Strong Contracted Sales But High Leverage Ratio, Maintain Accumulate

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1 : Evergrande (3333 HK) Van Liu 刘斐凡公司报告 : 中国恒大 (3333 HK) liufeifan@gtjas.com Strong Contracted Sales But High Leverage Ratio, Maintain Accumulate 强劲的合约销售但很高的杠杆比率, 维持 收集 The Company s contracted sales could still extend strong growth momentum with stable margins. As per the Company's proposed reorganization cooperation agreement, the estimated contract sales of Hengda Real Estate (the subsidiaries of the Company) for will amount to approximately RMB45 bn, RMB5 bn and RMB55 bn, respectively. The unit land cost amounted to RMB1,32 per sq.m, 15.7% of ASP during Jan.-Nov We think that the Company's weighted average funding cost will struggle to decrease further. To support the strong growth in contracted sales, the Company will maintain its tremendous debt scale. Thus, the Company's profitability will be damaged and its leverage ratio is likely to remain at a high level. Underlying net profit declined 74.8% YoY to RMB1.776 bn, which missed our expectation. We revise down 216, 217 and 218 forecasted underlying profit by 29.5%, 23.9% and 3.9% to RMB7.79 bn, RMB8.535 bn and RMB8.824 bn, respectively. Maintain Accumulate. Evergrande should justify a high NAV discount with a high leverage ratio and tremendous debt scale. As we revise down underlying net profit, we revise down the target price from HK$5.52 to HK$5.17, which represents a 6% discount to 216E NAV of HK$12.92, 8.9x 216 underlying PER and 1.x 216 PBR. We maintain Evergrande's investment rating as "Accumulate. Risk: lower-than-expected house sales and potential liquidity risk. 公司合约销售能以稳定毛利率延续强劲增长 依据公司建议的重组合作协定, 恒大地产 ( 公司附属公司 ) 在 年预计的合约销售将分别达到人民币 4,5 亿元, 人民币 5, 亿元及人民币 5,5 亿元 平均土地成本为人民币 1,32 元每平米, 为 216 年 1-11 月合约销售均价的 15.7% 我们认为公司的平均借贷成本将很难进一步降低 为支持合约销售的快速增长, 公司将维持其极大的债务规模 因此, 公司的盈利能力将被损害并且使其杠杆很有可能维持在一个高水平 核心净利同比减少 74.8%, 达到人民币 亿元, 低于我们预期 我们分别将 216, 217 和 218 年核心净利预测下调 29.5%,23.9% 和 3.9% 至人民币 7.79 亿元, 人民币 亿元和人民币 亿元 Rating: Accumulate Maintained 评级 : 收集 ( 维持 ) 6-18m TP 目标价 : HK$5.17 Revised from 原目标价 : HK$5.52 Share price 股价 : Stock performance 股价表现 (5.) (1.) (15.) (2.) % of return HK$4.96 (25.) Dec/15 Feb/16 Mar/16 May/16 Jun/16 Aug/16 Sep/16 Oct/16 Dec/16 Change in Share Price 股价变动 HSI Index 1 M 1 个月 Evergrande 3 M 3 个月 1 Y 1 年 Abs. % 绝对变动 % (6.4) (7.6) (19.9) Rel. % to HS index 相对恒指变动 % (4.1) (.3) (2.2) Avg. share price(hk$) 平均股价 ( 港元 ) Source: Bloomberg, Guotai Junan International. 4.9 GTJA Research 国泰君安研究 维持 收集 基于高的杠杆率和极大的债务规模, 恒大地产应适用较高的 NAV 折让 由于我们下调核心净利, 我们将目标价从 5.52 港元下调至 5.17 港元, 相当于 216 年每股估值 港元有 6% 的折让,8.9 倍 216 年核心市盈率和 1. 倍 216 年市净率 我们维持恒大地产的投资评级为 收集 风险 : 低于预期的房屋销售和潜在的流动性风险 Underlying Underlying Underlying Underlying Year End Turnover BPS PBR DPS Yield ROE Net Profit EPS EPS PER 年结收入每股净资产市净率每股股息股息率净资产收益率核心股东净利核心每股净利核心每股净利变动核心市盈率 12/31 (RMB m) (RMB m) (RMB) ( %) (x) (RMB) (x) (RMB) (%) (%) 214A 111,398 9, A 133,13 7, (22.8) F 146,892 7, F 167,868 8, F 179,74 8, Shares in issue (m) 总股数 (m) 13,689.7 Major shareholder 大股东 Hui Ka Yan 74.3% Market cap. (HK$ m) 市值 (HK$ m) 67,91.1 Free float (%) 自由流通比率 (%) month average vol. 3 个月平均成交股数 ( ) 23,37.5 FY16 Net gearing (%) FY16 净负债 / 股东资金 (%) Weeks high/low (HK$) 52 周高 / 低 6.83 / 4.62 FY16 Est. NAV (HK$) FY16 每股估值 ( 港元 ) 12.9 See the last page for disclaimer Page 1 of 9

2 Policies have turned from an easing stimulus to tightening stimulus in tier-1 cities, and select tier-2 and tier-3 cities, which is likely to cool the property market. According to the NBS, during Jan.-Nov. 216, commodity housing sales represented strong upside momentum. We think that soaring ASP, low stock levels, and numerous "land king" projects have recently triggered a round of policy tightening measures. These related policies mainly involve an increase in minimum down payment and HPR upgrading. Policy tightening could curb investment demand and delay rigid demand, thus, cooling the property market. As housing sales are expected to slow down, industry fundamentals and valuations are expected to face downside pressure in the short run. Figure 1: Cumulative House Sales Amount in China Figure 2: Cumulative House Sales GFA in China 12, 1, 8, 6, 4, 2, 7.% 6.% 5.% 4.% 3.% 2.% 1.%.% -1.% -2.% -3.% 1,6 1,4 1,2 1, % 4.% 3.% 2.% 1.%.% -1.% -2.% -3.% Amount Sold of Commodity Houses (LHS)(RMB bn) Amount Sold of Residential Houses (LHS) (RMB bn) Amount Sold YTD YoY of Commodity Houses (RHS) Amount Sold YTD YoY of Residential Houses (RHS) Source: NBS, Guotai Junan International. Source: NBS, Guotai Junan International. GFA Sold of Commodity Houses (LHS)(sq.m. mn) GFA Sold of Residential Houses (LHS) (sq.m. mn) GFA Sold of Commodity Houses (RHS) GFA Sold of Residential Houses (RHS) Figure 3: Stock-to-Sales Ratios by City Tier, Jan Nov. 216 Figure 4: Monthly Land Acquisition Amount in 1 Cities, Jan Nov Month Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Tier-1 Cities Tier-2 Cities Tier-3 Cities Source: CRIC, Guotai Junan International Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Monthly Land Acquisition GFA(LHS)(mn sq.m.) Monthly Land Acquisition GFA YoY(RHS) Land Acquisition Premium Rate(RHS) Source: Wind, Guotai Junan International. Policy tightening tailored to specific cities is likely to be suitable amidst market divergence. Due to the imbalanced structure of economic development, population mobility, and industry development, the performance of the property market has exhibited divergence. There were overheating property markets in tier-1 cities, and select tier-2 and tier-3 cities, but destocking pressure still exists in most tier-3 and tier-4 cities. In order to cope with the market divergence situation, policies will continue to tighten in cities with overheating property markets and ease in cities with destocking pressure. Therefore, policy tightening tailored to specific cities is likely to curb an "asset price bubble" in higher-tier cities and help destocking in lower-tier cities. There will be healthier property fundamentals in the long run. With increased land costs and amidst market divergence, the property market has entered into a margin squeezing and consolidation era. 12.% 1.% 8.% 6.% 4.% 2.%.% -2.% -4.% -6.% -8.% See the last page for disclaimer Page 2 of 9

3 Figure 5 : ASP by City Tier, Jan Nov. 216 Figure 6: Stock-to-Sales Ratios as at Nov , 4, 35, 3, 25, 2, 15, 1, 5, RMB/sq.m. Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 3.% 25.% 2.% 15.% 1.% 5.%.% -5.% -1.% ASP in Tier-1 Cities ASP in Tier-2 Cities ASP in Tier-3 Cities ASP YoY in Tier-1 Cities ASP YoY in Tier-2 Cities ASP YoY in Tier-3 Cities Source: CRIC, Guotai Junan International. 4 Months Bengbu Beihai Tangshan Sanya Dandong Jiangyin Haebin Jining Xining Yinchuan Yantai Lanzhou Shijiazuang Guiyang Quanzhou Jinmen Haikou Urumqi Shenyang Jinan Xian Huainan Shenzhen Changde Hohehot Changchun Maoming Kunming Chongqing Dalian Xianghe Putian Chengdu Taiyuan Wenzhou Guan Changzhou Xuzhou Yichang Wuxi Jingdezhen Tianjin Changsha Dongguan Beijing Wuhan Xiamen Fuzhou Ningbo Jiujiang Nantong Nanning Dachang Qingdao Maanshan Kunshan Jinan Suzhou Guangzhou Yanjiao Foshan Shanghai Chuzhou Hangzhou Nanchang Zhuhai Zhengzhou Huizhou Nanjing Hefei Source: CRIC, Guotai Junan International. The Company s contracted sales are expected to grow fast. During Jan.-Nov 216, contracted sales reached RMB bn, up by 12.4% YoY, achieving 116.3% of its revised 216 sales target. Contracted GFA amounted to mn sq.m, up by 89.8% YoY. The ASP during the same period was RMB8,316 per sq.m, up by 7.1% YoY. The proportion of contracted sales in tier-1 and tier-2 cities has increased since 213. As per the Company's proposed reorganization cooperation agreement with Shenzhen Investment Holding Co. Ltd, the estimated contract sales of Hengda Real Estate (the subsidiaries of the Company) for will amount to approximately RMB45 bn, RMB5 bn and RMB55 bn, respectively. Despite that the property market is likely to cool down, we believe that the Company's contracted sales will grow fast during Figure 7: Evergrande's Contracted Sales Breakdown by City Tier During 213-1H16 Figure 8: Evergrande s Sales Records 12.% 1.% , 1, 8.% 44.5% 4.6% 36.% 55.9% 6.% 4.% 46.1% 52.3% 56.5% 2.% 42.8%.% 1.3% 9.4% 7.1% 7.5% H16 Tier-1 Cities Tier-2 Cities Tier-3 Cities Contracted Sales(bn RMB) (LHS) ASP (RMB/sqm.) (RHS) 8, 6, 4, 2, The Company disposed of unprofitable businesses and optimized distribution within its diversified businesses. On 28 Oct. 216, the Company disposed of all of its interest in grain and oil, dairy products and spring water businesses. The aggregate consideration for the disposal was RMB2.7 bn. The disposal is being carried out for strategic consideration and will enable the Company to focus on property development and other related businesses. In addition, the Company is expected to recognize an unaudited before tax gain of approximately RMB5.7 bn. Evergrande will continue to focus on financial, internet, health care and cultural businesses. With the gradual development of these diversified businesses, we expect other income to maintain fast growth and estimate other income to increase from RMB5.122 bn in 215 to RMB bn in 218, or at a CAGR of 34.4% in See the last page for disclaimer Page 3 of 9

4 Figure 9: Evergrande s Diversification Strategy Financial Business Internet Business Diversification Strategy Healthcare Business Cultural Tourism Business Evergrande acquired Great Eastern Life Assurance (China) Co. Ltd in 215 and remarked it as Evergrande Life Insurance Establish a Internet+ financial platform and a community services platform Evergrande Health (78 HK) focuses on community health management, internet hospitals, the elderly care industry and medical beauty. Ride on Hainan International Tourism Island and Evergrande s enormous resources to community develop cultural tourism business Evergrande Life Insurance recorded RMB14.99 bn in premium income, ranking 3 th among all insurance companies in China HDFAX.COM conducts financial business and provides Internet-based online financial services. Ocean Flower Island in Hainan occupied planned GFA of around mn sq.m. The project record RMB12.21 bn in contracted sales on 28 Dec In April 216, the Company 17.28% shares of Shengjing Bank. HengTen Networks (136 HK) covers property services, neighborhood social networks, living services, Internet home and community finance business Evergrande Culture (834899) was listed on NEEQ. Evergrande has 56 cinema complexes with 45 screens. 4 cinema complexes are scheduled to open in 2H16, which results in 96 cinema complexes and 683 screens. Source: The Company, Guotai Junan International. The Company's land bank has improved further, which will help stabilize its gross margins. In 1H16, The Company acquired 8 parcels of land with a total GFA of mn sq.m. The average land cost amounted to RMB1,994 per sq.m. Around 73.9% of the investments in land acquisition activities were in tier-1 and tier-2 cites. Therefore, the Company's land bank quality improved further. As at 3 Jun. 216, the Company had 454 projects in 175 cities. Total GFA amounted to 186 mn sq.m. Its unit land cost amounted to RMB1,32 per sq.m., 15.7% of ASP during Jan.-Nov We think that improving quality in their land bank and reasonable proper unit land cost could result in stable gross margins in the next three years. We estimate gross margins to remain around 28.3% in Figure 1: Evergrande s Land Premium Payment Schedule RMB Bn Figure 11: Evergrande s Debt Structure RMB mn H16. Before 1H16 2H or Later Less than 1 Year 1-2 Years 2-5 Years Over 5 Years Source: The Company, Guotai Junan International. Source: The Company, Guotai Junan International. Tremendous debt scale and RMB depreciation are likely to damage the Company's profitability, the leverage ratio is likely to remain at a high level. Total borrowing, as at 3 Jun. 216, amounted to RMB381,261 bn. There was approximately 2% of borrowings denominated in foreign currencies. In addition, perpetual bonds increased by RMB4.265 bn to RMB116.2 bn in 1H16. During the same period, the interest expenses, exchange loss and profit attributable to holders of perpetual capital instruments were RMB bn, RMB1.572 bn and 4.22 bn, respectively. Domestic bond issuing has See the last page for disclaimer Page 4 of 9

5 tightened and bond yields increased recently. In addition, monetary policy will unlikely loosen further due to the pressures on RMB depreciation. Therefore, we think that the Company's weighted average funding cost will struggle to decrease further. In order to support the strong growth in contracted sales, the Company will maintain its newly started GFA at a high level. Therefore, debt scale should remain at a high level. Therefore, we think tremendous debt scales with RMB depreciation is likely to damage the Company's profitability. Net gearing ratios will still remain at high levels and are estimated to record over 22.% during Evergrande s 1H16 underlying net profit missed our expectation on higher-than-expected profit attributable to holders of perpetual capital instruments. Total revenue increased 12.5% YoY to RMB bn in 215. Gross profit amounted to RMB24.77 bn, up 12.2% YoY. GPM maintained stable. Underlying net profit slumped by 74.8% YoY to RMB1.776 bn. Due to higher-than-expected profit attributable to holders of perpetual capital instruments in 1H16, underlying net profit missed our expectation by 65.2%. Net gearing ratio soared by 15. ppts to 328.7% due to an increase in debt scale and more land acquisitions in 1H16. Cash balance also sharply increased by 159.9% YoY to RMB212,.3 bn. Table 1: Summary of Evergrande s 1H16 Results RMB mn 1H15 1H16 Change Total Revenue 77,743 87, % Gross Profit 22,7 24, % GPM 28.4% 28.3% -.1 ppts Net Profit 9,427 2, % Net Profit (Ex. after-tax fair value gains on IP and exchange losses) 7,35 1, % NPM 12.1% 2.3% -9.8 ppts NPM (Ex. after-tax fair value gains on IP and exchange losses) 9.% 2.% -7. ppts DPS (RMB cent).. n.a. Underlying EPS (RMB cent) % Land Appreciation Tax 3,2 3, % Cash and Cash Restricted 81, , % Total Asset 539, , % Stock of Properties 285,32 498, % Advanced Proceeds Received from Customers 37, , % Trade and Other Payables 159,629 25, % Total Debt 185, , % Shareholders Equity 58,47 51, % ROE 18.1% 3.7% ppts Net Gearing Ratio 178.7% 328.7% 15. ppts We revise down underlying profit forecasts but revise up net gearing ratio forecasts. Evergrande's contracted sales are likely to maintain fast growth. But, we think that GFA delivering will be lower than our previous expectation due to the possible cooling down in the property market. Therefore, we revise down 216, 217 and 218 forecasted total revenue by 5.4%, 1.% and 1.1% to RMB bn, RMB bn and RMB bn, respectively. Gross margins could remain stable. We think that a tremendous debt scale with RMB depreciation is likely to damage the Company's profitability. Overall, we revise down the 216, 217 and 218 forecasted underlying profit by 29.5%, 23.9 and 3.9% to RMB7.79 bn, RMB8.535 bn and RMB8.824 bn, respectively. Net gearing ratios should be higher than our previous assumptions. We revise up the 216, 217 and 218 forecasted net gearing ratios by 18. ppts, 53.1 ppts and 69.7 ppts to 247.1%, 255.2% and 225.8%, respectively. See the last page for disclaimer Page 5 of 9

6 Table 2: Evergrande's Profit Estimation Revision in New estimation Old estimation Change 216F 217F 218F 216F 217F 218F 216F 217F 218F Total Revenue 146, , ,74 155, ,59 181, % -1.% -1.1% Gross Profit 41,929 47,48 5,923 43,983 48,154 52,14-4.7% -1.5% -2.3% Operating Profit 34,514 38,464 42,529 37,426 41,227 44,98-7.8% -6.7% -5.3% Net Profit 9,443 11,815 11,965 14,83 16,683 18, % -29.2% -36.% Underlying Profit 7,79 8,535 8,824 1,43 11,212 12, % -23.9% -3.9% Gross Margin 28.5% 28.2% 28.4% 28.3% 28.4% 28.8%.2 ppts -.2 ppts -.3 ppts Operating Profit Margin 23.5% 22.9% 23.7% 24.1% 24.3% 24.8% -.6 ppts -1.4 ppts -1. ppts Net Profit Margin 6.4% 7.% 6.7% 9.5% 9.8% 1.3% -3.1 ppts -2.8 ppts -3.6 ppts Underlying Net Profit Margin 4.8% 5.1% 4.9% 6.5% 6.6% 7.% -1.6 ppts -1.5 ppts -2.1 ppts ROE 16.6% 17.8% 16.4% 27.% 26.6% 26.1% -1.4 ppts -8.8 ppts -9.7 ppts ROCE 1.9% 1.6% 11.6% 13.2% 14.3% 15.9% -2.3 ppts -3.7 ppts -4.3 ppts ROA 3.4% 3.8% 4.% 4.6% 4.9% 5.2% -1.2 ppts -1.1 ppts -1.1 ppts Net Gearing Ratio 265.1% 255.2% 225.8% 247.1% 22.1% 156.1% 18. ppts 53.1 ppts 69.7 ppts Source: The Company, Guotai Junan International. Maintain "Accumulate". Contracted sales should maintain strong growth. The Company also optimized its diversified business distribution. However, a tremendous debt scales along with RMB depreciation is likely to damage the Company's profitability and the leverage ratio is likely to remain at a high level. We think these negative factors lead to a high NAV discount for Evergrande. As we revise down underlying net profit, we revise down its target price from HK$5.52 to HK$5.18, which represents a 6% discount to the Company s revised 216E NAV of HK$12.95 per share, 8.5x underlying 216 PER and 1.x 216 PBR. We maintain Evergrande's investment rating to "Accumulate". Key risk factors include: lower-than-expected house sales and potential liquidity risk. Table 3: Breakdown of Evergrande s 16NAV NAV/share (RMB m) (HK$ m) (HK$) % of NAV % of GAV Development Properties 418,571 47, % 96.5% Investment Property 15,48 16, % 3.5% Gross Asset Value 433, , % 1.% (Net Debt)/ Net Cash (276,1) (31,114) (22.67) (1.8)% NAV 157, , % NAV/Share Source: Guotai Junan International. See the last page for disclaimer Page 6 of 9

7 Table 4: Peers Comparison Company Stock Code Mkt Cap (HK$ m) Last Price HK$ PE PB D/Y% ROE EV/EBITDA 216F 217F 218F 216F 217F 218F 216F 216F 216F HK listed large developers with major revenue from mainland China Overseas Land & Invest 688 HK 226, Evergrande Real Estate Group 3333 HK 67, China Resources Land Ltd 119 HK 12, Bbmg Corporation-H 29 HK 47, Country Garden Holdings Co 27 HK 93, Longfor Properties 96 HK 57, Agile Property Holdings Ltd 3383 HK 15, Soho China Ltd 41 HK 2, Shimao Property Holdings Ltd 813 HK 34, Guangzhou R&F Properties - H 2777 HK 3, Sino-Ocean Land Holdings 3377 HK 25, Franshion Properties 817 HK 22, Shui On Land Ltd 272 HK 13, Kwg Property Holding Ltd 1813 HK 13, Yuexiu Property Co Ltd 123 HK 13, Shenzhen Investment Ltd 64 HK 23, Hopson Development Holdings 754 HK 15, n.a. n.a. n.a. 1.6 n.a. n.a. Beijing North Star Co Ltd-H 588 HK 13, n.a..4.4 n.a n.a. Yuexiu Real Estate Investmen 45 HK 11, Greentown China Holdings 39 HK 13, China Vanke Co Ltd-H 222 HK 254, Median Simple Average Weighted Average HK listed mid-small developers with major revenue from mainland China Overseas Grand Oceans 81 HK 7, Poly Property Group Co Ltd 119 HK 9, n.a n.a ShInd Urban 563 HK 9, n.a. Modern Land China Co Ltd 117 HK 2, n.a. Powerlong Real Estate Holdin 1238 HK 9, China Aoyuan Property Group 3883 HK 4, n.a. C C Land Holdings Ltd 1224 HK 5, n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Fantasia Holdings Group Co 1777 HK 5, n.a. Yuzhou Properties Co 1628 HK 9, Central China Real Estate 832 HK 4, China Sce Property Holdings 1966 HK 8, Top Spring International Hld 3688 HK 3, n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Beijing Capital Land Ltd-H 2868 HK 8, Zhong An Real Estate Ltd 672 HK 1, n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Kaisa Group Holdings Ltd 1638 HK 8, n.a. n.a..3 n.a. n.a Glorious Property Holdings 845 HK 6,.3.77 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Median Simple Average Weighted Average Source: Bloomberg, Guotai Junan International. See the last page for disclaimer Page 7 of 9

8 Financial Statements and Ratios Income Statement Cash Flow Statement Year End Dec (RMB m) 214A 215A 216F 217F 218F Year End Dec (RMB m) 214A 215A 216F 217F 218F Total revenue 111, ,13 146, , ,74 Profit for the period 18,16 17,34 18,33 2,829 22,85 Sales of properties 17,45 126, , , ,131 - Adjustments for: Other income 3,948 6,681 9,43 11,881 14,943 Income tax expenses 13,175 14,15 12,582 15,892 18,223 Cost of sales (79,615) (95,717) (14,964) (12,46) (128,151) D&A 1,136 1,454 1,599 1,759 1,935 Gross profit 31,784 37,413 41,929 47,48 5,923 Others (13,34) (13,48) (8,28) (1,748) (11,283) - Fair value gains on IPs 9,393 12,859 1,287 1,94 11,232 After above adjustments: 18,988 19,491 24,25 27,732 31,68 - Fair value gains on FAs (85) (595) 536 Changes in working capital: (43,89) (17,6) 65 1,765 24,739 - Selling and marketing costs (9,154) (13,325) (13,967) (15,164) (15,367) Net cash from operations (24,11) 1,891 24,855 38,498 56,419 - Administrative expenses (4,38) (6,139) (6,638) (7,434) (7,772) - Others incomes (expenses) 568 1,58 3,753 3,344 2,978 Tax paid (7,36) (6,65) (8,913) (1,665) (1,453) Operating profit 28,553 32,316 34,514 38,464 42,529 Interest paid (14,77) (19,575) (23,492) (16,6) (12,9) - Others 3,654 2,123 (388) (383) (379) Net cash from operating activities (45,485) (23,749) (7,55) 11,233 33,875 - Finance income/(costs), net (1,15) (2,994) (3,24) (1,36) (1,122) Profit before income tax 31,191 31,445 3,885 36,721 41,28 Purchase of PPE and IPs (8,427) (15,518) (34,16) (9,145) (7,168) - Income tax expense (13,175) (14,15) (12,582) (15,892) (18,223) Other investing cash flow (3,964) 2,965 1,318 8,271 2,57 Profit for the period 18,16 17,34 18,33 2,829 22,85 Cash flow from investments (12,391) (12,553) (32,842) (873) (4,597) Profit attributable to - Shareholders (Net income) 12,64 1,46 9,443 11,815 11,965 Debt raised/(repaid) 6,895 13,17 84,955 (7,1) 29,618 - Shareholders (Underlying Profit) 9,213 7,128 7,79 8,535 8,824 Dividends paid to shareholders (6,338) (6,952) (5,2) (4,694) (5,874) - Perpetual capital instruments 4,339 5,88 7,44 6,885 6,43 Other financing cash flow (6,959) (13,79) 6,226 (22,975) (2,324) - Minority interest 1,73 1,792 1,457 2,128 4,436 Cash flow from financing 47,598 19,446 85,982 (34,769) 3,42 Basic EPS (RMB) Underlying EPS (RMB) Net increase in cash (1,277) 73,144 45,59 (24,41) 32,698 DPS (RMB) Beginning Cash Balance 4,118 29,847 13,9 148,73 124,345 Dividend payout ratio 49.8% 49.7% 49.7% 49.7% 49.7% Exchange losses on cash equivalents Balance Sheet Ending Cash Balance 29,847 13,9 148,73 124, ,55 As at 31 Dec (RMB m) 214A 215A 216F 217F 218F Property, plant and equipment 15,54 16,72 21,736 22,171 22,614 Land use rights 3,388 3,625 4,713 4,948 5,196 Ratios Investment property 61,857 97, ,29 138, , A 215A 216F 217F 218F Other current assets 1,63 27,2 47,123 5,978 53,642 Total non-current assets 9, , , ,15 234,262 ROE 25.3% 2.5% 16.6% 17.8% 16.4% Properties under development 21, ,61 427, , ,35 ROCE 16.6% 13.4% 1.9% 1.6% 11.6% Completed properties held for sale 35,682 54,118 64,942 77,93 74,33 ROA 6.% 4.3% 3.4% 3.8% 4.% Restricted cash 29,651 6,932 67,25 72,387 76,7 Net Gearing Ratio 188.9% 26.5% 265.1% 255.2% 225.8% Cash and cash equivalents 29,847 13,9 148,73 124, ,55 Debt to Equity Ratio 35.3% 582.1% 69.5% 537.2% 533.1% Trade and other receivables 16,27 21,78 38,323 43,796 46,719 Other non-current assets 61,649 42,886 55,541 5,432 46,379 Valuations Total current assets 383,65 612,344 82,27 796,77 819, A 215A 216F 217F 218F Total assets 474, ,35 1,2,69 1,13,92 1,53,491 Advanced proceeds received from customers 47,348 83,61 118, ,97 13,473 Underlying P/E (Diluted) (x) Trade and other payables 123, ,39 258, , ,71 P/E (Basic) (x) Bank borrowings 79, , , , ,14 P/E (Diluted) (x) Other current liabilities 17,553 23,567 28,28 28,846 29,423 P/B (x) Total current liabilities 268, , , , ,612 Dividend Yield (%) Borrowings 76,41 138,162 27, ,65 239,366 Deferred income tax liabilities 1,271 17,569 18,96 18,639 19,198 Margins Other payable 7,175 2,481 7,443 7,71 6, A 215A 216F 217F 218F Total non-current liabilities 93, , , , ,281 Total liabilities 362,84 614, , , ,893 Gross Margin 28.5% 28.1% 28.5% 28.2% 28.4% Total common equity 51,12 51,6 62,647 69,768 75,859 Operating Profit Margin 25.6% 24.3% 23.5% 22.9% 23.7% Minority interest 8,46 15,399 16,856 18,984 23,42 Underlying Net Profit Margin 8.3% 5.4% 4.8% 5.1% 4.9% Perpetual capital instruments 52,852 75,737 11,28 12,493 95,319 EBITDA Margin 29.9% 27.% 24.3% 23.7% 24.6% Total equity & liabilities 474, ,35 1,2,69 1,13,92 1,53,491 See the last page for disclaimer Page 8 of 9

9 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 Performance is -5% to 5%; or the fundamental outlook of the sector is neutral. Underperform 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 SMI Holdings Group Limited (198 HK), Guotai Junan International Holdings Limited (1788 HK), Binhai Investment Company Limited (2886 HK) and Link Holdings Limited (8237 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 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. 216 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 9 of 9