One Belt One Road Boosts the Valuations for Truck ...One Belt One Road Boosts the Valuations for...

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Seethe last page for disclaimer of 15

Sector Report: Automobile Sector Harry Chen陈欢瑜

行业报告：汽车行业 +86 755 23976683

[email protected]

21 April 2015

One Belt One Road Boosts the Valuations for Truck Exporters 一带一路提升卡车出口商估值

China heavy truck sales are expected to decrease 20% YoY in 2015 but

to recover in 2016 and 2017. Sales of heavy trucks and medium trucks

decreased the most, down 33.7% YoY and 32.3% YoY in 1Q15, respectively.

New floor area under construction and purchase of new land

decreased13.4% YoY and 32.4% YoY, respectively, in 1Q15, which reduced

the demand for construction trucks. In addition, international trade remained

weak, which depressed the demand for logistics trucks. However, we expect

that the replacement of Yellow Plate trucks due to environmental concerns

and the upgrade of technology, including emission standard and fuel

efficiency, will support the heavy truck sales. In addition, we think the easing

of property curbs and money policies to secure economic growth will support

the recovery of heavy truck sales in 2H15. Medium to long term, the launch of

the One Belt and One Road Strategy is expected to increase the export of

construction machineries. Therefore, we expected heavy truck sales growth

to decrease 20% YoY in 2015, but to recover 8% YoY and 6% YoY in 2016

and 2017, respectively.

Investment Suggestion: Truck Exporter. HK listed truck makers are valued

at weighted average of 10.1x 2015 PE and 1.2x 2015 PB, much lower than

peers in A-share and global markets. The valuation of truck makers is lower

than PV makers due to higher uncertainty and fluctuation of profit growth. We

think the drop of truck sales is expected to narrow in 2H15 due to easing

property curbs and monetary policies to secure China economic growth. In

addition, One Belt and One Road Strategy is expected to increase

machineries and truck exports which may increase the valuations of truck

makers. Therefore, we think that the HK listed stocks of truck makers which

have strong position in truck exports, are currently undervalued.

中国重卡的销售将在 2015 年下滑 20%，但是在 2016 和 2017 年复苏。1 季度重卡和中卡

销售下滑最厉害，同比减少 33.7%和 32.3%。这主要是因为 1 季度新开工面积和企业拿地

分别同比下滑 18.4%和 32.4%，因此工程类重卡的需求下滑。而且国际贸易持续疲软，压

抑运输类重卡需求。但是我们预期黄牌车的淘汰更新，以及排放标准提高和用油效率带来

的技术更新也将支持重卡销售。而且为了保证经济增长，房地产政策和货币政策都将继续

放松，因此重卡销售将在下半年逐步复苏。中长期里来看，“一带一路”将增加工程机械

的出口。因此我们认为重卡销售将在 2015 年下滑 20%，但是在 2016 年和 2017 年同比提

高 8%和 6%。

投资建议：卡车出口商。香港上市的卡车公司，现在的估值为 10.1 倍 2015 年 PE 和 1.2

倍 2015 年 PB，比 A 股上市的和全球的其他市场低很多。而卡车公司的估值也是比乘用车

的低，主要是因为盈利不确定性高，波动较大。我们预期 2015 年下半年的卡车销售下滑

将收窄，主要是受益于房地产调控政策的放松和宽松的货币政策。再加上“一带一路”政

策将带动机械和卡车出口，让卡车公司估值重估。因此我们认为在出口占据强有力竞争位

置的卡车公司的股票当前被低估。

Rating: Outperform Maintained

评级：跑赢大市(维持)

China GDP Forecasts 中国 GDP 预测

11.3

10.7

9.5

6.9

6.6

8.4

9.9

11.9

12.4

10.4

9.99.7

10.2

9.8

9.18.9

8.0

7.4 7.4

8.07.8

7.5

7.9

7.67.4 7.5

7.3 7.3

7.0 7.0 6.9 6.9 6.8 6.9

6.0

7.0

8.0

9.0

10.0

11.0

12.0

13.0

1Q

08

2Q

08

3Q

08

4Q

08

1Q

09

2Q

09

3Q

09

4Q

09

1Q

10

2Q

10

3Q

10

4Q

10

1Q

11

2Q

11

3Q

11

4Q

11

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

3Q

14

4Q

14

1Q

15

2Q

15F

3Q

15F

4Q

15F

1Q

16F

2Q

16F

Source: National Bureau of Statistics of China, Bloomberg, Guotai Junan International,

Heavy Truck Sales Forecasts 中国重卡销售预测

5%

45%

-36%

29%

59%

12%17%

60%

-13%

-28%

22%

-4%

-20%

8% 6%

-60%

-40%

-20%

0%

20%

40%

60%

80%

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

201

5F

201

6F

201

7F

units Heavy Truck Sales YoY Growth

Source: CAAM, Guotai Junan International,

Company Name 公司名称

Code 编号

Price 股价

(HK$)

Rating投资评级

14PER市盈率

(x)

15 PER市盈率

(x)

16 PER市盈率

(x)

15 ROE 净资产收益率

(%)

15 P/B市净率

(x)

15 Yield股息率

(%)DFG 00489 HK 12.82 Accumulate 6.2 5.6 5.1 0.9 16.8 2.4 Geely 00175 HK 4.30 Accumulate 11.9 9.4 7.0 1.1 13.3 1.6 BYD 01211 HK 44.10 Accumulate 190.7 35.8 44.8 2.4 7.2 0.6 Sinotruk 03808 HK 5.51 Accumulate 16.9 14.4 12.4 0.5 3.5 1.7 Brilliance 01114 HK 14.82 Neutral 13.8 12.4 10.5 3.2 28.1 1.0 Great Wall 02333 HK 56.30 Neutral 13.5 11.1 9.6 2.8 28.5 2.7 Xiezhong International 03663 HK 1.49 Neutral 19.6 17.3 16.5 1.2 6.8 0.0 Weighted Average. 市值加权平均 Outperform 49.2 15.3 16.1 2.2 19.6 1.8

Source︰the Companies, Bloomberg, Guotai Junan International.

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INDEX

Industry Analysis ....................................................................................................... 3

China Economy Analysis ......................................................................................................... 3

China Heavy Truck Sales Analysis .......................................................................................... 6

Valuation of Truck Makers ....................................................................................................... 7

Company Analysis ..................................................................................................... 9

Vehicle Sales Analysis of Sinotruk .......................................................................................... 9

Earning Analysis for Sinotruk ................................................................................................ 11

Company Valuation for Sinotruk ............................................................................................ 13

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Industry Analysis

Chinese Economy Analysis

China’s economic growth slowed down further in 1Q15. China GDP increased 7.0% YoY in 1Q14, but down 0.3 ppt QoQ from

4Q14,in-line with market forecasts and the government expectation. China GDP grew slower in 1Q15, which reached historical

low in the past 6 years, since China economy faced more downside risks in 2015 than that of 2014. These downside risks were

from outside and inside of China. Global economy still gradually recovered from post financial crisis. Economies of emerging and

developed countries diversified significantly. Strong US dollar attracted more liquidity to flow back to US from emerging market,

which affected the economic growth of emerging market. In addition, European economy was still threatened by the bankruptcy

risks of Greek. As a result, BDI of the end of March decreased 21.6% from the beginning of the year, which suggested that

international trades remained weak and China export was affected negatively. Currently, China experienced the overlap of three

special periods, including the period for slower economic growth, the period for the contraction of structural adjustment and the

period for absorption of previous stimulation policies. Even though the new power from the economy reform grew rapidly, the

influence of such power still small which cannot offset the weakening of traditional power. According to Bloomberg’s forecasts,

China economic growth is expected to slow down to 7.0% in 2015, which is in-line with the government’s target. However, to

secure such target, we expect Chinese government to ease money and properties policies to prevent significant shortfall.

Positive PMI reading in March but recovery is still in doubt. China’s official Purchasing Managers’ Index (fiPMIfl) rose to 50.1

in March, up from 49.9 in February, suggesting an increase in manufacturing activity. A competing PMI reading released by HSBC

also rose in March to 49.6, up from 49.2 in February. (A reading of 50 or above indicates expansion, while a reading below that

level indicates contraction.) We think that the March rise in PMI provides further that manufacturing activities have bottomed out.

The different between official PMI and the HSBC PMI indicates that large manufacturing enterprises (mainly SOEs) have started

to expand their manufacturing activities, while medium and small size enterprises, most of them privately owned, lagged behind.

We believe this 50.1 PMI reading is positive for markets, which still appear doubtful of recovery. Though we don’t expect a big

stimulus, policy easing is most likely to continue as growth recovery is not solid yet.

China money supply (M2) growth continued to drop in the end of March. China money supply M2 (including saving deposits,

money market mutual funds and other time deposits)in the end of March increased only 11.6% YoY, which 0.9 ppt slower than

February. The M2 growth was worse than market expectation and lower than the government’s target which was mainly due to

large drop of funds outstanding for foreign exchange. Even though central bank has already cut interest rate in 1Q15, further

reserve requirement ratio cut is required to maintain easing monetary environment to prevent hard landing of China economy.

Property curbs are expected to ease further to secure stable economic growth in 2015. China fixed assets investment

(fiFAIfl, excluding rural area) increased 13.5% YoY to RMB 7,751 billion in 1Q15. The FAI growthof 1Q15 decreased 4.1 ppt YoY

and 0.4 ppt from previous first 2 months, which was mainly affected by the cooling down of property investment in China which

accounted for 21% of FAI in 1Q15. Property investment in China increased only 8.5% YoY to RMB1,665 billion in 1Q15, down 7.8

Figure-1:China GDP Forecast, 1Q08-2Q16F Figure-2: Official PMI and HSBC PMI

11.3

10.7

9.5

6.9

6.6

8.4

9.9

11.9

12.4

10.4

9.99.7

10.2

9.8

9.18.9

8.0

7.4 7.4

8.07.8

7.5

7.9

7.67.4 7.5

7.3 7.3

7.0 7.0 6.9 6.9 6.8 6.9

6.0

7.0

8.0

9.0

10.0

11.0

12.0

13.0

1Q0

82Q

08

3Q0

84Q

08

1Q0

92Q

09

3Q0

94Q

09

1Q1

02Q

10

3Q1

04Q

10

1Q1

12Q

11

3Q1

14Q

11

1Q1

22Q

12

3Q1

24Q

12

1Q1

32Q

13

3Q1

34Q

13

1Q1

42Q

14

3Q1

44Q

14

1Q1

52Q

15F

3Q15

F4Q

15F

1Q16

F2Q

16F

45

46

47

48

49

50

51

52

53

54

55

Jan 11

Jun 11

Nov 11

Apr 12

Sep 12

Feb 13

Jul 13

Dec 13

May 14

Oct 14

Mar 15

Offical PMI HSBC PMI

Source: National Bureau of Statistics of China, Bloomberg, Guotai Junan International.

Source: National Bureau of Statistics of China, HSBC, Guotai Junan International.

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ppt YoY, which was significant drop in growth. This was mainly because that the property market in China has completed its

Golden Age and entered the Silver Age due to oversupply of commodity houses. New house sales decreased9.2% YoY in 1Q15

and selling price of new houses decreased gradually MoM in the last 6 months. As a result, property developers were cautious to

purchase new land and start new projects. In 1Q15, new-floor-space started and purchased new lands decreased 18.4% YoY and

32.4% YoY, respectively. The slowed growth in property investment has affected China economy significantly. Therefore, we

expect property curb to ease further to secure stable economic growth in 2015.

Mining activities continued to slow down in 1Q15. Since China economy growth slowed down, electricity consumption

increased only 2.6% YoY in 1Q15, 1.8 ppt lower than that of 1Q14. Mining activities, including electricity consumption in mining

sector and fixed asset, which both decreased 2.1% YoY and 2.6% YoY in the first 2 months of 2015. As a result, transportation of

coal by railway dropped 8.4% YoY in 1Q15 which has significant impacts on the demand for mining trucks and cargo trucks. We

expect mining activities to remain weak in the rest of 2015.

International trade dropped 7.2% YoY in 1Q15, worse than expected. According to China Custom, international trade value

adjusted for the effects of Spring Festival, including export and import, decreased 7.2% YoY in 1Q15, worse than expected.Export

value increased 1.2% YoY while import value dropped 17.3% YoY in 1Q15. Export to Japan remained weak while export to

emerging countries increased rapidly in 1Q15. Domestic demand weakening and commodities price decreased significantly

in 1Q15, which negative affected import trade. We expect international trade to remain weak in the rest of 2015.

Highway cargo traffic showed sign of weakening. Highway cargo volume increased 6.4% YoY in 1Q15, but down 6.1 ppt from

the previous 2 months of 2015, which suggested that the weakening of international trade started to affect highway cargo traffic.

Even though the development of e-commerce in China increased rapidly which boosted the higway cargo traffic, we expect

Figure-3: China Money Supply (M2) Growth Figure-4:MonthlyChina FAI Growth

8

9

10

11

12

13

14

15

16

17

18

Jan 11

Jun 11

Nov 11

Apr 12

Sep 12

Feb 13

Jul 13

Dec 13

May 14

Oct 14

Mar 15

%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Jan

11

Jun

11

Nov

11

Apr

12

Se

p 12

Fe

b 1

3

Jul 1

3

Dec

13

May

14

Oct

14

Mar

15

Source: The People’s Bank of China, Guotai Junan International. Source: National Bureau of Statistics of China, Guotai Junan International.

Figure-5:Property Investment and Sales of Property Figure-6:Electricity Consumption and Mining Activities

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

Jan

11

Ap

r 11

Jul 1

1

Oct

11

Jan

12

Ap

r 12

Jul 1

2

Oct

12

Jan

13

Ap

r 13

Jul 1

3

Oct

13

Jan

14

Ap

r 14

Jul 1

4

Oct

14

Jan

15

Investment in Property New Floor Space StartedSales of Commodity House

-15%

-5%

5%

15%

25%

35%

45%

Jan

11

Jun

11

No

v 1

1

Ap

r 12

Se

p 12

Feb

13

Jul 1

3

De

c 1

3

May

14

Oct

14

Ma

r 1

5

FAI in Mining Electricity Consumption in MiningChina Electricity Consumption Daily Coal Shipment by Railway

Source: National Bureau of Statistics of China, Guotai Junan International. Source: National Bureau of Statistics of China, Guotai Junan International.

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highwaycargo traffic to increase slowly in 2015.

Logistics profitability recoverd and investment in logisitcs continued to expand. According to China logistics information

center, logistics production index (fiLPIfl) increased 3.1 ppt MoM to 58.0, since business activities resumed after Spring Festival. (A

reading of 50 or above indicates expansion, while a reading below that level indicates contraction.) Both LPI (new order) and LPI

(forward) suggested that logistics business continued to expand. LPI (operating profit) recovered from 43.2 in February to 50.3

March which suggested that the profitability of logistics business recovered in March. Therefore, fixed asset investment speeded

up in March. We expect logistic business to expand further due to rapid growth of e-commerce.

Figure-7:China Import and Export Trade Growth Figure-8: China Highway Cargo Traffic

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

Jan

11

Jun

11

No

v 11

Ap

r 12

Sep

12

Feb

13

Jul 1

3

De

c 13

May

14

Oct

14

Mar

15

Import and Export Trade Import Export

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

Jan

11

Jun

11

No

v 1

1

Ap

r 12

Se

p 1

2

Fe

b 1

3

Jul 1

3

De

c 1

3

Ma

y 14

Oct

14

Mar

15

Highway Cargo Traffic

Source: China Custom,Guotai Junan International. Source: National Bureau of Statistics of China, Guotai Junan International.

Figure-9:China Logistics Production Index: Figure- 10: China Logistics Production Index: Operation

Profit and Fixed Asset Investment

40.0

45.0

50.0

55.0

60.0

65.0

70.0

75.0

Oct

11

Ma

r 1

2

Au

g 1

2

Jan

13

Jun

13

No

v 1

3

Ap

r 14

Se

p 1

4

Feb

15

LPI LPI: Forward LPI: New order

40.0

45.0

50.0

55.0

60.0

65.0

Oct

11

Ma

r 1

2

Au

g 1

2

Jan

13

Jun

13

Nov

13

Ap

r 14

Se

p 1

4

Fe

b 1

5

LPI: Operation Profit LPI: Fixed Asset Investment

Source: CAAM, Guotai Junan International. Source: CAAM, Guotai Junan International.

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China Heavy Truck Sales Analysis

Truck sales slumped 19.4% YoY in 1Q15. China commercial vehicles (fiCVfl) sales decreased 19.4% YoY in 1Q15. Truck sales

(including incomplete vehicles and chassis) dropped 22.6% YoY while bus sales increased 3.9% YoY. The rapid drop of truck

sales was mainly due to slower growth of China economy and fixed asset investment, as well as the decrease of international

trade.

Figure-11: China CV Sales and Sales Growth Figure- 12:China Truck Sales and Sales Growth

-40%

-20%

0%

20%

40%

0

100,000

200,000

300,000

400,000

500,000

600,000

Jan

11

Mar

11

May

11

Jul 1

1S

ep

11N

ov 1

1Ja

n 1

2M

ar 1

2M

ay 1

2Ju

l 12

Se

p 12

Nov

12

Jan

13

Mar

13

May

13

Jul 1

3S

ep

13N

ov 1

3Ja

n 1

4M

ar 1

4M

ay 1

4Ju

l 14

Se

p 14

Nov

14

Jan

15

Mar

15

units CV Sales CV Sales Growth

-40%

-20%

0%

20%

40%

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

Jan

11

Mar

11

May

11

Jul 1

1S

ep

11N

ov 1

1Ja

n 1

2M

ar 1

2M

ay 1

2Ju

l 12

Se

p 12

Nov

12

Jan

13

Mar

13

May

13

Jul 1

3S

ep

13N

ov 1

3Ja

n 1

4M

ar 1

4M

ay 1

4Ju

l 14

Se

p 14

Nov

14

Jan

15

Mar

15

units Truck Sales Sales Growth


Figure- 13:Different Truck Sales and Sales Growth Figure- 14: China Heavy Truck Sales Forecasts

-33.7%-32.3%

-21.1%

-8.2%

-40%

-30%

-20%

-10%

0%

0

100,000

200,000

300,000

400,000

500,000

600,000

He

avy

Tru

ck

Med

ium

Tru

ck

Ligh

t Tru

ck

Min

i Tru

ck

units 1Q15 1Q14 YoY Growth

5%

45%

-36%

29%

59%

12%17%

60%

-13%

-28%

22%

-4%

-20%

8% 6%

-60%

-40%

-20%

0%

20%

40%

60%

80%

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5F

201

6F

201

7F

units Heavy Truck Sales YoY Growth


China heavy truck sales are expected to decrease 20% YoY in 2015 and to grow slowly in 2016 and 2017. Among different

type of trucks, sales of heavy trucks and medium trucks decreased the most, down 33.7% YoY and 32.3% YoY in 1Q15,

respectively. New floor area under construction and purchase of new land decreased in 1Q15 which reduced the demand for

construction trucks. In addition, international trade remained weak which depressed the demand for logistic trucks. However, we

expect the replacement of Yellow Plate trucks due to environmental concerns and the upgrade of technology, including emission

standard and fuel efficiency, will support the heavy truck sales. In addition, we think the easing of property curbs and money

policies to secure economic growth will support the recovery of heavy truck sales in 2H15. In a longer term, Chinese government

launched the One Belt and One Road Schemeto help other developing countries to build railway and which may increase the

export of construction machineries. Therefore, we expected heavy truck sales to decrease 20% YoY in 2015, but recovered to8%

YoY and 6% YoY in 2016 and 2017, respectively. Sales drop of heavy trucks is expected to narrow down in 2H15 due to lower

comparable base.

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Valuation of Truck Makers

Investment Suggestion: Truck Exporters. According to Table-1, HK listed truck makers, are valued at the weighted average of

10.1x 2015 PE and 1.2x 2015 PB, much lower than peers in A-share and global market. The valuation of truck makers is lower

than PV makers due to higher uncertainty and fluctuation of profit growth. We think the drop of truck sales is expected to narrow in

2H15 due to easing property curbs and monetary polices to secure China economic growth. In addition, One Belt and One Road

Strategy is expected to increase machineries and truck exports which may revalue related truck makers. Therefore, we think that

truck makers’ stocks listed in HK which has strong position in truck export, are currently undervalued.

Table-1: Valuation of Major Commercial Vehicle Makers

Company Stock Code Currency

Last price PE PB ROE

(%) D/Y

(%) EV/EBI

TDA

14A 15F 16F 17F 14A 15F 16F 17F 15F 15F 15F Qingling Motors Co Ltd-H

1122 HK HKD 3.06 12.9 11.9 10.6 10.2 0.8 0.8 0.8 0.8 7.0 7.4 3.4

Weichai Power Co Ltd-H

2338 HK HKD 32.45 10.8 12.0 10.7 10.5 1.6 1.4 1.2 1.1 12.8 1.5 6.3

Sinotruk Hong Kong Ltd

3808 HK HKD 5.51 25.1 19.3 16.1 15.0 0.6 0.6 0.6 0.6 3.9 2.2 5.0

Simple Average 16.2 14.4 12.5 11.9 1.0 0.9 0.9 0.8 7.9 3.7 4.9 Weighted Average 13.0 13.1 11.5 11.1 1.4 1.2 1.1 1.0 11.1 2.0 5.9 Dongfeng Automobile Co Ltd-A

600006 CH

CNY 8.07 n.a. n.a. n.a. n.a. 0.6 0.6 0.5 n.a. n.a. n.a. n.a.

Weichai Power Co Ltd-A

000338 CH

CNY 34.53 14.2 16.5 14.6 12.6 2.1 1.9 1.7 1.5 11.8 0.9 6.9

BeiqiFoton Motor Co Ltd-A

600166 CH

CNY 8.40 16.8 24.0 15.3 n.a. 1.5 1.4 1.3 n.a. 8.6 n.a. n.a.

Anhui Jianghuai Auto Co-A

600418 CH

CNY 15.12 26.9 16.0 11.7 n.a. 2.7 2.4 2.1 n.a. 18.3 2.2 5.0

Cnhtc Jinan Truck Co Ltd-A

000951 CH

CNY 24.19 17.2 19.3 13.9 11.0 2.3 2.1 1.9 1.5 12.5 1.8 n.a.

Zhengzhou Yutong Bus Co -A

600066 CH

CNY 31.99 18.1 14.7 12.5 11.5 3.8 3.4 2.8 2.7 23.5 3.1 7.2

Shenyang Jinbei Automotive-A

600609 CH

CNY 7.19 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Jiangling Motors Corp Ltd-A

000550 CH

CNY 44.35 18.5 14.2 9.5 7.7 3.6 2.9 2.2 1.6 26.6 3.6 4.7

Yangzhou Yaxing Motor Co-A

600213 CH

CNY 14.59 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Zhongtong Bus & Holding Co-A

000957 CH

CNY 19.20 16.3 24.3 19.4 n.a. n.a. n.a. n.a. n.a. 16.4 0.4 n.a.

Simple Average 18.3 18.4 13.8 10.7 2.4 2.1 1.8 1.8 16.8 2.0 6.0 Weighted Average 15.5 15.0 11.6 7.4 2.4 2.1 1.8 1.3 15.2 1.7 4.4 Mitsubishi Heavy Industries

7011 JT JPY 660.40 12.5 19.4 14.4 12.6 1.3 1.3 1.2 1.1 9.2 1.8 6.5

Fuji Heavy Industries Ltd

7270 JP JPY 4,063.00 10.5 12.0 9.2 9.0 2.8 3.2 2.5 2.1 31.3 2.6 4.6

Hino Motors Ltd 7205 JP JPY 1,629.00 9.8 12.7 10.8 9.7 2.6 2.4 2.1 1.8 19.4 2.7 6.0 Isuzu Motors Ltd 7202 JP JPY 1,595.00 8.4 12.3 10.7 9.7 1.6 1.9 1.6 1.4 15.7 2.2 5.3 Navistar International Corp

NAV US USD 29.00 n.a. 42.5 10.1 8.5 n.a. n.a. n.a. n.a. (7.8) n.a. 5.7

Paccar Inc PCAR US USD 63.88 17.8 14.7 13.9 13.3 3.6 3.0 2.8 2.5 23.3 3.2 7.8 Volkswagen Ag VOW GR EUR 229.60 8.2 9.5 8.5 7.7 1.0 1.1 1.0 0.9 12.7 2.8 2.7 Bayerische Motoren Werke Ag

BMW GR EUR 113.13 10.2 11.8 11.0 10.5 1.6 1.7 1.6 1.5 15.2 3.1 3.6

Daimler Ag-Registered Shares

DAI GR EUR 88.04 10.6 12.2 10.9 10.4 1.7 1.9 1.7 1.5 16.2 3.5 4.6

Man Se MAN GR EUR 98.92 104.7 79.6 41.0 n.a. 2.5 3.2 3.3 n.a. 6.1 3.1 14.7 Renault Sa RNO FP EUR 93.90 8.7 10.2 8.2 7.5 0.7 1.0 0.9 0.8 11.4 2.8 4.6 Volvo Ab-B Shs VOLVB SS SEK 100.20 82.2 17.2 13.1 11.6 2.2 2.4 2.2 2.0 17.3 3.5 6.9 Tata Steel Ltd TATA IN INR 348.50 11.2 15.7 9.9 7.8 0.9 0.8 0.7 0.7 7.7 2.7 6.5 Simple Average 24.6 20.8 13.2 9.9 1.9 2.0 1.8 1.5 14.2 2.8 6.1 Weighted Average 17.1 14.5 11.4 9.3 1.6 1.8 1.6 1.3 15.3 3.0 4.7 Global Simple Average

19.7 17.9 13.2 10.8 1.7 1.7 1.5 1.4 13.0 2.8 5.7

Global Weighted Average

16.9 14.5 11.4 9.2 1.7 1.8 1.6 1.3 15.2 2.9 4.7

Source: Bloomberg, Guotai Junan International.

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Company Report: Sinotruk (03808) Harry Chen陈欢瑜

公司报告：中国重汽(03808 HK) +86 755 23976683

[email protected]

21 April 2015

Improving Market Share Due to Launch of New Trucks 新车卡车推出提升市场份额

We expect heavy truck sales of Sinotruk to decrease 2% YoY in 2015 but to rebound 9% YoY and 11% YoY in 2016 and 2017, respectively. According to CAAM, vehicle sales of CNHTC (Sinotruk’s parent company) dropped 12.1% YoY in 1Q15. Sales of CNHTC’s heavy trucks dropped 27.0% YoY while that of other vehicles increased 15.0% YoY. Rapid drop of heavy truck sales was mainly due to slower growth of Chinese economy and fixed asset investment, as well as the decrease of international trade. Other vehicle sales, including light trucks and buses, of Sinotruk continued to stably ncrease mainly due to production expansion of its light truck production. T-series and C-series have helped Sinotruk to open up the market for tractor segment and increase its market competitiveness in cargo truck segments. Therefore, market share of Sinotruk is expected to strengthen further during the next few years.

Maintain fiAccumulatefl Rating and revise up TP to HKD6.50. The PE valuation of Sinotruk is higher than its peers’ and its historical average while its PB valuation is cheaper than its peers’ and its historical average. We believe that the One Belt One Road strategy will boost the valuation of Sinotruk. Therefore, we think Sinotruk is undervalued. We maintain Sinotruk’s fiAccumulatefl rating and revise up its TP to HKD6.50, representing 20.0x 15PE, 16.8x 16PE, 0.63x 15PB and 0.57x 16PB.

我们预计中国重汽的重卡销售在 2015 年下滑 2%，但是在 2016 年和 2017 年将反弹 9%

和 11%。根据中汽协的数据显示，2015 年 1 季度中国重汽集团（中国重汽的母公司）的

汽车销售同比下滑 12.1%。公司的重卡大幅下滑 27.0%，但是它的其他汽车销售增加

15.0%。重卡的快速下滑，主要因为中国经济增速和固定资产的投资增速下滑，而且国际

贸易也有所下滑。公司的其他汽车销售（包括轻卡和客车）增长稳定，则受惠于其快速增

长的生产规模。T 系和 C 系帮助公司打开牵引车市场，同时增加其在货运市场的竞争力，

因此我们相信公司的市场份额在未来几年将继续增加。

维持“收集”评级，上调目标价到 6.50 港元。当前中国重汽的 PE 估值高于其同业，但是

其 PB 估值则低于其同业及其历史平均。我们相信“一带一路”将继续提高公司估值，因

此公司当前估值吸引。我们维持公司的“收集”评级，上调目标价到 6.50 港元，相当于

20.0 倍 15 年 PE、16.8 倍 16 年 PE、0.63 倍 15 年 PB 和 0.57 倍 16 年 PB。

Rating: Accumulate Maintainedd

评级：收集(维持)

6-18m TP目标价: HK$6.50Revised from 原目标价: HK$4.90 Share price 股价： HK$5.510

Stock performance 股价表现

Change in Share Price 股价变动

1 M 1 个月

3 M 3 个月

1 Y 1 年

Abs. % 绝对变动 %

19.3 27.5 33.7

Rel. % to HS index 相对恒指变动 %

5.0 13.2 11.4

Avg. share price(HK$) 平均股价（港元）

5.2 4.7 4.3

Source: Bloomberg, Guotai Junan International

Year End 年结

Turnover 收入

Net Profit 股东净利

EPS 每股净利

EPS每股净利变动

PER市盈率

BPS每股净资产

PBR市净率

DPS 每股股息

Yield 股息率

ROE净资产收益率

12/31 (RMB m) (RMB m) (RMB) (△%) (x) (RMB) (x) (RMB) (%) (%)

2013A 30,410 271 0.098 120.7 45.1 7.538 0.6 0.040 0.9 1.3

2014A 32,809 408 0.148 50.4 30.3 7.671 0.6 0.060 1.3 1.9

2015F 33,296 701 0.254 71.8 16.9 8.103 0.5 0.063 1.5 3.2

2016F 36,806 834 0.302 18.9 14.4 8.938 0.5 0.075 1.7 3.5

2017F 41,301 966 0.350 15.9 12.4 9.617 0.5 0.087 2.0 3.8

Shares in issue (m)总股数 (m) 2,761.0 Major shareholder 大股东 CNHTC 64.9%

Market cap. (HK$ m)市值(HK$ m) 14,798.9 Free float (%) 自由流通比率(%) 18.53 month average vol. 3 个月平均成交股数(‘000) 2,075.0 FY15 Net gearing FY15 年净负债/股东资金(%) 19.352 Weeks high/low (HK$) 52 周高/低 6.580/3.750 15 NAV 15 年资产净值 6.6

Source︰the Company, Bloomberg, Guotai Junan International

3.50

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Apr 14 Jul 14 Oct 14 Jan 15 Apr 15

HK

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HSI Sinotruk

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Seethe lastpage fordisclaimer of 15

Company Analysis

Vehicle Sales Analysis of Sinotruk

Vehicle sales of CNHTC (Sinotruk’s parent company) dropped 12.1% YoY in 1Q15. According to CAAM, vehicle sales of

CNHTC decreased 12.1% YoY in 1Q15.Sales of CNHTC’s heavy truck dropped 27.0% YoY while that of other

vehiclesincreased15.0% YoY, respectively. Rapid drop of heavy truck sales were mainly due to slower growth of China

economy and fixed asset investment, as well as the decrease of international trade. Other vehicle sales, including light trucks

and buses, of CNHTC continued to increase stable mainly due to production expansion of its light truck production. Therefore,

sales contributed by other vehicles increased 10.2 ppt YoY to 43.2% of total vehicles sales in 1Q15.

Figure-15: Truck Sales and Sales Growth of CNHTC Figure-16: Truck Sales and Sales Growth of CNHTC

-60%

-30%

0%

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unitHeavy Truck Light Truck and BusHeavy Truck Growth Growth of Light Truck and Bus

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Heavy Truck Light Truck and Bus


Dongfeng Motor Corporation (fiDFMfl) and CNHTC continued to expand market share. Among the top 5 heavy truck

makers, market share of FAW, BACI Foton and Shangxi Heavy truck decreased, down 1.8 ppt YoY, 0.4 ppt YoY and 1.8 ppt

YoY, respectively, in 1Q15, while that of CNHTC and DFM increased 3.2 ppt YoY and 1.6 ppt YoY, respectively. CNHTC

overtook FAW to become the second largest heavy truck makers in 2014 and 1Q15 in term of market share. DFM continued to

maintain strong market position since its medium and heavy trucks have very good reputationin the e-commerce logistic

market due to its light weight and better fuel efficiency. CNHTC gained market shares from its competitors, thanks for its

change of market orientation and the rapid growth of its new tracks based on MAN’s TGA platform.

Light trucks and buses sales are expected to turn losses to profit in 2017. Since the light truck production capacity of

Sichuan Wangpai Commercial Vehicle, Fujian Haixi and Jinan Commercial Truck continued to expand, light truck and buses

sales of Sinotruk increased stably, up 29.7% YoY in 2014. According the management, the sales of light trucks and buses are

still in losses. The breakeven production scales are around 80k units. Therefore, we expect light truck and bus sales to

increased rapidly and turn losses to profit in 2017.

Truck export is expected to benefit from fiOne belt, one Roadfl. Heavy truck export increased 1.7% YoY to 25,001 units,

accounting for 24.3% of total heavy truck sales of Sinotruk in 2014. Heavy truck export recovered slightly but still remained

weak due to weak economic growth in emerging countries and geopolitical issues in Middle East of Asia. We expect economic

growth of Middle East to recover slightly but international trade to remain weak in 2015. Therefore, Truck export is expected to

grow slowly in 2015. However, we expect truck export to benefit from the government’s "One belt, one road" strategy. "One

belt, one road" is a development strategy started by the Chinese government in 2013. It refers to the New Silk Road Economic

Belt, which will link China with Europe through Central and Western Asia, and the 21st Century Maritime Silk Road, which will

connect China with Southeast Asian countries, Africa and Europe. Many of the countries mentioned have traditionally had

close trade and investment relations with China, which says they should deepen cooperation, especially in terms of building

infrastructure and other development projects. The strategy underlines the government's push to have a bigger say in global

economic and political affairs, and to export China's technologies and production capacity in oversupplied areas such as steel

manufacturing. The push for building of infrastructure and export of high technology product are expected to boost truck

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export.

Total vehicle sales of Sinotruk are expected to decrease 2% YoY in 2015 but recover 9% YoY and 11% YoY during

2016 and 2017, respectively. Heavy truck T-series and C-series of Sinotruk, which were based on MAN’s TGA platform, were

launched in the year end of 2013. After the market has recognized the quality of the product, T-series and C-series have

helped Sinotruk to open up the market for tractor segment and increase its market competitiveness in cargo truck segments,

which then boost truck sales of Sinotruk. Therefore, we expect heavy truck sales of Sinotruk to decrease 2% YoY in 2015 but

recovered 9% YoY and 11% YoY in 2016 and 2017, respectively.

Figure-17: Market Share in over 14 tons Truck Market by

Major Heavy Truck Makers

Figure-18: Sales Volume Distribution of Different Truck

Models of Sinotruk, 2014

22.0 18.2 19.7 18.2 19.0 21.1 20.6 21.4 20.9 19.4 22.6

19.6 20.5 20.6 19.6 19.5 16.2 17.2 15.6 16.3 16.6

18.2

21.2 19.7 19.8 22.3 22.7

17.9 16.7 16.9 15.7 16.2 14.4

10.6 12.3 12.0 10.6 10.7

11.8 13.2 13.1 14.1 14.5 14.1

10.4 11.6 10.6 12.9 10.1 12.2 13.5 14.9 14.7 14.5 12.7

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1Q

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% BAIC Foton Shangxi Heavy Truck FAW CNHTC DFM

Dumper, 41.7%

Tractor, 26.0%

Cargo, 7.1%

Special Vehicle, 3.2%

Mixer, 22.0%

Source: CAAM, Guotai Junan International. Source: the Company, Guotai Junan International.

Figure-19: Light Truck and Buses Sales of Sinotruk Figure-20: Heavy Truck Export of Sinotruk

243.6%

40.1% 32.4% 29.7%

0%

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20,000

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unit Light Trucks & Buses Light Trucks & Buses Growth

-0.5%

-45.6%

59.4%53.9%

27.1%

-7.3%1.7%

-60%

-40%

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0%

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unit Export Heavy Truck Export Growth

Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International.

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Earning Analysis for Sinotruk Net profit of 2014 increased 50.4% YoY, worse than our and market forecasts. Vehicle sales of the Company increased

13.5% YoY to 156,422 units. Sales of heavy trucks, light trucks and buses increased 6.5% YoY, 30.7% YoY and 0.4% YoY,

respectively. The sales contribution of light trucks and buses increased from Since the sales contribution of light trucks and

buses increased4.3 ppt YoY to 34.4%, the average selling price of vehicles decreased 1.1% YoY. However, the gross profit

increased 0.2 ppt to 16.9%, which was mainly due to improvement of economies of scales and the result of the costs

reduction and efficiency measures taken by the Company to reduce its procurement costs and controllable expenses.

Distribution costs accounted for 6.9% to turnover, down 0.4 ppt YoY which primarily resulted from the reduction in warranty

costs which benefited from the strengthening of quality control. The administrative expenses accounted for 7.3% to turnover in

the year 2014, up 0.5 ppt YoY, which was mainly due to the increase in the provision for bad debts in accordance with the

increase in account receivables of the trade receivables under prudent provisioning policy, the increase in research and

development cost and the increase in salaries and staff benefits.

Table-2: Financial Statement of Sinotruk, 2013-2014

(RMB mn) 2013 2014 YoY %

Turnover 30,410 32,809 7.9%

Cost of sales (25,319) (27,273) 7.7%

Gross profit 5,091 5,536 8.7%

Distribution expenses (2,238) (2,280) 1.9%

Administrative expenses (2,075) (2,406) 15.9%

Other gains - net 210 305 45.1%

Operating profit 988 1,154 16.9%

Finance Income 84 78 -7.3%

Finance costs (479) (428) -10.7%

Profit before taxation 592 804 35.8%

Income tax (153) (209) 37.0%

Profit for the year/period 440 595 35.4%

Non-controlling interests 168 187 11.2%

Attributable to: equity shareholders 271 408 50.4%

Basic EPS 0.098 0.148 50.4%

Diluted EPS 0.098 0.148 50.4%Source: the Company, Guotai Junan International.

Figure-19: Sales Contribution of Export for Sinotruk Figure-20: Vehicle Sales Forecasts of Sinotruk

0%

20%

40%

60%

80%

100%

2008 2009 2010 2011 2012 2013 2014

Domestic Export

-40%

-20%

0%

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40%

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unitsHDT Light Trucks & BusesHDT Growth Light Trucks & Buses Growth


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Table-3: Key Operation Data and Financial Ratio of Sinotruk, 1H13-1H14 2013 2014 YoY %

Operational data Sales Truck 137,806 156,422 13.5% Heavy trucks (unit) 96,370 102,675 6.5% Domestic sales (unit) 71,789 77,674 8.2% Export(unit) 24,581 25,001 1.7% LDT and MDT and buses 28,979 31,429 8.5% Engines 7,368 7,723 4.8%ASP Truck 210,286 200,923 -4.5% Heavy trucks (unit) 271,212 271,841 0.2% LDT and MDT and buses 68,587 65,445 -4.6% Engines 71,342 70,572 -1.1%Financial Ratio pptGross profit margin(%) 16.7% 16.9% 0.1 EBITDA 3.2% 3.5% 0.3 Net profit margin(%) 0.9% 1.2% 0.4 Distribution expenses to Revenue 7.4% 6.9% -0.4 Admin expenses to Revenue 6.8% 7.3% 0.5 Effective tax rate 25.8% 26.0% 0.2 Source: the Company, Guotai Junan International.

Gross profit margin of Sinotruk is expected to remain stable in 2015 but to gradually improve in 2016 and 2017. As

discussed previously, we expect the trucks sales of Sinotruk under MAN’s TGA platform to increase rapidly which offset the

negative impact of the light truck sales on its average selling price (fiASPfl). Therefore, we expect ASP to remain stable during

2015-2017. Gross profit margin is expected to improve gradually during 2015 to 2017 due to improvement of economy of

scales and lower depreciation per unit of truck.

Figure-19: ASP Forecasts of Sinotruk Figure-20: Utilization Rage and Gross Profit Margin

Forecasts of Sinotruk

61,000

62,000

63,000

64,000

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2010 2011 2012 2013 2014 2015F 2016F 2017F

RM

B

Total Truck ASP(LHS) HDT ASP(LHS)Light Truck and Bus ASP(RHS)

0%

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2008 2009 2010 2011 2012 2013 2014 2015F 2016F 2017F

Utilization Rate(LHS) Gross Profit Margin(RHS)


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Company Valuation for Sinotruk

Maintain fiAccumulatefl rating and revise TP to HKD6.50. During January of 2008 to April 2015, the average forward PE

and PB of Sinotruk are 13.8x and 0.8x, respectively. Sinotruk is currently trading at 17.1x 15PE, 14.4x 16PE, 0.54x 15PB and

0.49x 16PB. The PE valuation of Sinotruk is higher than its peers’ and its historical average while its PB valuation is cheaper

than its peers’ and its historical average. We believe that One Belt One Road strategy to boost the valuation of related

companies, including Sinotruk. Therefore, we maintain Sinotruk’s fiAccumulatefl rating and revise up its TP to HKD6.50,

representing 20.0x 15PE, 16.8x 16PE, 0.63x 15PB and 0.57x 16PB.

Figure-21: Sinotruk Forward PE Band Figure-22: Sinotruk Forward PB Band

Source: Bloomberg, Guotai Junan International. Source: Bloomberg, Guotai Junan International.

Sinotruk

0

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(X)

PE band PE (historical mean) PE (2015F)PE (2016F) PE (historical high) PE (historical low)

Sinotruk

0.0

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Financial Statement and Ratios Income Statement Balance Sheet

Year end Dec (RMB mn) 2013A 2014A 2015F 2016F 2017F Year end Dec (RMB mn) 2013A 2014A 2015F 2016F 2017F

Turnover 30,410 32,809 33,296 36,806 41,301 Property, plant & equipment

12,682 12,384 12,198 12,091 12,034

Revenue from truck and engine

30,193 32,508 33,000 36,481 40,934 Intangible assets

672 531 392 252 107

Others revenue 217 301 296 325 367 Land use rights 1,546 1,520 1,505 1,512 1,559

Cost of Sales (25,319) (27,273) (27,530) (30,360) (33,998) Others 1,563 1,890 2,227 2,784 3,667

Gross profit 5,091 5,536 5,766 6,446 7,303 Non-current assets 16,462 16,325 16,322 16,638 17,367

Expenses Inventories 7,804 8,736 7,867 10,284 10,083

Other revenue and net income

210 305 320 331 297 Trade and other receivables

16,125 15,875 16,235 18,857 20,520

Distribution expenses (2,238) (2,280) (2,305) (2,549) (2,859) Other current assets 1 2 3 4 6

Administrative expenses (2,075) (2,406) (2,038) (2,246) (2,497) Amounts due from related parties

17 18 18 20 22

Operating profit 988 1,154 1,743 1,983 2,244 Restricted cash 1,284 1,212 1,104 1,234 1,143

Finance Income 84 78 65 77 85 Cash 4,004 3,285 6,055 5,013 7,213

Finance Costs (479) (428) (444) (448) (456) Current assets 29,235 29,128 31,281 35,412 38,988

EBT 592 804 1,364 1,611 1,873 Total assets 45,697 45,453 47,603 52,050 56,355

Provision for Income Tax

(153) (209) (342) (396) (465)Borrowings

753 1,587 1,446 1,615 1,496

Net profit for the period 440 595 1,022 1,215 1,408 Termination benefits, post-employment benefits and medical insurance plan

21 22 22 22 22

Other long-term payable 415 464 525 606 683

Minority Interest (After Tax)

168 187 321 382 442 Non-current liabilities

1,190 2,073 1,992 2,243 2,201

Attributable to: equity shareholders

271 408 701 834 966

Trade and other payables

13,811 12,796 14,570 15,480 18,466

Basic EPS (RMB) 0.098 0.148 0.254 0.302 0.350 Provision 356 384 390 431 484

Diluted EPS (RMB) 0.098 0.148 0.254 0.302 0.350 Amounts due to related parties

448 484 491 543 609

Dividend per share (RMB)

0.040 0.060 0.063 0.075 0.087 Interest-bearing borrowings

9,019 8,514 7,756 8,666 8,029

Income tax payables 487 77 12 3 1

Current liabilities 23,695 22,201 23,238 25,130 27,601

Total liabilities 24,885 24,274 25,230 27,373 29,802

Cash Flow Statement

Year end Dec (RMB mn) 2013A 2014A 2015F 2016F 2017FAttributable to: equity shareholders

18,864 19,044 19,916 21,839 23,273

EBIT 592 804 1,364 1,611 1,873 Minority interests 1,948 2,135 2,456 2,838 3,281

Depreciation for PPE 1,165 1,363 1,343 1,333 1,332 Total equity 20,812 21,179 22,373 24,677 26,554

Other adjustments 612 397 417 413 420 BPS 7.538 7.671 8.103 8.938 9.617

Change in WC (1,068) (1,590) 1,906 (4,155) 1,058

Interest paid (442) (395) (410) (414) (420) Financial Ratio

Income tax paid (195) (152) (248) (339) (394) 2013A 2014A 2015F 2016F 2017F

Net cash generated from operating activities

646 427 4,372 (1,550) 3,870 Gross margin (%) 16.7 16.9 17.3 17.5 17.7

Operating margin (%) 3.2 3.5 5.2 5.4 5.4

Capital expenditure (693) (753) (844) (926) (1,022) Net margin (%) 0.9 1.2 2.1 2.3 2.3

others 356 340 349 370 370 Effective tax rate (%) 25.8 26.0 25.0 24.6 24.8

Net cash used in investing activities

(337) (413) (494) (557) (652) ROE (%) 1.3 1.9 3.2 3.5 3.8

Vehicle sales growth (%) 13.3 13.5 5.7 12.2 12.8

Net change in bank loans and other loans

(1,199) (599) (899) 1,079 (755) Revenue growth (%) 9.0 7.9 1.5 10.5 12.2

Dividend paid (33) (110) (133) (175) (208) EPS growth(%) 120.7 50.4 71.8 18.9 15.9

Others (29) (59) (114) 120 (101) BPS growth(%) 1.7 1.8 5.6 10.3 7.6

Net cash generated from financing activities

(1,261) (769) (1,145) 1,024 (1,064) Gearing ratio(%) 21.4 22.2 19.3 19.8 16.9

Current ratio(x) 1.2 1.3 1.3 1.4 1.4

Cash at the beginning of the year/period

4,975 4,004 3,285 6,055 5,013 Interest Coverage(x) 2.2 2.9 4.1 4.6 5.1

Net increase/(decrease) in cash

(952) (755) 2,733 (1,083) 2,154 Inventory turnover days 92.2 92.0 91.0 90.0 90.0

Effect of FX rate (18) 36 37 41 47 Trade receivable days 180.4 178.0 176.0 174.0 174.0

Cash at the end of the year/period

4,004 3,285 6,055 5,013 7,213 Trade payable days 147.2 148.0 150.0 149.0 150.0

Source: the Company, Guotai Junan International.

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Company Rating Definition

The Benchmark: Hong Kong Hang Seng Index

Time Horizon: 6 to 18 months

Rating Definition

Buy Relative Performance>15%; or the fundamental outlook of the company or sector is favorable.

Accumulate Relative Performance is 5% to 15%; or the fundamental outlook of the company or sector is favorable.

Neutral Relative Performance is -5% to 5%; or the fundamental outlook of the company or sector is neutral.

Reduce Relative Performance is -5% to -15%; or the fundamental outlook of the company or sector is unfavorable.

Sell Relative Performance <-15%; or the fundamental outlook of the company or sector is unfavorable.

Sector Rating Definition

The Benchmark: Hong Kong Hang Seng Index

Time Horizon: 6 to 18 months Rating Definition

Outperform Relative Performance>5%; or the fundamental outlook of the sector is favorable.

Neutral Relative Performanceis -5% to 5%; or the fundamental outlook of the sector is neutral.

Underperform Relative Performance<-5%; or thefundamental 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 China All Access (Holdings) Limited (00633), Guangshen Railway Company Limited-H shares (00525), Guotai Junan

International Holdings Limited (01788) and Binhai Investment Company Limited (02886), 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 had investment banking relationships with Xiezhong International (3663HK) mentioned in this Research Report within the preceding 12 months. Guotai Junan and its group companies have not had investment banking relationships with DFG (00489HK) / Geely Auto (00175HK) /BYD Corporation (01211HK) /Sinotuk (03808HK) /Brilliance (01114HK) / Great Wall Motor (02333HK) mentioned in this Research Report within the preceding 12 months.

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 and 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. © 2015 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) 2509-9118 Fax: (852) 2509-7793 Website: www.gtja.com.hk

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