Morning Express. CMS(HK) Research Highlights. A-share Research Highlights. Tuesday, August 5, 2014

Transcription

1 Morning Express China Merchants Securities (HK) Hong Kong Equity Research CMS(HK) Research Highlights Truly (732 HK, HK$4.46, BUY, TP HK$7.15) Anticipate 1H margin decline on lower utilization; expect near-term pressure despite 2H recovery on track Event: Truly announced profit warning for 1H14, given 1) one-off income tax overprovision of HK$68mn recognized in 1H13, and 2) gross margin decline on slower spec migration and lower utilization rate in 1H14. Including one-off item, the company expects 1H14 net profit to decline by 25%+ YoY. In addition, company released July revenue of HK$2.02bn (+10.3% YoY, +3.4% MoM), improving from June revenue of HK$1.96bn (+5.8% YoY, +8.6% MoM). Jan-July sales amounted to HK$11.5bn, up 10% YoY. Our view: With weak 2Q14 sales of HK$5.2bn (-1.2% yoy; vs +27% YoY in 1Q14) previously reported due to 3G inventory correction and slower 4G transition in 2Q, we believe Truly's softer 2Q GPM on lower utilization was partly anticipated given its 20%+ share price correction since 2Q. Excluding impact of one-time gain of HK$68mn in 1H13, our analysis indicated 1H14 revenue/net profit of HK$9.52bn/HK$512mn (+9.9% YoY/-10.1% YoY), factoring in 1H14 GPM contraction to 12.4% from 13.9% in 2Q13 and higher opex ratio of 4.3% from 3.2% in 2Q13. As highlighted in our note in June, we believe 2Q was likely the trough for Truly in 2014, with weaker-than-expected revenue in April/May due to customers' product transition and operators' subsidy policy changes. We expect continued revenue recovery in 3Q will lead to better gross margin on higher utilization. Assuming 2H14 revenue of HK$14.2bn (+18.4% YoY) and GPM of 13.7% (vs 12.4% in 1H), our scenario analysis suggested 2014E net profit of HK$1.59bn (+6.7% YoY, excl one-off items), implying 19% downside to consensus estimate of HK$1.89bn. In conclusion, we expect share price pressure in near term amid weakerthan-expected 2Q margin, but we believe July revenue recovery is an encouraging sign as handset supply chain is entering peak season of product launch and accelerating China 4G demand in 2H. Truly will report 1H14 result on 20 Aug, and we are now reviewing our numbers. (Alex Ng) Stock Market Indices Close 1-day chg % chg Hang Seng Index Hang Seng Finance Index Hang Seng Utilities Index Hang Seng Property Index Hang Seng Composite Index HSCEI CSI Shanghai Composite Index TWSE Global Last price chg %chg Brent Oil COMEX Gold COMEX Copper LME Copper LME Aluminum BDI Exchange/interest rates Last price chg %chg USD/RMB USD/HKD EUR/USD Y RMB NDF M Libor M Shibor Y US T-Note Yield HSI vs. HSCEI vs. CSI 300 (%) HSI HSCEI CSI Aug/13 Oct/13 Dec/13 Feb/14 Apr/14 Jun/14 A-share Research Highlights Coal Industry Monthly Report (Aug 2014) Coal price short-term bottoming, rallying trend still continues With the industry undergoing de-inventory in July, coal price kept falling and owing to the upbeat trend of coal driven by policy relaxations, coal stocks outperformed the market significantly: Domestic steam coal price kept To access our research reports on the Bloomberg terminal, type CMHK <GO> 1

2 falling in July. Shenhua ( CH) cut coal price for six consecutive times and North Port price kept falling. Bohai-Rim price index fell for eight consecutive weeks to RMB489/ton, down by RMB39/ton from the end of June, which kept breaking new lows for the index. Jingtang Habor coking coal price was raised to RMB970/ton, down by RMB10/ton from the end of June. Though coal price kept falling and the performance of coal market remained soft, the macroeconomic situation was upbeat and with the increasing policy relaxations, the sector of coal stocks had a strong rally. The coal industry index surged 13.8% in July, outperforming the CSI 300 Index by 5.3%, which was ranked no.2 among the 29 subsectors, just behind the non-ferrous metal industry. Limited production in August conducive to restoring equilibrium between supply and demand, with steam-coal price short-term bottoming and metallurgical-coal price remaining weak Demand of peak season providing slight support, with steam-coal price short-term bottoming. At present, the daily coal consumption of power plants has increased amid the hot weather, but growth is limited by the suppression of hydropower. Meanwhile, as the pressure of de-inventory remained relatively high in various aspects, coal price is still not ready for a significant rally yet. At the same time, we have also seen some positive signs: coastal freight, as a leading indicator, rebounded quickly and there was a slight recovery in the enthusiasm of downstream purchasing; Shanxiorigin inventory decreased after several months of significant gains. In addition, the 10% production limitation proposed by the Coal Industry Association, if implemented, will also improve the oversupply situation of coal at present. With greater pressure on steel supply, metallurgical coal hard to see rally. Though the steel industry PMI rebounded, the new orders index retreated to the contraction region of below 50 again in terms of sub-categories, which indicated no real improvement in the actual end demand during the low season. With the significant price declines of raw materials, the upbeat profits of steel enterprises had led to higher enthusiasm of production. However, the downstream demand was not good and the inventory of steel enterprises increased passively, which created higher pressure of supply and hence steel price would be difficult to see recovery. The industry chain of coal-coke-steel is still expected to be consolidating amid weakness in August. Yet, with the stabilizing and upbeat domestic economy, the gradually relaxing property policy and the recovery of market confidence, we will be closely monitoring the influence caused by the changes of property industry chain upon the upstream demand. Investment views: With the increasing policy relaxations recently as well as the mini-stimulus providing base support for the real economy and the relatively upbeat economic figures, certain cyclical stocks have been triggered for rally. We reckon the rally of coal sector will still continue: 1) With the macro looking good, the effects of short-term policy relaxations cannot be falsified and the rally of cyclical stocks will not end. From the angle of industry comparison and asset allocation, the rally of coal sector is still worth participating. 2) The short-term bottoming of coal price and the measures such as the limited production of industry in future may result in the earlier-than-expected rally of coal price. We continue to recommend Jizhong Energy ( CH), Luan Environmental ( CH) and Wintime Energy ( CH), which can rally strongly. Risk reminder: The macroeconomic recovery is below expectation. (Lu To access our research reports on the Bloomberg terminal, type CMHK <GO> 2

3 Ping, Zhang Shun, Kong Weiwei, Aug 3, 2014) Antitrust Actions in Automobile Industry Has Begun Event: SAIC has recently made an announcement that the filing of general dealership of automobiles and authorized dealership of automobile brands will be ceased with effect from October 1, In addition, acceptance of filing materials from automobile suppliers will be ceased with effect from August 20. Following the cessation of filing, the scope of business on the licenses of automobile dealers, including general dealers, who engage in sales of branded automobiles will be unified as sales of automobiles. The previous registration of sales of xx branded automobiles can be changed to sales of automobiles. Comments: 1. In August 2004, MOFCOM, NDRC and SAIC jointly promulgated the Administrative Rules on Branded Sales of Automobiles (the Administrative Rules ) which required domestic automobile dealers to obtain authorization from automobile manufacturers and file with MOFCOM and departments of commerce and industry, with effect from April The current revocation of filing requirements on general dealers and authorized dealers by the SAIC has not fundamentally changed the authorization system of automobile dealers and manufacturers, but it will become a prologue for the amendment and easing of the Administrative Rules, indicating evolution in the automobile dealing and after-sales markets. 2. In August 2013, the NDRC formally commenced its antitrust investigation in the automobile industry. In June 2014, the Ministry of Transport released the Consultation Paper on Guiding Opinion on the Transformation, Upgrade and Service Improvement of Automobile Repairing Industry (Consultation Draft). In August 2014, the SAIC revoked the filing requirements on the dealers and authorized dealers. We believe that these actions are interrelated and the antitrust actions in the automobile market have begun. We believe that the automobile dealing and repairing markets will be undergoing profound evolution with the furthering of antitrust measures: (1) Antitrust measures facilitated integration and intensive development in automobile dealing. The strength of the automobile makers will be undermined, whilst the multi-brand and cross-regional dealership groups will benefit from the ease of resource integration, cost cutting and increased bargaining power to manufacturers. On the other hand, the development for single-brand or smaller dealers will become more difficult due to their lower capability in resisting risks. The concentration in the automobile dealing industry will become higher and the capital intensive 4S shop development model in urban areas will be moving to intensive models of 2S+2S and automobile supermarket. (2) The ratios of the prices of parts and components to complete automobiles are exceptionally high in the domestic automobile after-sales market, which is mainly due to the corner of the automobile manufacturers on the supply of original parts and components and repair technologies as To access our research reports on the Bloomberg terminal, type CMHK <GO> 3

4 well as information. To fully rectify this, legislation by the government on breaking those corners and the restriction on the usage of non-original parts and components and the opening of repair technology and information to third parties are fundamental. As a result, third-party repairing companies will directly benefit. (3) Antitrust practices have become a general direction of the automobile industry, and the dealing and after-sales areas are undergoing profound evolution. We believe that third-party repairing as well as parts and components companies will significantly benefit from the antitrust process of the automobile industry. Related parts and components companies that can benefit include Fuyao Glass ( CH), Xingyu Automotive ( CH) and Longji Machinery ( CH). As for the market of imported automobiles, antitrust in the industry will facilitate lower prices of complete automobiles and after-sales services, which are favorable to the import market as a whole. The only one import-wholealing service provider Sinomach Automobile ( CH) is going to benefit. Risk factors mainly include lower-than-expected progress in antitrust measures. (Wang Liusheng and Fang Xiaojian, August 3, 2014) Marginal Adjustments to Monetary Policies Inevitable Investment thesis: Last Thursday, the PBOC launched 14-day repos for RMB26 bn, which was the first time it had net withdrawal of liquidity from the market over the last 12 weeks. The only surprise was that the interest rate of the repos decreased by 10 bp to 3.7%. The performance of the markets on Thursday and Friday suggested that investors rather focused on the impact on pricing from the drop in repos interest rate. Both the yields in money and bond markets declined, and our views are as follows: First, growth of M2 for June was too high and deviated from target range, suggesting that the targeted easing could not be proceeded in money and credit markets at the same time. As a result, the central bank withdrew liquidity from the open market in the last week of July to stabilize the aggregate money supply. Second, the central bank lowered the interest rate of repos whilst withdrawing liquidity, indicating its intention to ease the impact on the market when it had net withdrawal of liquidity, and to keep the expectation on liquidity stable. Third, the central bank intended to reduce interest rate of liquidity for lowering the cost of financing to the real economy in response to the standing committee meeting of the State Council. Fourth, the central bank needed more flexible open market operations to suppress the short-term fluctuation in liquidity following the slow increase in funds outstanding for foreign exchange. As a result, the period of repos was shortened to 14 days from 28 days. Fifth, the reverse in the gap between 14-day and 28-day repos interest rates was more significant from last Monday to last Wednesday, and such phenomenon can be effectively rectified by lowering the 14-day repos interest rate. In addition, the 7-day repos interest rate could also be stabilized. The central bank also aimed at managing the trend of short-term interest rates. Sixth, the withdrawal of liquidity by the central bank through open market operations might indicate that it has injected sufficient base money through other channels in July in terms of the supply to monetary base, but this has To access our research reports on the Bloomberg terminal, type CMHK <GO> 4

5 yet to be proved by upcoming data. In general, we believe that lowering the repos interest rate to ease the impact of net withdrawal of liquidity can stabilize the expectation on liquidity in the short term. The central bank s first net withdrawal of liquidity from the open market in 12 weeks indicated that adjustments to monetary policies are inevitable. We shouldn t be too bullish about the level of liquidity in the interbank market in future. The influence of price tools to the markets may gradually increase when the central bank no longer uses quantitative tools for passive control. (Xie Yaxuan, Zhao Wenli, Zhang Yiping, Yan Ling and Zhao Ke, August 4, 2014) To access our research reports on the Bloomberg terminal, type CMHK <GO> 5

6 What to Watch Company Events Date Ticker Company Event 2014/08/ HK CLEAR MEDIA Interim Result 2014/08/ HK SAN MIGUEL HK Interim Result/ Dividend 2014/08/ HK PCPD Interim Result/ Dividend 2014/08/ HK HANGFAT GINSENG Interim Result/ Dividend 2014/08/ HK VANKE PPT OVS Interim Result/ Dividend 2014/08/ HK SINOSOFT TECH Interim Result 2014/08/ HK GUOTAI JUNAN I Interim Result/ Dividend 2014/08/ HK MGM CHINA Interim Result/ Dividend 2014/08/ HK COSMO LADY Interim Result 2014/08/ HK YORKEY OPTICAL Interim Result/ Dividend 2014/08/ HK HKT-SS Interim Result 2014/08/ HK DIFFER GROUP Interim Result 2014/08/ HK LUOXIN PHARMA Interim Result 2014/08/ HK SOUTHCHINA LAND Interim Result 2014/08/ HK BRANDINGCHINA Interim Result/ Dividend To access our research reports on the Bloomberg terminal, type CMHK <GO> 6

7 Research Coverage List As of August 5, Updated weekly. Share px Mkt cap EPS P/E Company Ticker Rating Aug month TP % Upside (US$mn) 2014E 2015E 2016E 2014E 2015E 2016E Analyst Auto & Auto Parts Brilliance China 1114 HK BUY HK$14.4 HK$ , Colleen LI BYD Company 1211 HK NEUTRAL HK$51.65 HK$ , Colleen LI China ZhengTong Auto 1728 HK BUY HK$4.19 HK$ , Colleen LI Geely Automobile 175 HK BUY HK$3.09 HK$ , Colleen LI CSR 1766 HK BUY HK$7.11 HK$ , Colleen LI Great Wall Motor 2333 HK BUY HK$33.6 HK$ , Colleen LI CSR Times Electric 3898 HK BUY HK$27.05 HK$ , Colleen LI Minth Group 425 HK BUY HK$15.1 HK$ , Colleen LI Dongfeng Motor 489 HK BUY HK$13.56 HK$ , Colleen LI Zhongsheng Group 881 HK NEUTRAL HK$9.92 HK$ , Colleen LI Oil and Gas SPT Energy 1251 HK BUY HK$4.03 HK$ Michael YUK Hilong Holding 1623 HK BUY HK$4.41 HK$ Michael YUK Chu Kong Petroleum 1938 HK BUY HK$2.74 HK$ Michael YUK China Oilfield Services 2883 HK NEUTRAL HK$19.4 HK$ , Michael YUK Jutal Offshore Oil Services 3303 HK NEUTRAL HK$2.77 HK$ Michael YUK Anton Oilfield Services 3337 HK BUY HK$4.24 HK$ , Michael YUK NewOcean Energy 342 HK BUY HK$5.5 HK$ , Michael YUK Sinopec 386 HK BUY HK$7.56 HK$ , Michael YUK CIMC Enric 3899 HK NEUTRAL HK$9.3 HK$ , Michael YUK United Energy Group 467 HK BUY HK$1.14 HK$ , Michael YUK China Oil And Gas Group 603 HK NEUTRAL HK$1.39 HK$ Michael YUK Petrochina 857 HK BUY HK$10.1 HK$ , Michael YUK CNOOC 883 HK BUY HK$14.1 HK$ , Michael YUK Property China Resources Land 1109 HK NEUTRAL HK$17.86 HK$ , Feiqin DUAN Sunac China 1918 HK BUY HK$6.31 HK$ , Feiqin DUAN Evergrande Real Estate 3333 HK BUY HK$3.33 HK$ , Feiqin DUAN Greentown China 3900 HK BUY HK$9.74 HK$ , Feiqin DUAN To access our research reports on the Bloomberg terminal, type CMHK <GO> 7

8 Share px Mkt cap EPS P/E Company Ticker Rating Aug month TP % Upside (US$mn) 2014E 2015E 2016E 2014E 2015E 2016E Analyst China Overseas Land 688 HK BUY HK$23.45 HK$ , Feiqin DUAN Hopson Development 754 HK BUY HK$8.65 HK$ , Feiqin DUAN Optics Valley Union 798 HK BUY HK$0.77 HK$ Feiqin DUAN Metals and Mining China Hongqiao 1378 HK BUY HK$6.62 HK$ , Shawn LEE Zhaojin Mining 1818 HK NEUTRAL HK$4.87 HK$ Shawn LEE Aluminum Corp of China 2600 HK NEUTRAL HK$3.52 HK$ , N.A. N.A. Shawn LEE Zijin Mining 2899 HK NEUTRAL HK$2.01 HK$ , Shawn LEE Jiangxi Copper 358 HK SELL HK$14.72 HK$ , Shawn LEE China Molybdenum 3993 HK NEUTRAL HK$5.16 HK$ Shawn LEE RUSAL 486 HK NEUTRAL HK$4.0 HK$ , N.A Shawn LEE Technology, Media & Telecom China Telecom 728 HK NEUTRAL HK$4.27 HK$ , Alex NG China Unicom 762 HK NEUTRAL HK$13.56 HK$ , Alex NG China Mobile 941 HK NEUTRAL HK$85.2 HK$ , Alex NG Wisdom 1661 HK BUY HK$3.85 HK$ Jeff HAO Kingdee 268 HK NEUTRAL HK$2.68 HK$ Jeff HAO Chinasoft 354 HK NEUTRAL HK$2.52 HK$ Jeff HAO Kingsoft 3888 HK BUY HK$23.05 HK$ , Jeff HAO SinoMedia 623 HK BUY HK$5.85 HK$ Jeff HAO Tencent 700 HK BUY HK$129.2 HK$ , Jeff HAO NetDragon 777 HK BUY HK$14.46 HK$ Jeff HAO Hardware Technology AAC Technologies 2018 HK NEUTRAL HK$47.45 HK$ , Alex NG Coolpad 2369 HK BUY HK$1.86 HK$ Alex NG Sunny Optical 2382 HK NEUTRAL HK$9.82 HK$ , Alex NG TCL Comm 2618 HK BUY HK$10.24 HK$ , Alex NG Truly 732 HK BUY HK$4.46 HK$ , Alex NG Lenovo Group 992 HK BUY HK$10.64 HK$ , Alex NG Textile & Garment China Lilang 1234 HK BUY HK$4.99 HK$ Ivy ZHAO 361 Degrees 1361 HK NEUTRAL HK$1.83 HK$ Ivy ZHAO To access our research reports on the Bloomberg terminal, type CMHK <GO> 8

9 Share px Mkt cap EPS P/E Company Ticker Rating Aug month TP % Upside (US$mn) 2014E 2015E 2016E 2014E 2015E 2016E Analyst Xtep International 1368 HK BUY HK$3.32 HK$ Ivy ZHAO Belle 1880 HK NEUTRAL HK$9.9 HK$ , Ivy ZHAO Peak Sport 1968 HK BUY HK$2.09 HK$ Ivy ZHAO ANTA Sports Products 2020 HK BUY HK$13.18 HK$ , Ivy ZHAO Li Ning 2331 HK NEUTRAL HK$4.83 HK$ , N.A. N.A Ivy ZHAO China Dongxiang 3818 HK BUY HK$1.51 HK$ , Ivy ZHAO Ports Design 589 HK NEUTRAL HK$3.24 HK$ Ivy ZHAO Trinity 891 HK BUY HK$1.9 HK$ Ivy ZHAO Food & Beverage Want Want China 151 HK NEUTRAL HK$10.72 HK$ , Ling HUA China Mengniu Dairy 2319 HK BUY HK$38.0 HK$ , Ling HUA Tingyi 322 HK BUY HK$22.25 HK$ , Ling HUA Vitasoy 345 HK NEUTRAL HK$10.02 HK$ , Ling HUA Retail Haier Electronics 1169 HK BUY HK$22.4 HK$ , Gloria WANG Springland International 1700 HK NEUTRAL HK$3.2 HK$ , Gloria WANG Holdings Sa Sa International 178 HK NEUTRAL HK$6.2 HK$ , Gloria WANG Intime Retail Group 1833 HK BUY HK$7.44 HK$ , Gloria WANG GOME ELECTRICAL 493 HK BUY HK$1.34 HK$ , Gloria WANG Bonjour Holdings 653 HK NEUTRAL HK$1.19 HK$ Gloria WANG Alternative Energy Datang Renewable Power 1798 HK SELL HK$1.13 HK$ Lei YIN China Wind Power 182 HK BUY HK$0.63 HK$ Lei YIN Xinjiang Goldwind 2208 HK BUY HK$8.81 HK$ Lei YIN GCL-Poly Energy 3800 HK BUY HK$2.63 HK$ , N.A Lei YIN Singyes Solar 750 HK BUY HK$12.02 HK$ , Lei YIN Tianneng Power 819 HK BUY HK$2.91 HK$ Lei YIN China Longyuan Power 916 HK BUY HK$7.88 HK$ , Lei YIN Huaneng Renewables 958 HK BUY HK$2.58 HK$ , Lei YIN Port & Shipping COSCO Pacific 1199 HK BUY HK$11.62 HK$ , Kate LI China Merchants 144 HK NEUTRAL HK$25.7 HK$ , Kate LI To access our research reports on the Bloomberg terminal, type CMHK <GO> 9

10 Share px Mkt cap EPS P/E Company Ticker Rating Aug month TP % Upside (US$mn) 2014E 2015E 2016E 2014E 2015E 2016E Analyst CSCL 2866 HK NEUTRAL HK$2.23 HK$ N.A Kate LI Orient Overseas 316 HK BUY HK$40.75 HK$ , Kate LI Sinotrans Shipping 368 HK NEUTRAL HK$2.13 HK$ , Kate LI Machinery & Equipment Zoomlion Heavy 1157 HK NEUTRAL HK$4.84 HK$ Yiding JIAO CMEC 1829 HK BUY HK$4.79 HK$ Yiding JIAO Lonking 3339 HK BUY HK$1.4 HK$ Yiding JIAO Sany Heavy 631 HK NEUTRAL HK$1.83 HK$ Yiding JIAO Electric Power Huadian Power 1071 HK BUY HK$4.89 HK$ Vera LIANG China Power 2380 HK BUY HK$3.2 HK$ , Vera LIANG Huaneng Power 902 HK BUY HK$8.82 HK$ , Vera LIANG Datang Power 991 HK BUY HK$3.9 HK$ , Vera LIANG Pharmaceutical & Healthcare Essex Bio-Technology 1061 HK BUY HK$2.7 HK$ Jonathan HSU CSPC Pharmaceutical 1093 HK BUY HK$5.93 HK$ , Jonathan HSU Sinopharm Group 1099 HK BUY HK$23.0 HK$ , Jonathan HSU Sino Biopharm 1177 HK BUY HK$6.55 HK$ , Jonathan HSU Phoenix Healthcare 1515 HK BUY HK$11.52 HK$ , Jonathan HSU Dawnrays 2348 HK BUY HK$6.43 HK$ Jonathan HSU Shineway Pharma 2877 HK NEUTRAL HK$13.16 HK$ , Jonathan HSU Sihuan Pharmaceutical 460 HK BUY HK$4.89 HK$ , Jonathan HSU ikang Healthcare Group KANG US BUY US$18.69 US$ , Jonathan HSU Bank ABC 1288 HK BUY HK$3.79 HK$ , Donger WANG ICBC 1398 HK BUY HK$5.29 HK$ , Donger WANG Minsheng 1988 HK BUY HK$8.04 HK$ , Donger WANG BOCOM 3328 HK NEUTRAL HK$5.87 HK$ , Donger WANG CQRCB 3618 HK BUY HK$3.87 HK$ , Donger WANG BOC 3988 HK BUY HK$3.69 HK$ , Donger WANG China Construction Bank 939 HK BUY HK$5.94 HK$ , Donger WANG Citic 998 HK SELL HK$5.13 HK$ , Donger WANG To access our research reports on the Bloomberg terminal, type CMHK <GO> 10

11 Share px Mkt cap EPS P/E Company Ticker Rating Aug month TP % Upside (US$mn) 2014E 2015E 2016E 2014E 2015E 2016E Analyst Gaming Wynn Macau 1128 HK SELL HK$32.45 HK$ , Angela HAN LEE Sands China 1928 HK BUY HK$56.75 HK$ , Angela HAN LEE MGM China 2282 HK BUY HK$27.7 HK$ , Angela HAN LEE Galaxy Entertainment 27 HK BUY HK$64.6 HK$ , Angela HAN LEE Melco Crown 6883 HK BUY HK$84.45 HK$ , Angela HAN LEE SJM 880 HK SELL HK$20.65 HK$ , Angela HAN LEE Environmental Protection Everbright International 257 HK BUY HK$10.68 HK$ , Shawn LEE Dongjiang Environmental 895 HK BUY HK$29.3 HK$ , Shawn LEE Industrial Goods TK group 2283 HK BUY HK$1.04 HK$ Ling HUA Source: Bloomberg, CMS (HK) To access our research reports on the Bloomberg terminal, type CMHK <GO> 11

12 Recently Published Reports Date published Name of report Analyst Macau Gaming - July review Angela HAN LEE Kingsoft(03888.HK) Jeff Hao Hopson Development (754 HK) Feiqin DUAN, Kate LI US 2Q14 GDP rebounded to 4.0% QoQ SAAR Lynn SONG, Cliff ZHAO, David XIE China/HK Healthcare - 1H14 results preview Jonathan HSU HK Stock Market Fund Flows (Issue of July 2014) Lynn SONG, Cliff ZHAO, David XIE Haier Electronics (1169 HK) Gloria WANG China Banks interim results preview Donger WANG Wynn Macau (1128 HK) Angela HAN LEE ICBC (1398 HK) Donger WANG Kingsoft(3888 HK) Jeff Hao US Housing Market Overview David XIE, Cliff ZHAO, Lynn SONG Gome Electrical (493 HK) Gloria WANG Wisdom Holdings Group (1661 HK) Jeff HAO Hong Kong Stock Market Outlook 2H14 Cliff ZHAO, George CHEN, Zichen XU HK Market Strategy Bi-weekly Cliff ZHAO, George CHEN, Zichen XU Dongjiang Environmental (895 HK) Shawn LI VITASOYINT'L (345 HK) Ling HUA Springland International (1700 HK) Gloria WANG TCL Comm (2618 HK) Alex NG Sunac China Holdings Limited (1918 HK) Kate LI Li Ning (2331 HK) Ivy ZHAO Zoomlion (1157 HK) Yiding JIAO To access our research reports on the Bloomberg terminal, type CMHK <GO> 12

13 Contact CMS (HK) Equity Research Head of Equity Research Sam LEE Deputy Head of Equity Research Cliff ZHAO Deputy Head of Equity Research Liangsheng DENG Deputy Head of Equity Research David XIE Macro Research Chief Strategist Cliff ZHAO China Macro Economy David XIE Overseas Macro Economy Lynn SONG HK Market Strategy George CHEN HK Market Strategy Zichen XU Industry Research Alternative Energy Lei YIN Automobile, Auto Parts & Dealership Colleen LI Banking Donger WANG Electric Power Vera LIANG Food & Beverage Ling HUA Gaming Angela HAN LEE Hardware Technology Alex NG Machinery Yiding JIAO Metals and Mining Shawn LEE Oil and Gas Michael YUK Pharmaceutical & Healthcare Jonathan HSU Port & Shipping Kate LI Property Feiqin DUAN Retail Gloria WANG Technology, Media & Telecom Jeff HAO Technology, Media & Telecom Andrew Huang Textile & Garment Ivy ZHAO To access our research reports on the Bloomberg terminal, type CMHK <GO> 13

14 Investment Ratings Industry Rating 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 12 months Expected to underperform the market index by >10% over the next 12 months Company Rating BUY NEUTRAL SELL 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 12 months Expected to underperform the market index by >10% over the next 12 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 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 ). 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