公司收入同比升 19.6% 至 1.6 亿美元, 股东净利扭亏至 3,227 万美元 公司实现扭亏为盈主因是干散货航运市场运价出现的持续性改善所致 干散货运输大概率继续复苏 考虑过去 3 年较少的造船订单量, 我们预计行业 218/219 年运力供给增速为 2.%/1.5%, 好于克拉克森预测的 3.8%/3.% 需求增速 同时, 我们预 计国内的进口铁矿石量将维持强劲 公司预计维持其自有船队在锁价 / 即期市场 8%/2% 运力的配置 我们预计 218 年干散货分部收入同比增长 16.5% 中美贸易战对集运收入影响较小 公司集运航线均在亚洲, 由于货源属于互补型, 货量一 直保持稳定 由于单箱运价已经稳定, 我们预测中外运航运 218 年集运收入同比升 4.1% 液化天然气运输业务于 218 年开启, 预计 22 年开始年均可贡献 3, 万美元利润 截至 218 年 3 月, 亚马尔天然气项目的 2 艘冰级船已经交付并投入使用, 另外 3 艘预计 将于 219 年一季度交付 据悉, 每艘船每年可贡献公司税前利润约 6 万美元 Rating: Accumulate Maintained 评级 : 收集 ( 维持 ) 6-18m TP 目标价 : HK$2.36 Revised from 原目标价 : HK$2.5 Share price 股价 : Stock performance 股价表现 % of return (1.) [Table_PriceChange] Change in Share Price 股价变动 Abs. % 绝对变动 % Rel. % to HS Index 相对恒指变动 % Avg. share price(hk$) 平均股价 ( 港元 ) 1 M 1 个月 Source: Bloomberg, Guotai Junan International. 3 M 3 个月 HK$2.4 (2.) Apr/17 Jul/17 Oct/17 Jan/18 Apr/18 HSI index Sinotrans Shipping 1 Y 1 年 (14.) (8.2) 12.8 (1.1) (2.4) (13.6) 中中外外运航输运 调整目标价至 2.36 港元并维持 收集 评级 我们认为公司与招商轮船间的协同效应有望成 为公司股价的催化剂 考虑净资产账面价值具备较高安全边际, 公司的估值水平具备进一 步上行空间 我们的目标价对应.66 倍.65 倍以及.64 倍的 218 至 22 年市净率 [Table_ Year End Turnover Net Profit EPS EPS PER BPS PBR DPS Yield ROE 年结收入股东净利每股净利每股净利变动市盈率每股净资产市净率每股股息股息率净资产收益率 12/31 (US$ m) (US$ m) (US$) ( %) (x) (US$) (x) (US$) (%) (%) 216A 841 (23) (.58) n.a. (4.5) (12.) 217A 1, n.a F 1, F 1, F 1, [Table_BaseData] Shares in issue (m) 总股数 (m) 3,992.1 Major shareholder 大股东 Sinotrans & CSC 68.2% Market cap. (HK$ m) 市值 (HK$ m) 8,143.9 Free float (%) 自由流通比率 (%) month average vol. 3 个月平均成交股数 ( ) 8,441.8 FY18 Net gearing (%) FY18 净负债 / 股东资金 (%) net cash 52 Weeks high/low (HK$) 52 周高 / 低 (HK$) 2.73/1.57 FY18 Est. NAV (HK$) FY18 每股估值 ( 港元 ) 3.2 Source: the Company, Guotai Junan International. See the last page for disclaimer Page 1 of 8

2 Sinotrans Shipping s ( the Company ) 217 results were in line with expectations. In 217, the Company recorded total revenue of US$1.6 bn, up 19.6% YoY. 217 shareholders' profit was US$ mn, reversing from a loss of US$ mn in 216. Sinotrans Shipping announced final dividend of US$38 cents per share, corresponding to a 47.6% dividend payout ratio, higher than our expectation. This move demonstrated the management's confidence on Sinotrans Shipping's future cash flow to some extent. Based on calculations, the Company recorded 2H17 shareholders' profit of US$24 mn, benefiting from continued recovery of the dry bulk shipping market. We believe that the global shipping market, represented by dry bulk shipping and container shipping, bottomed out after 216. Trending from the recovery in 217, BDI is still in its early stages of recovery and Sinotrans Shipping's profitability will enhance. Figure-1: BDI Component Indexes Performance BCI: Capesize BPI: Panamax BSI: Supramax BSI: Handysize 4, 3,5 3, 2,5 2, 1,5 1, 5 Figure-2: BDI and the Company's Breakeven Level 2,5 2, 1,5 1, 5 BDI Sinotrans Shipping's breakeven level Source: The Baltic Exchange, Guotai Junan International. Source: The Baltic Exchange, the Company, Guotai Junan International. The dry bulk segment improved amid rising shipping freights, mixed with a well-structured vessel portfolio. The segment s 217 revenue grew 32.7% YoY to US$489.1 mn, slightly lower than our expectation. Average age of self-owned vessels reduced from 6.38 years in 216 to 6.2 years at the end of 217, indicating the Company s high efficiency in optimizing fleet portfolio. Average daily charter hire/time charter equivalent ( TCE ) rate of self-owned vessels was US$1,458, up 6.4% YoY. By March 218, Sinotrans Shipping s dry bulk fleet s deadweight tonne ("DWT") capacity totaled 6.64 mn tonnes, of which, 5% capacity was chartered in. Regarding the remaining 5% of self-owned vessels, Sinotrans Shipping expected 8% of the self-owned capacity to be price locked-in for 218, while these locked-in freights guarantees relatively stable profit margins. In our opinion, locked-in shipping prices (over spot market average) guarantees Sinotrans Shipping s stable margins, while the flexible fleet structure also allows the Company to achieve a certain amount of exposure to arbitrage activities in the spot. So far, Sinotrans Shipping's dry bulk operating structure and strategy are forward-looking, and we expect the segment's revenue to increase 16.5% YoY in 218 amid an overall upturn in industry trend. Table-1: Dry Bulk Fleet Delivery and Capacity Breakdown of Sinotrans Shipping as at March 31, 218 Sinotrans Shipping's Fleet: Self-owned Chartered-in Controlled Vessels Orderbook No. DWT( ) TEU No. DWT( ) TEU No. DWT ( ) TEU Capesize 9 1, ,788 - Panamax , ,19 - Handy & Handymax ,74-6 Dry Bulk Carriers 36 3, , ,637-6 Container vessels , , ,365 LNG Total vessels 51 3,686 16, ,628 25, ,314 42,365 1 Source: the Company. See the last page for disclaimer Page 2 of 8

3 After bottoming out in 217, the dry bulk shipping market might continue to recover gradually in 218. We believe that Sinotrans Shipping will continue to benefit from industry recovery in 218. Benefiting from order digestion and vessel scrapping over the past 3 years, the ratio of orders-on-hand/existing capacity had reached a historical low (7.%) of the dry bulk shipping industry in March 218. Due to the slow pace of vessel delivery, we expect 218/219 dry bulk shipping capacity YoY growth to be 2.%/1.5%. Considering the upcoming launch of the 219 and 22 Ballest Water Convention and tightened regulations of using low-sulfur fuel, we expect the dry bulk shipping industry's capacity growth to be more restrained after 218. On the other hand, benefiting from global economic growth, we estimate 218/219 dry bulk shipping demand growth to be 3.8%/3.%, exceeding growth from the supply side. Dry bulk shipping demand mainly consists of iron ore (around 28.4%), coal (23.6%), grains (1.1%) and small bulks (37.9%), while iron is normally the most changeable factor. We expect China's iron ore imports to grow moderately in 218 amid the market's cautiously optimistic expectation on China's 218 real estate infrastructure investment. Figure-3: Capacity of Dry Bulk Vessels and YoY Growth Mn DWT Global Capacity YoY Changes 9 15.% % % 12.2% % % 5 1% 8% 4 5.8% 7% 3 4.3% 6% 2 2.5% 3.% 4% 1 2% 2.1% 1.7% % E Source: Clarksons, Guotai Junan International. Figure-4: Dry Bulk Shipping Capacity Changes Mn DWT Old Vessels' Demolition New Vessels' Delivery Demand YoY % Supply YoY % E 219E Source: Clarksons, the Company, Guotai Junan International. 15% 1% 5% % -5% The market believes that the recent heating up of Sino-U.S. trade relations might affect Sinotrans Shipping's container shipping business, while we expect the segment to remain stable in 218 due to the nature of fixed routes. First of all, Sinotrans Shipping's container shipping lines are all intra-asia, and the Company s underlying transported goods are complementary to Japan, Korea, and Australia (e.g. electronic devices and primary processed goods). Benefiting from robust cargo-trading demand, shipping volume of Sinotrans Shipping Containers grew 14% YoY in 217, the highest growth rate in the past 3 years. Clarksons predicted that demand for intra-asia container shipping will increase 6.3%/6.1% YoY during 218/219, higher than projected global average growth of 5.%/4.8%. For intra-asia lines, Sinotrans Shipping provides high-frequency and port-to-port services tailored to customer needs. Meanwhile, competition patterns on each route has been relatively stable. In 217, the Company ranked No.1 in China-Taiwan routes in terms of market share and No.3 in China-Japan routes in terms of market share. After 3 consecutive years of freight decline ( ), the Company's container box average revenue was US$329/TEU ("ASP"), the same as in 216, and we believe that intra-asia container shipping ASP bottomed out. Recent intra-asia freights performed strongly, CCFIs in Japan, Australia, and Southeast Asia improved during 1Q18. For Japan-bound routes (Osaka, Kansai, Tokyo and Kanto), Shanghai-Kansai/Kanto's freights increased YoY by 1.%/1.4% by the end of second week in April 218. For the Australia and New Zealand-bound routes, SCFI surged 96.7% YoY by the end of second week in April 218. Overall, we expect Sinotrans Shipping's container segment revenue to grow 4.1% YoY in 218. See the last page for disclaimer Page 3 of 8

4 Figure-5: SCFI Intra-Asia Container Shipping Freights SCFI: Japan Kansai SCFI: Japan Kanto SCFI: Australia & NZ, Melbourne 1,5 SCFI: Korea Bushan Figure-6: CCFI Intra-Asia Container Shipping Freights CCFI: Southeast Asia CCFI: Japan CCFI: Korea CCFI: Australia & NZ 1,2 1,1 1, 1, Source: Shanghai Shipping Exchange, Guotai Junan International. Source: Shanghai Shipping Exchange, Guotai Junan International. The LNG joint venture ( JV ) is expected to gradually contribute profit starting 218. By March 217, two LNG carriers had been delivered and put into operation for the Yamal project. The remaining three LNG carriers are expected to be delivered in 1Q19. The total cost of the five carriers was US$1.59 bn, of which, 15% was paid by the parent company Sinotrans&CSC, while Sinotrans Shipping contributed US$75.62 mn, holding 25.5% of the profit share. The Company signed a 3-year long-term lease agreement with the Yamal project. The locked-in freight is not affected by the spot market and guarantees reasonable and stable returns. According to Sinotrans Shipping's guidelines, the JV may contribute shared profit of US$3 mn/year based on the contract value. We expect the LNG segment to contribute investment income of US$12 mn in 218. Since the remaining three vessels are expected to start contributing to revenue in 2Q19, the LNG segment is expected to contribute approximately US$26 mn in investment income in 219. After 22, investment income from the JV will become stable at around US$3 mn/year according to the timeline. Figure-7: Yamal LNG Project Share Breakdown Figure-8: LNG Profit Contribution Projection US$ Mn LNG JV Profit Contribution YoY Dynagas, 48.5% CLNG (5%:5% owned by COSCO SHIPPING Energy(626 SH/1138 HK)and China Merchants Energy Shipping(61872 SH), 26% % 3 15% 14% 12% 1% 8% 6% 4% 2% Sinotrans Shipping, 25.5% 218E 219E 22E % Source: the Company, COSCO SHIPPING Energy (626 SH/1138 HK), Guotai Junan International. Source: the Company, Guotai Junan International. Revise up earnings estimates as we remain optimistic on dry bulk shipping recovery and LNG contribution. Traditionally, dry bulk shipping s off-season begins with the Chinese New Year and lasts until April. The industry s peak season happens in the second half of the year, while BDI and its sub-indexes rise at the same time. As we stated above, we estimate dry bulk segment revenue to grow moderately at 16.5% YoY in 218. Earnings contribution in the initial stage of the Yamal LNG JV may fluctuate but is expected to remain stable afterwards. After the gradual delivery of LNG carriers, Sinotrans Shipping s capital expenditure pressure will be slightly reduced. Combining the expectation of rising fuel costs and other expenses, we project Sinotrans Shipping s overall operation costs to increase YoY by 9.7%/8.3% in 218/219. In summary, we revise up Sinotrans Shipping s earnings estimates by 8.7% and 7.6%, respectively. Corresponding EPS estimates for are US$.11, US$.14, and US$.16, respectively, reflecting YoY improvement of 34.7%, 28.7% and 11.9%. See the last page for disclaimer Page 4 of 8

5 Table-2: Change in Earnings Estimates USD in million FY18F FY19F FY2F New estimates Revenue 1,12 1,212 1,311 EBIT Net Income EPS (US$) Original estimates Revenue 1,238 1,333 n.a. EBIT n.a. Net Income 4 52 n.a. EPS (US$).1.13 n.a. % change Revenue -9.5% -9.1% n.a. EBIT 6.5% -24.2% n.a. Net Income 8.7% 7.6% n.a. EPS (US$) 8.9% 7.8% n.a. Source: Guotai Junan International. Adjust TP to HK$2.36 to reflect Sinotrans Shipping s attractive valuation. Currently, the ultimate parent company China Merchants Group ( CMG ) owns two listed shipping companies ("Sinotrans Shipping" and "China Merchants Energy Shipping", CMES, SH) that engage in dry bulk shipping, constituting horizontal competition. In 217, CMG had successfully completed capital restructuring in its ports, highways, and logistics sectors. To our understanding, Sinotrans Shipping is expected to continue cooperating with CMES in terms of route allocation and optimization of operating costs in the next 2 years, which could become a catalyst for Sinotrans Shipping s stock price. Due to the downturn in the HK market, the Company's share price has been trading lower than its net assets for a long period of time. Up to the most recent week, Sinotrans Shipping was trading at approximately.55x 218 PBR, with relatively high safety margin. On the other hand, current Sino-U.S. trade relations is shadowing China's exports future, destabilizing expectation on Hong Kong s shipping sector profitability. Additionally, the valuation of the overall HK stock market underwent a downward adjustment recently. The expectation of uncertainty might put pressure on the shipping industry's valuation. In our view, the valuation of Sinotrans Shipping is underestimated, yet is subject to overall market pressure. As a result, we adjust TP to HK$2.36 to reflect its attractive valuation under an upturn in the dry bulk shipping environment. The TP represents.66x/.65x/.64x PBR, and 27.7x/21.5x/19.2x PER. Major risks: 1) a slowdown in dry bulk shipping recovery in 217 and beyond and 2) tariff or trade sanction escalation from the recent Sino-U.S. trade war. See the last page for disclaimer Page 5 of 8

6 Table-3: Peers Comparison PE PB ROE(%) D/Y(%) EV/EBITDA ROA(%) Company Stock Code Currency Last price 17A 18F 19F 2F 17A 18F 19F 2F 18F 18F 18F 18F HK - Listed Companies Sinotrans Shipping Ltd 368 HK HKD n.a. 1.7 Sinotrans Limited-H 598 HK HKD Cosco Shipping Energy Tran-H 1138 HK HKD n.a Cosco Shipping Holdings Co-H 1919 HK HKD Orient Overseas Intl Ltd 316 HK HKD Pacific Basin Shipping Ltd 2343 HK HKD Sitc International Holdings 138 HK HKD Simple Average Weighted Average China - Listed Companies Cosco Shipping Holdings Co-A CH CNY Cosco Shipping Developme-A CH CNY n.a. 2.3 n.a. n.a. n.a n.a. 1.2 Cosco Shipping Energy Tran-A 626 CH CNY n.a Cosco Shipping Specialized-A 6428 CH CNY n.a. 1.6 China Merchants Energy -A CH CNY n.a. 1.8 Simple Average Weighted Average Other Area - Listed Companies Ap Moller-Maersk A/S-B MAERSKB DC DKK 8,958. n.a D/S Norden DNORD DC DKK Hapag-Lloyd Ag HLAG GR EUR Kirby Corp KEX US USD n.a Golar Lng Ltd GLNG US USD n.a. n.a Teekay Corp TK US USD 8.84 n.a (1.3) 2.5 n.a. n.a. Seaspan Corp SSW US USD Ship Finance Intl Ltd SFL US USD Hyundai Merchant Marine 112 KS KRW 4,575. n.a. n.a. n.a. n.a. 1.6 n.a. n.a. n.a. n.a. n.a. n.a. n.a. Korea Line Corp 588 KS KRW 27, n.a n.a n.a Wan Hai Lines Ltd 2615 TT TWD n.a n.a. n.a n.a. 3.8 Evergreen Marine Corp Ltd 263 TT TWD n.a n.a U-Ming Marine Transport Corp 266 TT TWD n.a. n.a n.a. n.a. n.a. n.a. n.a. n.a. Yang Ming Marine Transport 269 TT TWD n.a n.a. n.a n.a. (11.7) (.7) Mitsubishi Logistics Corp 931 JP JPY 2, Mitsui Osk Lines Ltd 914 JP JPY 3, Nippon Yusen Kk 911 JP JPY 2,174. n.a Kawasaki Kisen Kaisha Ltd 917 JP JPY 2,459. n.a Simple Average Weighted Average Source: Bloomberg. See the last page for disclaimer Page 6 of 8

7 Financial Statements and Ratios Income Statement Year end 31 Dec (US$ m) 216A 217A 218F 219F 22F Total Revenue 841 1,6 1,12 1,212 1,311 -Dry bulk shipping Container shipping Others (including LNG) Proportionate Revenue Driven by JVs (2) (2) (2) (2) (2) Cost of operations and SG&A (923) (977) (1,72) (1,161) (1,245) Other operating income (164) 6 (9) (11) (19) Operating Profit (246) Interest income, net Share of profits/(losses) of JV (1) Profit Before Tax (241) Income Tax (1) (6) (8) (1) (11) Profit After Tax (242) Non-controlling Interest 13 (8) (7) (9) (1) Shareholders' Profit/Loss (23) Basic EPS (.58) Cash Flow Statement Year end 31 Dec ($US m) 216A 217A 218F 219F 22F Profit before income tax (241) Depreciation and amortization Loss (Gain) on disposal of PP&E 214 (12) Share of loss/(gain) of JCEs () 1 (12) (26) (3) Finance costs, net (5) (8) (5) (8) (5) Changes in working capital 12 9 (82) (66) (95) Interest received, net Government subsidy recognized (49) (8) Others 15 (2) 3 (39) (4) Income tax paid () (6) (8) (1) (11) Cash from Operating Activities (4) CapEx (96) (23) (26) (54) (1) Decrease in bank deposits 113 (167) (33) 6 (8) Others 118 (16) 18 (1) 1 Cash from Investing Activities 134 (26) (4) (4) (8) Dividends paid (2) (2) (13) (17) Changes in bank loans (14) (8) 35 (1) 21 Cash from Financing Activities (14) (28) 15 (23) 4 Cash at Beg of Year Net Changes in Cash 136 (84) 25 6 (79) Cash at End of Year Source: the Company, Guotai Junan International. Balance Sheet Year end 31 Dec (US$ m) 216A 217A 218F 219F 22F Property, plant and equipment 1,15 1,131 1,26 1, Investments in JCEs Other non-current assets Total Non-current Assets 1,219 1,26 1,174 1,25 1,166 Cash & Cash Equivalents Short-term bank deposits Inventories Trade and other receivables Other current assets Total Current Assets ,6 Total Assets 2,74 2,189 2,167 2,172 2,172 Trade and other payables Other current liabilities Total Current Liabilities Borrowings Other non-current liabilities Total Non-current Liabilities Total Liabilities Share capital Reserves 1,737 1,766 1,762 1,796 1,832 Total Shareholders' Equity 1,788 1,817 1,814 1,847 1,883 Minority Interest Total Equity 1,796 1,834 1,838 1,881 1,926 [Table_FinancialRatio] Financial Ratios 216A 217A 218F 219F 22F EBITDA margin (%) (22.) EBIT margin (%) (29.2) Net income margin (%) (27.3) ROA (%) (1.6) ROE (%) (12.) Current ratio (x) Quick ratio (x) Operating cash flow ratio (x) Total asset turnover (x) Fixed asset turnover (x) Total liabilities/total assets (%) Net gearing ratio (%) net net net net net cash cash cash cash cash See the last page for disclaimer Page 7 of 8

8 [Table_CompanyRatingDefinition] Company Rating Definition The Benchmark: Time Horizon: 6 to 18 months Rating Hong Kong Hang Seng Index Definition Buy 买入 Relative Performance>15%; or the fundamental outlook of the company or sector is favorable. Accumulate 收集 Relative Performance is 5% to 15%; or the fundamental outlook of the company or sector is favorable. Neutral 中性 Relative Performance is -5% to 5%; or the fundamental outlook of the company or sector is neutral. Reduce 减持 Relative Performance is -5% to -15%; or the fundamental outlook of the company or sector is unfavorable. Sell 卖出 Relative Performance <-15%; or the fundamental outlook of the company or sector is unfavorable. [Table_IndustryRatingDefinition] Sector Rating Definition The Benchmark: Time Horizon: 6 to 18 months Rating Hong Kong Hang Seng Index Definition Outperform 跑赢大市 Relative Performance>5%; or the fundamental outlook of the sector is favorable. Neutral 中性 Relative Performance is -5% to 5%; or the fundamental outlook of the sector is neutral. Underperform 跑输大市 Relative Performance<-5%; Or the fundamental outlook of the sector is unfavorable. DISCLOSURE OF INTERESTS (1) The Analysts and their associates do not serve as an officer of the issuer mentioned in this Research Report. (2) The Analysts and their associates do not have any financial interests in relation to the issuer mentioned in this Research Report. (3) Except for GREENLAND BROAD (1253 HK),KAISA GROUP (1638 HK),GUOTAI JUNAN I (1788 HK),BINHAI INVESTMENT (2886 HK),GFI MSCI A I (3156 HK),CAM SCSMALLCAP (3157 HK),ZHENRO PPT (6158 HK),LINK HOLDINGS (8237 HK),MR CSI3 ETF-R (CNY) (83127 HK),GFI MSCI A I-R (CNY) (83156 HK),Guotai Junan and its group companies do not hold equal to or more than 1% of the market capitalization of the issuer mentioned in this Research Report. (4) Guotai Junan and its group companies have not had investment banking relationships with the issuer mentioned in this Research Report within the preceding 12 months. (5) Guotai Junan and its group companies are not making a market in the securities in respect of the issuer mentioned in this Research Report. (6) Guotai Junan and its group companies have not employed an individual serving as an officer of the issuer mentioned in this Research Report. There is no officer of the issuer mentioned in this Research Report associated with Guotai Junan and its group companies. DISCLAIMER This Research Report does not constitute an invitation or offer to acquire, purchase or subscribe for securities by Guotai Junan Securities (Hong Kong) Limited ("Guotai Junan"). Guotai Junan and its group companies may do business that relates to companies covered in research reports, including investment banking, investment services, etc. (for example, the placing agent, lead manager, sponsor, underwriter or invest proprietarily). Any opinions expressed in this report may differ or be contrary to opinions or investment strategies expressed orally or in written form by sales persons, dealers and other professional executives of Guotai Junan group of companies. Any opinions expressed in this report may differ or be contrary to opinions or investment decisions made by the asset management and investment banking groups of Guotai Junan. Though best effort has been made to ensure the accuracy of the information and data contained in this Research Report, Guotai Junan does not guarantee the accuracy and completeness of the information and data herein. This Research Report may contain some forward-looking estimates and forecasts derived from the assumptions of the future political and economic conditions with inherently unpredictable and mutable situation, so uncertainty may contain. Investors should understand and comprehend the investment objectives and its related risks, and where necessary consult their own financial advisers prior to any investment decision. This Research Report is not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation or which would subject Guotai Junan and its group companies to any registration or licensing requirement within such jurisdiction. 218 Guotai Junan Securities (Hong Kong) Limited. All Rights Reserved. 27/F., Low Block, Grand Millennium Plaza, 181 Queen s Road Central, Hong Kong. Tel.: (852) Fax: (852) Website: See the last page for disclaimer Page 8 of 8