CMS (HK) Research Highlights

Transcription

1 Jul 22, 2014 (Tuesday) 晨会报告 CMS (HK) Research Highlights China Mobile (941 HK, Neutral, TP HK$78.0) June net adds stabilising; 4G accelerated further China Mobile (CM)'s June data indicated accelerated growth of 4G business, with June 4G net adds of 5.8mn (+76% MoM, vs 3.3mn/2.0mn in May/Apr) and total 4G user base expanded to 13.9 mn (+72% MoM, vs 8.1mn in May). Total mobile user base reached 791mn (+0.4% MoM, vs 787mn in May), with net adds of 3.3mn (+24% MoM, vs 2.7mn in May) driven by 4G/3G/2G net adds(loss) of +5.8mn/+2.2mn/-4.7mn. In our view, CM's June data suggested that 4G subscriber migration continued to accelerate, with June 4G net adds accounting for 72% of 3G/4G net adds (vs. 43% in May, 22% in Apr). We believe this is due to the tariff cut of 4G packages and CM's increasing efforts in marketing/promotions in June. We expect CM's 4G net adds ramp-up to continue in 2H, and the company is on track to achieve 50mn 4G user target in 2014, with monthly 4G net adds reaching 5.5mn or above. In near term, we believe FDD-LTE license issuance have limited impact to CM's 4G business, given that 1) CM's 2G/3G subscribers continued to migrate to 4G, and 2) CU/CT's 4G-LTE infrastructure and network coverage remain weak. However, we believe CM's increasing 4G CAPEX and marketing/subsidy expense will continue to exert pressure on CM's profitability in short term. We maintain our Neutral rating with TP HK$78.0. Our E EPS are HK$5.34/5.27. (Alex Ng) Zoomlion (1157 HK, Neutral, TP HK$4.2) Bleak demand; farm machinery M&A may be the turning point Both GM and NP are under pressure The company announced unaudited NP to be RMB bn for 1H2014, implying a 60-70% drop YoY. The main reasons are a) new housing construction area decreases, causing the demand of concrete machineries and cranes to drop; b) keep complying with tightened credit sales policy, which improved the contract quality but decreased total revenue; c) GP drop due to long and short term factors; d) RMB100mn FX loss. Our views We believe that new housing construction area s YoY decline in 2H2014 will be gradually narrowed, but could hardly turn positive. The demand for construction machineries would not recover fully until the next real estate resurgence. Lower pump truck sales, limiting financial leasing business, misjudging on sales permission on 3rd emission level chassis, all causing GM to decline. We believe it is difficult for the company to reverse the declining trend in GP, but the company's market share is not reduced. We are not optimistic about the company's profitability in 2H, we estimate NP to drop by 50% due to lower 2H base. We believe the company s ideal target of farm machinery M&A is a company with sales between RMB 5 to10billion. Based on different income, NP and valuation assumptions, we estimate the contribution of the M&A to be HK$0.19 to 1.22 per share HK Indices Last price chg % chg HSI Finance Properties Utilities 23, , , , Commerce&Industry 14, HSCEI 10, HSCCI 4, HKSPGEM World Indices Last price chg % chg FTSE 100 DAX 30 6, , CAC 40 4, DJIA 17, S&P500 1, Nasdaq Composite 4, Nikkei , Asia-Pacific Indices Last price chg % chg KOSPI 2, TWSE 9, STI 3, India BSE 30 25, S&P/ASX 200 5, HSI One Year Jul-13 Nov-13 Mar-14 Jul-14 HSCEI One Year Jul-13 Nov-13 Mar-14 Jul-14 Source:Bloomberg China Merchants Securities (HK) Research of 15

2 Valuation Based on the unfavourable market environment, we have significantly reduced the company's 2014 revenue and NP by 15.65% and 45.29% respectively, but we think the company's current 2014E P/B value is 0.66, below the historical average and median industry. Downside risk is limited. We cut our target price to HK$ 4.2, equivalent to 0.6x2014E P/B. Maintain our Neutral rating. (Yiding Jiao) 2 of 15

3 A-share Research Highlights (CMS Research Center) Investment Strategy Weekly Report (0720) - Remain Bearish Overall, With Rotating Themes [Sun Qianqian, Chen Wenzhao. July 20, 2014] 1. Economic fundamentals short-term stable, but mid-term pressure persists The announcement of economic and monetary data for June was completed. The economy was stable, with the expectation of expanding credit being realized. Growth in the added value of industrial output increased by 0.4ppt MoM, which reflected the effects of mini-stimulus policy; growth of M2 increased significantly by 1.3ppt, reaching the peak level of 14.7% in the year, while new RMB loans also reached RMB1.08 trillion, the second highest in the year, which indicated an increase of risk sentiment for banks. Looking to the second half, owing to the steady consumption growth and the more or less confirmed mild recovery of exports, the key influences on the market would still be investments. Manufacturing investment: this is the largest part in fixed assets investment. With the expectation of mild recovery in exports, manufacturing investment is hard to improve significantly but the probability of plunging is also not high. Real estate investment: as the real estate inventory is still at a relatively high level over the recent years, coupled with the still uncertain property trend, rhythm of land acquisitions and investments of the developers would not accelerate immediately upon relaxation any more, but would tend to be following that of the market more closely. New construction would only start again after a reasonable digestion of inventory. Infrastructure investment: our estimate of total infrastructure investment for the year is around RMB12 trillion, with accumulative annual growth of 22%-23%, which would still be very difficult to hedge against the downside risk of property investment. 2. Reform of state-owned enterprises and Shanghai-HK Stock Connect beneficial to the valuation recovery of value stocks with low valuation, not good for small caps After the announcement by the State-owned Assets Supervision and Administration Commission (SASAC) of the State Council on 15th, a new round of reform on the local state-owned enterprises has begun. With the deepening of pilot points in the reform of state-owned enterprises in future, there would be more and more related speculations gradually and the regional reform of state-owned enterprises is also worth noting. Shanghai-HK Stock Connect will drive the valuation recovery of value stocks with low valuation. Although the full scale of Shanghai-HK Stock Connect will just increase the total market capitalization of all the relevant stocks in circulation by 2.3%, the connecting of two places and the reform market mechanism thereafter are expected to bring structural changes to the market, which will be revealed in A shares with scarcity of pharmaceuticals, white wine, electrical appliances Global Commodity Last price chg % chg Brent Oil Gold LME Aluminum LME Copper BDI API Coal Exchange /Currency /Bond Market USD/RMB USD/HKD 1-YR RMB NDF EUR/USD 3-M Libor 3-M Shibor 1, , , Last price chg % chg YR US T-Note Yield Brent Oil One Year Jul-13 Dec-13 May-14 Gold Commodity One Year Jul-13 Nov-13 Mar-14 Jul-14 LME Aluminum Commodity One Year Jul-13 Nov-13 Apr-14 Source:Bloomberg 3 of 15

4 favored by QFII, food & beverage, transportation, autos & parts, as well as some stocks with significant discounts and tendency of valuation recovery, whereas small caps, on the contrary, will tend to see downward revisions of valuation. 3. Investment strategy From the experience of past few years, when there was no internal economic recovery, the economic warming up and the stock market rebound based on policy relaxation would be short-lived and not significant. Hence, the market as a whole would still be bearish with rotating themes. For the short-term, we recommend A shares with scarcity which could benefit from Shanghai-HK Stock Connect, a minority of stocks with significant discounts in prices as well as investment targets in the reform of local state-owned enterprises with better sentiment of the industry. 4 of 15

5 What to Watch LME Copper Commodity One Year 8000 Economic Data HK:Nil US:Nil Date Ticker Stock Name Earnings Results 2014/07/ CKLIFE SCIENCES Date Ticker Stock Name Issue Price 6000 Jul-13 Nov-13 Apr-14 BDI One Year Jul-13 Nov-13 Mar-14 API Coal One Year Jul-13 Nov-13 Mar-14 Source:Bloomberg 5 of 15

6 China Merchants Securities (Hong Kong) Stock Pool Update Weekly Share px Mkt cap EPS P/E Company Ticker Rating Jul month TP % Upside (US$mn) 2014E 2015E 2016E 2014E 2015E 2016E Analyst Auto & Auto Parts Brilliance China 1114 HK BUY HK$14.5 HK$ , Colleen LI BYD Company 1211 HK NEUTRAL HK$48.15 HK$ , Colleen LI China ZhengTong Auto 1728 HK BUY HK$4.18 HK$ , Colleen LI Geely Automobile 175 HK BUY HK$2.91 HK$ , Colleen LI CSR 1766 HK BUY HK$6.68 HK$ , Colleen LI Great Wall Motor 2333 HK BUY HK$29.15 HK$ , Colleen LI CSR Times Electric 3898 HK BUY HK$26.05 HK$ , Colleen LI Minth Group 425 HK BUY HK$14.64 HK$ , Colleen LI Dongfeng Motor 489 HK BUY HK$13.72 HK$ , Colleen LI Zhongsheng Group 881 HK NEUTRAL HK$10.02 HK$ , Colleen LI Oil and Gas SPT Energy 1251 HK BUY HK$3.82 HK$ Michael YUK Hilong Holding 1623 HK BUY HK$4.0 HK$ Michael YUK Chu Kong Petroleum 1938 HK BUY HK$2.64 HK$ Michael YUK China Oilfield Services 2883 HK NEUTRAL HK$19.38 HK$ , Michael YUK Jutal Offshore Oil Services 3303 HK NEUTRAL HK$2.64 HK$ Michael YUK Anton Oilfield Services 3337 HK BUY HK$4.57 HK$ , Michael YUK NewOcean Energy 342 HK BUY HK$5.77 HK$ , Michael YUK Sinopec 386 HK BUY HK$7.22 HK$ , Michael YUK CIMC Enric 3899 HK NEUTRAL HK$9.79 HK$ , Michael YUK United Energy Group 467 HK BUY HK$1.15 HK$ , Michael YUK China Oil And Gas Group 603 HK NEUTRAL HK$1.38 HK$ Michael YUK Petrochina 857 HK BUY HK$10.16 HK$ , Michael YUK CNOOC 883 HK BUY HK$13.46 HK$ , Michael YUK Property China Resources Land 1109 HK NEUTRAL HK$15.2 HK$ , Feiqin DUAN Sunac China 1918 HK BUY HK$5.08 HK$ , Feiqin DUAN Evergrande Real Estate 3333 HK BUY HK$3.34 HK$ , Feiqin DUAN Greentown China 3900 HK BUY HK$8.23 HK$ , Feiqin DUAN China Overseas Land 688 HK BUY HK$20.55 HK$ , Feiqin DUAN Hopson Development 754 HK BUY HK$8.15 HK$ , Feiqin DUAN 6 of 15

7 Share px Mkt cap EPS P/E Company Ticker Rating Jul month TP % Upside (US$mn) 2014E 2015E 2016E 2014E 2015E 2016E Analyst Optics Valley Union 798 HK BUY HK$0.77 HK$ Feiqin DUAN China Merchants Land 978 HK BUY HK$1.05 HK$ Feiqin DUAN Metals and Mining China Hongqiao 1378 HK BUY HK$6.18 HK$ , Shawn LEE Zhaojin Mining 1818 HK NEUTRAL HK$4.7 HK$ Shawn LEE Aluminum Corp of China 2600 HK NEUTRAL HK$3.09 HK$ , N.A. N.A. Shawn LEE Zijin Mining 2899 HK NEUTRAL HK$1.78 HK$ , Shawn LEE Jiangxi Copper 358 HK SELL HK$13.68 HK$ , Shawn LEE China Molybdenum 3993 HK NEUTRAL HK$4.71 HK$ Shawn LEE RUSAL 486 HK NEUTRAL HK$3.77 HK$ , N.A Shawn LEE Technology, Media & Telecom China Telecom 728 HK NEUTRAL HK$4.01 HK$ , Alex NG China Unicom 762 HK NEUTRAL HK$12.64 HK$ , Alex NG China Mobile 941 HK NEUTRAL HK$81.65 HK$ , Alex NG Wisdom 1661 HK BUY HK$4.21 HK$ Jeff HAO Kingdee 268 HK NEUTRAL HK$2.79 HK$ Jeff HAO Chinasoft 354 HK NEUTRAL HK$2.2 HK$ Jeff HAO Kingsoft 3888 HK BUY HK$23.2 HK$ , Jeff HAO SinoMedia 623 HK BUY HK$6.16 HK$ Jeff HAO Tencent 700 HK BUY HK$121.5 HK$ , Jeff HAO NetDragon 777 HK BUY HK$13.52 HK$ Jeff HAO Hardware Technology AAC Technologies 2018 HK NEUTRAL HK$47.95 HK$ , Alex NG Coolpad 2369 HK BUY HK$2.17 HK$ Alex NG Sunny Optical 2382 HK NEUTRAL HK$11.06 HK$ , Alex NG TCL Comm 2618 HK BUY HK$10.8 HK$ , Alex NG Truly 732 HK BUY HK$4.58 HK$ , Alex NG Lenovo Group 992 HK BUY HK$10.88 HK$ , Alex NG Textile & Garment China Lilang 1234 HK BUY HK$5.12 HK$ Ivy ZHAO 361 Degrees 1361 HK NEUTRAL HK$1.78 HK$ Ivy ZHAO Xtep International 1368 HK BUY HK$3.35 HK$ Ivy ZHAO Belle 1880 HK NEUTRAL HK$8.74 HK$ , Ivy ZHAO Peak Sport 1968 HK BUY HK$2.04 HK$ Ivy ZHAO 7 of 15

8 Share px Mkt cap EPS P/E Company Ticker Rating Jul month TP % Upside (US$mn) 2014E 2015E 2016E 2014E 2015E 2016E Analyst ANTA Sports Products 2020 HK BUY HK$12.26 HK$ , Ivy ZHAO Li Ning 2331 HK BUY HK$4.72 HK$ , Ivy ZHAO China Dongxiang 3818 HK BUY HK$1.54 HK$ , Ivy ZHAO Ports Design 589 HK NEUTRAL HK$3.29 HK$ Ivy ZHAO Trinity 891 HK BUY HK$1.99 HK$ Ivy ZHAO Food & Beverage Want Want China 151 HK NEUTRAL HK$10.94 HK$ , Ling HUA China Mengniu Dairy 2319 HK BUY HK$37.6 HK$ , Ling HUA Tingyi 322 HK BUY HK$21.4 HK$ , Ling HUA Vitasoy 345 HK NEUTRAL HK$10.08 HK$ , Ling HUA Retail Haier Electronics 1169 HK BUY HK$21.2 HK$ , Gloria WANG Sa Sa International 178 HK BUY HK$6.01 HK$ , Gloria WANG Intime Retail Group 1833 HK BUY HK$7.1 HK$ , Gloria WANG Gome Electrical 493 HK BUY HK$1.23 HK$ , Gloria WANG Bonjour Holdings 653 HK NEUTRAL HK$1.17 HK$ Gloria WANG Alternative Energy Datang Renewable Power 1798 HK SELL HK$1.07 HK$ Lei YIN China Wind Power 182 HK BUY HK$0.63 HK$ Lei YIN Xinjiang Goldwind 2208 HK BUY HK$9.18 HK$ Lei YIN GCL-Poly Energy 3800 HK BUY HK$2.5 HK$ , N.A Lei YIN Singyes Solar 750 HK BUY HK$11.34 HK$ , Lei YIN Tianneng Power 819 HK BUY HK$2.95 HK$ Lei YIN China Longyuan Power 916 HK BUY HK$7.87 HK$ , Lei YIN Huaneng Renewables 958 HK BUY HK$2.46 HK$ , Lei YIN Port & Shipping COSCO Pacific 1199 HK BUY HK$10.96 HK$ , Kate LI China Merchants 144 HK NEUTRAL HK$25.4 HK$ , Kate LI CSCL 2866 HK NEUTRAL HK$2.15 HK$ N.A Kate LI Orient Overseas 316 HK BUY HK$38.45 HK$ , Kate LI Sinotrans Shipping 368 HK NEUTRAL HK$2.12 HK$ , Kate LI Machinery & Equipment Zoomlion Heavy 1157 HK NEUTRAL HK$4.45 HK$ Yiding JIAO CMEC 1829 HK BUY HK$4.53 HK$ Yiding JIAO 8 of 15

9 Share px Mkt cap EPS P/E Company Ticker Rating Jul month TP % Upside (US$mn) 2014E 2015E 2016E 2014E 2015E 2016E Analyst Lonking 3339 HK BUY HK$1.34 HK$ Yiding JIAO Sany Heavy 631 HK NEUTRAL HK$1.69 HK$ Yiding JIAO Electric Power HUADIAN POWER 1071 HK BUY HK$5.49 HK$ Vera LIANG China Power 2380 HK BUY HK$3.28 HK$ , Vera LIANG Huaneng Power 902 HK BUY HK$9.25 HK$ , Vera LIANG Datang Power 991 HK BUY HK$4.0 HK$ , Vera LIANG Pharmaceutical & Healthcare Essex Bio-Technology 1061 HK BUY HK$2.6 HK$ Jonathan HSU CSPC Pharmaceutical 1093 HK BUY HK$6.32 HK$ , Jonathan HSU Sinopharm Group 1099 HK BUY HK$23.85 HK$ , Jonathan HSU Sino Biopharm 1177 HK BUY HK$6.82 HK$ , Jonathan HSU Phoenix Healthcare 1515 HK BUY HK$11.72 HK$ , Jonathan HSU Dawnrays 2348 HK BUY HK$6.39 HK$ Jonathan HSU Shineway Pharma 2877 HK NEUTRAL HK$13.48 HK$ , Jonathan HSU Sihuan Pharmaceutical 460 HK BUY HK$5.14 HK$ , Jonathan HSU ikang Healthcare Group KANG US BUY US$18.8 US$ , Jonathan HSU Bank ABC 1288 HK BUY HK$3.51 HK$ , Donger WANG ICBC 1398 HK BUY HK$4.97 HK$ , Donger WANG Minsheng 1988 HK BUY HK$7.07 HK$ , Donger WANG BOCOM 3328 HK NEUTRAL HK$5.17 HK$ , Donger WANG CQRCB 3618 HK BUY HK$3.57 HK$ , Donger WANG BOC 3988 HK BUY HK$3.49 HK$ , Donger WANG China Construction Bank 939 HK BUY HK$5.58 HK$ , Donger WANG Citic 998 HK SELL HK$4.78 HK$ , Donger WANG Gaming Wynn Macau 1128 HK SELL HK$29.95 HK$ , Angela HAN LEE Sands China 1928 HK BUY HK$55.5 HK$ , Angela HAN LEE MGM China 2282 HK BUY HK$27.3 HK$ , Angela HAN LEE Galaxy Entertainment 27 HK BUY HK$63.3 HK$ , Angela HAN LEE Melco Crown 6883 HK BUY HK$85.55 HK$ , Angela HAN LEE SJM 880 HK SELL HK$20.15 HK$ , Angela HAN LEE Environmental Protection 9 of 15

10 Share px Mkt cap EPS P/E Company Ticker Rating Jul month TP % Upside (US$mn) 2014E 2015E 2016E 2014E 2015E 2016E Analyst Everbright International 257 HK BUY HK$11.28 HK$ , Shawn LEE Dongjiang Environmental 895 HK BUY HK$24.3 HK$ , Shawn LEE Industrial Goods TK group 2283 HK BUY HK$1.13 HK$ Ling HUA 10 of 15

11 HSI Index Components Performance Code Name Price Chg 1D (%) Last price HSCEI Index Components Performance Code Name Price Chg 1D 1 CHEUNG KONG TSINGTAO BREW-H CLP HLDGS LTD JIANGSU EXPRES-H HONG KG CHINA GS MAANSHAN IRON-H WHARF HLDG SINOPEC SHANG-H HSBC HLDGS PLC ANGANG STEEL-H POWER ASSETS HOL JIANGXI COPPER-H HANG SENG BK SINOPEC CORP-H HENDERSON LAND D CHINA RAIL GR-H HUTCHISON WHAMPO DONGFENG MOTOR-H SHK PPT CHINA COMM SER-H NEW WORLD DEV ZHEJIANG EXPRESS SWIRE PACIFIC-A BEIJING CAP AI-H BANK EAST ASIA CHINA TELECOM-H MTR CORP AIR CHINA LTD-H SINO LAND CO PETROCHINA CO-H HANG LUNG PROPER HUANENG POWER-H CHINA MERCHANT ANHUI CONCH-H CITIC PACIFIC CHINA CONST BA-H CHINA RES ENTERP DATANG INTL PO-H CATHAY PAC AIR CHINA CITIC BK-H ESPRIT HLDGS CHINA SHENHUA-H SINOPEC CORP-H HARBIN ELECTRIC HKEX CHINA SHIPPING-H LI & FUNG LTD YANZHOU COAL-H YUE YUEN INDUS CHINA RAIL CN-H CHINA OVERSEAS ICBC-H TENCENT CHINA COM CONS-H CHINA UNICOM HON CHINA COAL ENE-H PETROCHINA CO-H CHINA COSCO HO-H CNOOC LTD PING AN INSURA-H CHINA CONST BA-H PICC PROPERTY & CHINA MOBILE ALUMINUM CORP-H CHINA SHENHUA-H CHINA LIFE INS-H COSCO PAC LTD SHANGHAI ELECT-H ICBC-H GUANGZHOU R&F -H FIH MOBILE LTD CHINA SHIPPING-H PING AN INSURA-H CHINA OILFIELD-H BOC HONG KONG HO ZIJIN MINING-H ALUMINUM CORP-H CHINA NATL BDG-H CHINA LIFE INS-H BANK OF COMMUN-H BANK OF COMMUN-H CHINA MERCH BK-H BANK OF CHINA-H BANK OF CHINA-H CMOC-H (%) 11 of 15

12 A+H Company Performance Last price Name(H) Code (H) Price (H) Code (A) Price (A) Spread (%) NANJING PANDA-H JINGWEI TEXTIL-H NORTHEAST ELEC-H JINGCHENG MAC SHENJI GROUP-H CHONGQING IRON-H TIANJIN CAP-H SHANDONG XINHU-H SINOPEC SHANG-H BEIJING NORTH-H YANZHOU COAL-H ALUMINUM CORP-H BAIYUNSHAN PH-H CHINA SOUTHERN-H MAANSHAN IRON-H CHINA SHIPPING-H DATANG INTL PO-H JIANGXI COPPER-H DONGFANG ELECT-H ANHUI EXPRESS-H GUANGSHEN RAIL-H HISENSE KELON -H SHENZHEN EXPRE-H CHINA CITIC BK-H ZTE CORP-H GUANGZHOU SHIP-H LUOYANG GLASS-H SINOPEC YIZHEN-H BANK OF CHINA-H AIR CHINA LTD-H BANK OF COMMUN-H ICBC-H PING AN INSURA-H SINOPEC CORP-H CHINA LIFE INS-H HUADIAN POWER-H CHINA MERCH BK-H TSINGTAO BREW-H HUANENG POWER-H JIANGSU EXPRES-H ANGANG STEEL-H ANHUI CONCH-H WEICHAI POWER-H of 15

13 Recently Published Research Date published Name of report Analyst 17-Jul-14 Sands China (1928 HK) Angela Han Lee 17-Jul-14 Bonjour Holdings (653 HK) Wang Xiaodi 16-Jul-14 Huadian Power (1071 HK) Vera Liang 16-Jul-14 Sa Sa International (178 HK ) Wang Xiaodi 15-Jul-14 China Longyuan (916HK) Yin Lei 15-Jul-14 China banks - Still in favor Wang Donger 14-Jul-14 Macau Gaming - 2Q14 Preview Angela Han Lee 11-Jul-14 Intime Retail Group(1833.HK) Wang Xiaodi 11-Jul-14 Warning signs in Portugal? Lynn Song, Cliff Zhao, David Xie 10-Jul-14 Suntien Green Energy (956 HK) Vera Liang 10-Jul-14 FOMC minutes Lynn Song, Cliff Zhao, David Xie 9-Jul-14 China Tech Alex Ng 9-Jul-14 Jutal Offshore Oil Services (3303 HK) Michael Yuk 7-Jul-14 HK Market Strategy Bi-weekly Cliff Zhao, George Chen, Zi chen Xu 4-Jul-14 Hilong Holdings (1623 HK) Michael Yuk 4-Jul-14 US Labor Market Lynn Song, Cliff Zhao, David Xie 3-Jul-14 China Real Estate Kate Li, Duan Feiqin 3-Jul-14 Li Ning (2332 HK) Ivy Zhao 2-Jul-14 Macau Gaming Angela Han Lee 30-Jun-14 Lenovo Group (992 HK) Alex Ng 27-Jun-14 HK Stock Market Fund Flows (Issue of June 2014) Lynn Song, Cliff Zhao, David Xie 26-Jun China Clean Energy Sector Investment Outlook Yin Lei 26-Jun China Property Sector Investment Outlook Duan Feiqin 24-Jun-14 HK Market Strategy Bi-weekly Cliff Zhao, George Chen, Zi chen Xu 24-Jun-14 2H14 Hong Kong Metal&Mining Sector Investment Li Xiang 24-Jun-14 2H14 Hong Kong Food&Beverage Sector Investment Hua Ling 24-Jun-14 June Eurozone Flash Composite PMI Lynn Song, Cliff Zhao, David Xie 23-Jun-14 Dongjiang Environmental (895 HK) Li Xiang 20-Jun-14 ikang Healthcare Group (KANG US) Jonathan Hsu 20-Jun Hong Kong TMT Sector Investment Outlook Jeff Hao 20-Jun Hong Kong Thermal Power Sector Investment Vera Liang 17-Jun-14 Outlook 2H14 Hong Kong Stock Market Investment Outlook Cliff Zhao, George Chen, Zi chen Xu 17-Jun-14 2H14 Hong Kong Shipping and Port Sector Investment Kate Li 16-Jun-14 Strategy 2H14 China Healthcare Equity Strategy Jonathan Hsu 13-Jun-14 2H14 Oil & Gas Industry Outlook Michael Yuk 12-Jun-14 Bottom HK Stock of Market Form Machinery Sector Outlook Yiding JIAO 10-Jun-14 Eurozone Monthly Chart Book (June 2014) Lynn Song, Cliff Zhao, David Xie 10-Jun-14 China Wind Power Operator Yin Lei 9-Jun-14 Truly International (732 HK) Alex Ng 5-Jun-14 Bottom China Dongxiang of Form (3818 HK ) Ivy Zhao 4-Jun-14 Belle(1880 HK) Ivy Zhao 4-Jun-14 Environmental protection Li Xiang 13 of 15

14 RATING DEFINITION & DISCLAIMER INDUSTRY OVERWEIGHT NEUTRAL UNDERWEIGHT DEFINITION Expected to outperform the market index by > 10% over the next 12 months Expected to outperform or underperform the market index by 10% or less over the next twelve months Expected to underperform the market index by >10% over the next 12 months COMPANY BUY NEUTRAL SELL DEFINITION Expected to outperform the market index by >10% over the next twelve months Expected to outperform or underperform the market index by 10% or less over the next twelve months Expected to underperform the market index by >10% over the next twelve months Analyst Disclosure The analysts primarily responsible for the preparation of all or part of the research report contained herein hereby certify that: (i) the views expressed in this research report accurately reflect the personal views of each such analyst about the subject securities and issuers; and (ii) no part of the analyst s compensation was, is, or will be directly or indirectly, related to the specific recommendations or views expressed in this research report. REGULATORY DISCLOSURES China Merchants Securities (HK) Co., Limited acted as the Joint Book-runner of China Merchants Land Ltd. on its placement. China Merchants Securities (HK) Co., Limited acted as the Global Coordinator, Joint Book-runner and Joint Lead Manager of Evergrande Real Estate Group Ltd. in an offering. China Merchants Securities (HK) Co., Limited acted as the Joint Bookrunner and Joint Lead Manager of Lenovo Group Ltd. in an offering. China Merchants Securities (HK) Co., Limited acted as the Joint Global Coordinator and Joint Book-runner of Optics Valley Union Holding Co. Ltd. on the IPO. China Merchants Securities (HK) Co., Limited acted as the Sole Sponsor, Sole Global Coordinator and Sole Book-runner of TK Group (Holdings) Ltd. on the IPO. China Merchants Securities (HK) Co., Limited has received compensation from or mandates for investment banking services in the past 12 months from certain listed corporations whose securities are being reviewed in this research report. DISCLAIMER This document is prepared by China Merchants Securities (HK) Co., Limited ( CMS HK ). CMS HK is a licensed corporation to carry on Type 1 (dealing in securities), Type 2 (dealing in futures), Type 4 (advising on securities), Type 6 (advising on corporate finance) and Type 9 (asset management) regulated activities under the Securities and Futures Ordinance (Chapter 571). This document is for information purpose only. Neither the information nor opinion expressed shall be construed, expressly or impliedly, as an advice, offer or solicitation of an offer, invitation, advertisement, inducement, recommendation or representation of any kind or form whatsoever to buy or sell any security, financial instrument or any investment or other specific product. The securities, instruments or strategies discussed in this document may not be suitable for all investors, and certain investors may not be eligible to participate in some or all of them. Certain services and products are subject to legal restrictions and cannot be offered worldwide on an unrestricted basis and/or may not be eligible for sale to all investors. The information and opinions, and associated estimates and forecasts, contained herein have been obtained from or are based on sources believed to be reliable. CMS HK, its holding or affiliated companies, or any of its or their directors, officers or employees ( CMS Group ) do not represent or warrant, expressly or impliedly, that it is accurate, correct or complete and it should not be relied upon. CMS Group will not accept any responsibility or liability whatsoever for any use of or reliance upon this document or any of the content thereof. The contents and information in this document are only current as of the date of their publication and will be subject to change without prior notice. Past performance is not indicative of future performance. Estimates of future performance are based on assumptions that may not be realized. The analysis contained herein is based on numerous assumptions. Different assumptions could result in materially different results. Opinions expressed herein may differ or be contrary to those expressed by other business divisions or other members of CMS Group as a result of using different assumptions and/or criteria. This document has been prepared without regard to the individual financial circumstances and investment objectives of the persons who receive it. Use of any information herein shall be at the sole discretion and risk of the user. Investors are advised to independently evaluate particular investments and strategies, take financial and/or tax advice as to the implications (including tax) of investing in any of the securities or products mentioned in this document, and make their own investment decisions without relying on this publication. CMS Group may have a long or short position, make markets, act as principal or agent, or engage in transactions in securities of companies referred to in this document and may also perform or seek to perform investment banking services or provide advisory or other services for those companies. 14 of 15

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