E 2016E 2017E

November 26, 2015 Sinosoft Technology Group [1297.HK] A beneficiary of establishing carbon trading platform. BUY The development of the sales tax refund system for overseas visitors is in line with Sinosoft Technology (SInosoft) management s expectations. The number of merchants connected to system increased from about 20 in Jul 2015 to 170 in Nov 2015. Central government is likely to extend the coverage of the sales tax refund for overseas visitors to other provinces which offers growth potential to Sinosoft. China is likely to establish carbon trading platform in 2017 and Sinosoft is one of the potential beneficiaries as the company is a leading carbon management solutions provider. HK-listed IT sector has been gaining market attention recently due to: improvement in sentiment on A-share listed IT names and supportive government policy. We still like Sinosoft and we maintain the view that there are multiple catalysts for the stock going forward including: i) Sinosoft potentially winning the contracts for installation of sales tax refund systems for overseas visitors in other provinces, ii) more favourable policies on environmental protection and carbon emission control, iii) potential co-operation with other financial institutions and iv) potential M&A opportunity. Sinosoft should deliver solid earnings growth of 29.3%/29.9%/25.4% in 2015E/2016E/2017E. We believe the current valuation of 23.4x 2015E still looks reasonable comparing with its peers. Maintain BUY with a target price of HK$6.27 (based on 30x 2015E PER, higher than historical average but still discount to it s A-share listed peers). TMT Sector-Software BUY Close: HK$4.94 (Nov 25, 2015) Target Price: HK$6.27 (+26.9%) Share Price Performance Investment Highlights Update on sales tax refund system. Development of the sales tax refund system for overseas visitors is line with management s expectations. The number of merchants connected to the systems increased from about 20 in Jul 2015 to 170 in Nov 2015. The total number of merchants connected to the system will increase to 300 by end of 2015. Sinosoft is now in discussion with local governments such as Jiangsu and Yuannan for supplying the systems and solutions. As one of the leading solution providers and we expect Sinosoft to have contract wins in near future and the tax refund system business will make more meaningful contribution in 2016. Market Cap US$658m Increasing attention on Paris Climate Conference. Paris Climate Conference will be held as scheduled from Nov 30, 2015 to Dec 11, 2015. Sinosoft jointed the UN climate conference in the US earlier this year and we believe that Sinosoft is likely to participate in the Paris Climate Conference for sharing the experience in China. If participants of the Paris Climate Conference manage to reach an agreement on a 2 C ceiling on global warming which could lay a key foundation for the launch of China s carbon emission trading market and implementation of polices regarding energy saving and emission reduction activities. SInosoft is now developing an online reporting system with NDRC for enterprises in China for disclosure of carbon emission figures. Sinosoft is one of the beneficiaries of launching carbon trading market in China as the company has first mover advantage of providing carbon management solutions to local governments and private sectors in China. Management remains positive on outlook. Sinosoft s management remains positive on the company s outlook. The new business development and geographically expansion is for supporting growth in 2H 2016 and 2017. Shares Outstanding Auditor Mark Po, CFA Senior Analyst (852) 3698-6318 1,032.3m Deloitte Free Float 54.1% 52W range 3M average daily T/O Major Shareholding HK$2.46-7.48 US$1.8m Founders & Management (47.9%) Key Financials (in RMB m) 2013 2014 2015E 2016E 2017E markpo@chinastock.com.hk Rev enue 297.3 366.4 473.4 589.7 682.8 Change (y oy %) 26.4 23.2 29.2 24.6 15.8 Gross Prof it 196.7 236.6 308.4 394.3 476.6 Gross Margin % 66.2 64.6 65.1 66.9 69.8 Net Prof it 100.9 134.5 174.0 225.9 283.4 Net Margin % 34.0 36.7 36.7 38.3 41.5 EPS (Basic) 0.11 0.13 0.17 0.22 0.27 Change (y oy %) 12.35 14.13 29.32 29.87 25.43 Wong Chi Man, CFA Head of Research (852) 3698-6317 cmwong@chinastock.com.hk DPS $0.015 $0.019 $0.034 $0.044 $0.055 ROE (%) 23.6 19.7 21.3 22.8 23.5 Div idend Yield (%) 0.38 0.48 0.85 1.11 1.39 PER (x) 34.6 30.3 23.4 18.1 14.4 PBR (x) 6.6 5.5 4.6 3.8 3.1 FCF Yield (%) 3.96% 3.22% 4.47% 5.94% 7.91% Capex (m) 36.0 36.8 37.0 37.3 37.5 Free cash f low per sh 0.2 0.1 0.2 0.2 0.3 Net Gearing (%) net cash net cash net cash net cash net cash 1

Figure 1: Key Assumptions for Sinosoft 2010 2011 2012 2013 2014 2015F 2016F 2017F Turnover (Rmbm) Export tax softw are and related services 23.1 30.6 39.0 67.7 91.1 119.9 156.1 119.9 e-government solutions 34.0 61.6 63.1 75.7 90.9 107.2 128.7 107.2 Carbon management solutions 0.0 7.7 13.3 34.4 66.5 96.4 124.9 96.4 Information integration softw are 25.9 28.4 55.7 46.8 58.1 78.5 94.1 78.5 YoY Change (%) Export tax softw are and related services 32.0 27.6 73.7 34.4 31.7 30.2 (23.2) e-government solutions 81.2 2.4 20.0 20.0 18.0 20.0 (16.7) Carbon management solutions n.a. 72.6 158.8 93.7 44.9 29.6 (22.8) Information integration softw are 9.7 96.0 (16.0) 24.3 35.0 20.0 (16.7) Gross margin (%) 50.8 60.3 67.8 66.2 64.6 65.1 66.9 69.8 Net margin (%) 29.0 30.3 32.4 34.0 36.7 36.7 38.3 41.5 Cost (Rmbm) S,G&A (24.9) (28.1) (35.7) (48.2) (60.2) (73.5) (88.6) (102.6) R&D Expenses (5.02) (15.94) (20.67) (28.46) (33.49) (43.27) (53.90) (62.41) Financial Expenses (1.2) (2.9) (2.7) (1.7) - (1.0) (1.0) (1.0) YoY Change (%) S,G&A 13.1 26.9 35.0 24.9 22.1 20.5 15.8 R&D Expenses 217.7 29.7 37.7 17.7 29.2 24.6 15.8 Financial Expenses 144.6 (4.9) (36.9) (100.0) n.a. - - Export tax software and related services Number of paying customers, accumulative 29,095.0 35,058.0 38,646.0 44,000.0 49,251.2 54,870.0 61,331.6 68,439.4 No. of new customers - 5,963.0 3,588.0 5,354.0 5,251.2 5,618.8 6,461.6 7,107.8 ASP (RMB) - 1,940.0 4,681.0 4,175.0 4,900.0 5,600.0 6,300.0 6,400.0 Sales of softw are (RMBm) 11.4 11.6 16.8 22.4 25.7 31.5 40.7 45.5 YoY Change (%) - 1.5 45.2 33.1 15.1 22.3 29.4 11.7 Consultation (annual membership fee) No. of customers 22,694.0 28,397.0 28,985.0 37,000.0 43,152.0 49,128.0 54,040.8 59,444.9 ARPU (RMB) 516.0 648.0 607.0 848.0 1,050.0 1,250.0 1,460.0 1,606.0 Consultation Revenue (RMBm) 11.7 18.4 17.6 31.4 45.3 61.4 78.9 95.5 YoY Change (%) 57.1 (4.4) 78.3 44.4 35.5 28.5 21.0 - Training (RMBm) 0.0 0.6 4.6 14.0 20.0 27.0 36.5 49.3 - - - - - 0.4 0.4 0.4 0.4 Carbon management - - - - - - - No. of client (government) 1.0 2.0-2.0 4.0 4.0 4.0 Average contract size (RMBm) 7.7 6.6-8.0 8.5 10.0 12.0 No. of industries - - - - - - - No. of clients - - 2.0 2.0 4.0 4.0 4.0 Average contract size (RMBm) - - 10.0 10.0 10.0 10.0 10.0 No. of enterprise clients - - 48.0 80.0 75.0 150.0 180.0 Average contract size (RMBm) - - 0.3 0.3 0.3 0.3 0.3 Sources: Company, CGIHK Research 2

Figure 2: Earnings projection Income Statement (RMB m) FY2013 FY2014 FY2015F FY2016F FY2017F Cash Flow Statement (RMB m) FY2013 FY2014 FY2015F FY2016F FY2017F Revenue 297 366 473 590 683 Net Income 111 146 192 251 309 Growth yoy% 26.4% 23.2% 29.2% 24.6% 15.8% Depreciation & Amort. 36 37 37 37 38 Gross Profit 197 237 308 394 477 Change in Working Capital (4) (47) (40) (38) (15) Growth yoy% 23.4% 20.3% 30.4% 27.8% 20.9% Cash from Ops. 143 136 189 250 332 Selling General & Admin Exp. (77) (94) (117) (142) (165) Capital Expenditure (2) (3) (4) (4) (4) Others Operating Expenses/Items (9) 3 (0) (1) (2) Sale of Property, Plant, and Equipment - - - - - Operating Income 111 146 192 251 309 Change in Investing Acitivities (87) (303) (158) (71) (85) Growth yoy% n.a. n.a. n.a. n.a. n.a. Cash from Investing (90) (306) (161) (74) (90) Interest Expense (1.7) 0 (1.0) (1.0) (1.0) Net increase in bank borrowings (82) 0 0 0 0 Interest and Invest. Income 3.0 10.6 12.5 14.2 22.4 Income/(Loss) from Affiliates 0 0 0 0 0 Issuance of Common Stock 308 0 0 0 0 Other Non-Operating Inc. (Exp.) 0 0 0 0 0 Common Dividends Paid (20) (15) (20) (35) (45) Impairment of Goodwill - - - - - Special Dividend Paid - - - - - Gain (Loss) On Sale Of Invest. - - - - - Other Financing Activities (22) (3) (7) (10) (8) Gain (Loss) On Sale Of Assets - - - - - Cash from Financing 184 (19) (26) (45) (53) Income Tax Expense (11) (23) (29) (38) (47) Minority Int. in Earnings 0 0 0 0 0 Net Change in Cash 237 (188) 1 130 188 Net Income 101 135 174 226 283 Growth yoy% n.a. 32.4% 33.3% 29.3% 29.9% Balance Sheet (RMB m) FY2013 FY2014 FY2015F FY2016F FY2017F Ratios FY2013 FY2014 FY2015F FY2016F FY2017F ASSETS Sources: Company, CGIHK Research Profitability Cash And Equivalents 288 103 198 327 516 Return on Assets % 17.9% 17.9% 17.6% 19.2% 20.6% Receivables 221 261 337 419 486 Return on Capital % 21.9% 21.9% 19.7% 21.4% 22.9% Inventory 1 1 1 2 2 Return on Equity % 23.6% 23.6% 19.7% 21.3% 22.8% Other Current Assets 70 277 277 277 277 Total Current Assets 580 642 813 1,026 1,281 Margin Analysis Net Property, Plant & Equipment 7 9 9 8 7 Gross Margin % 66.2% 64.6% 65.1% 66.9% 69.8% Long-term Investments - - - - - SG&A Margin % 16.2% 16.4% 15.5% 15.0% 15.0% Other Intangibles - - - - - EBIT Margin % 38.4% 42.9% 43.1% 44.9% 48.6% Deferred Tax Assets, LT - - - - - EBITDA Margin % 39.2% 43.7% 43.8% 45.5% 49.2% Other Long-Term Assets 127 168 168 166 166 Net Income Margin % 34.0% 36.7% 36.7% 38.3% 41.5% Goodwill - - - - - Accounts Receivable Long-Term - - - - - Asset Turnover Total Long Term Assets 135 177 177 174 174 Total Asset Turnover 0.4x 0.4x 0.5x 0.5x 0.5x Total Assets 714 819 990 1,200 1,455 Fixed Asset Turnover 2.2x 2.1x 2.7x 3.4x 3.9x Accounts Receivable Turnover 1.4x 1.5x 1.6x 1.6x 1.5x LIABILITIES & EQUITY Inventory Turnover 232.4x 354.4x 354.4x 354.4x 354.4x Accounts Payable 73 50 65 80 93 Accrued Exp. - - - - - Liquidity Short-term Borrowings 0 0 0 0 0 Current Ratio 7.4x 11.4x 11.4x 11.7x 12.7x Curr. Port. of LT Debt - - - - - Quick Ratio 7.4x 11.4x 11.4x 11.7x 12.6x Curr. Income Taxes Payable - - - - - Avg. Days Sales Out. 271.2 259.6 259.6 259.6 259.6 Unearned Revenue, Current - - - - - Avg. Days Inventory Out. 1.6 1.0 1.0 1.0 1.0 Other Current Liabilities 5 6 7 7 8 Avg. Days Payable Out. 256.1 172.9 126.6 135.3 153.5 Total Current Liabilities 78 56 71 88 101 Avg. Cash Conversion Cycle 186.1 212.8 212.8 213.0 213.3 Long-Term Debt 0 0 0 0 0 Net Debt to Equity net cash net cash net cash net cash net cash Def. Tax Liability, Non-Curr. 14 22 24 26 29 Other Non-Current Liabilities 0 0 0 0 0 Growth Over Prior Year Total Liabilities 92 78 95 114 130 Total Revenue 26.4% 23.2% 29.2% 24.6% 15.8% Common Stock 8 8 8 8 8 Net Income 32.4% 33.3% 29.3% 29.9% 25.4% Additional Paid In Capital - - - - - Payout Ratio % 13.1% 14.6% 20.0% 20.0% 20.0% Retained Earnings 614 733 887 1,078 1,316 Treasury Stock - - - - - Comprehensive Inc. and Other - - - - - Minority Interest 0 0 0 0 0 Total Equity 622 741 895 1,086 1,325 Total Liabilities And Equity 714 819 990 1,200 1,455 3

Figure 3: Peer Comparison Ticker Company PE EV/EBITDA P/B ROE ROA Div yield Price Market Cap 2015F 2016F 2017F 2015F 2016F 2017F 2014 2015F 2014 2015F 2014 2015F 2014 2015F Lcy US$m x x x x x x x x % % % % % % HK Listed Software plays 268 HK Kingdee International Sftwr 4.01 1,508 36.3 29.3 23.0 14.6 12.9 11.1 3.0 3.1 7.6 9.9 4.2 5.2 0.4 0.3 1297 HK Sinosoft Technology Group Ltd 4.94 658 24.0 18.9 16.8 19.0 14.5 11.9 5.4 4.7 23.6 19.7 18.3 18.0 0.5 0.6 354 HK Chinasoft International Ltd 3.77 1,001 22.7 18.3 14.7 13.1 10.6 8.7 2.1 2.1 7.1 9.8 4.5 4.7 0.0 0.0 596 HK Inspur International Ltd 1.57 183 n.a. n.a. n.a. n.a. n.a. n.a. 0.8 n.a. 6.5 n.a. -0.5 n.a. 1.9 n.a. 861 HK Digital China Holdings Ltd 9.37 1,324 20.7 24.0 16.0 20.2 20.4 17.6 1.2 1.3 3.9 8.7 1.8 2.8 n.a. 1.5 856 HK Vst Holdings Ltd 2.30 432 5.5 4.8 4.1 6.7 6.0 5.3 0.9 0.8 15.7 14.8 4.7 4.6 5.1 5.3 1588 HK Chanjet Information Tech-H 17.62 494 21.7 17.2 13.7 100.8 67.2 n.a. 2.6 2.6 22.4 6.9 6.2 6.2 2.7 0.0 Average 21.8 18.7 14.7 29.1 21.9 10.9 2.3 2.4 12.4 11.6 5.6 6.9 1.8 1.3 A-share Listed Software plays 300253 CH Shanghai Kingstar Winning-A 49.08 4,198 153.9 102.5 62.3 174.7 105.1 54.4 30.8 26.8 13.9 18.0 11.1 12.2 n.a. 0.4 300166 CH Beijing Orient National-A 40.01 3,538 94.6 66.4 45.8 78.0 58.5 43.2 13.5 11.1 10.3 14.2 9.6 11.3 0.1 0.3 600588 CH Yonyou Network Technology-A 32.46 7,416 84.5 62.5 47.3 91.2 65.1 51.9 10.0 9.5 17.6 11.3 2.4 6.8 n.a. 0.6 300271 CH Beijing Thunisoft Corp Ltd-A 44.44 2,225 60.2 44.4 33.4 54.7 40.8 29.9 11.8 7.9 13.2 14.2 9.6 9.3 0.1 0.3 600410 CH Beijing Teamsun Technology-A 25.97 2,609 136.7 42.6 n.a. n.a. n.a. n.a. 7.1 n.a. 1.8 8.7 1.0 5.6 n.a. n.a. 600718 CH Neusoft Corp-A 23.57 4,584 57.5 49.1 n.a. n.a. n.a. n.a. 5.3 n.a. 7.9 n.a. 2.1 n.a. n.a. n.a. 000977 CH Inspur Electronic Informat-A 31.55 4,740 62.6 42.5 30.6 67.7 46.9 38.5 11.5 11.0 12.7 18.4 7.1 8.7 n.a. 0.3 300290 CH Bringspring Science And Te-A 21.84 1,099 109.2 84.0 n.a. n.a. n.a. n.a. 13.7 n.a. 14.6 n.a. 9.3 n.a. 0.2 n.a. 002063 CH Ygsoft Inc -A 23.73 2,216 40.2 33.7 27.6 68.6 59.6 49.1 8.3 7.3 23.6 12.3 8.8 n.a. n.a. 0.3 Average 88.8 58.6 41.2 89.2 62.7 44.5 12.5 12.3 12.9 13.9 6.8 9.0 0.1 0.4 Overseas Listed Software plays SAP GY Sap Se 73.49 96,070 19.8 18.2 17.0 13.4 12.9 12.3 4.1 4.1 22.1 19.8 8.8 12.3 n.a. 1.6 CRM US Salesforce.Com Inc 80.39 53,379 106.9 82.1 63.4 39.0 30.8 24.8 11.2 11.1-13.4 11.8-0.9 4.6 0.0 0.0 IBM US Intl Business Machines Corp 138.60 134,457 9.3 9.1 8.6 7.7 7.6 7.2 10.1 8.5 79.1 102.6 12.5 12.2 3.5 3.5 ORCL US Oracle Corp 39.46 168,282 15.1 13.7 12.8 8.6 8.5 8.5 3.6 3.6 24.7 22.5 9.1 9.8 1.4 1.4 Average 37.8 30.8 25.4 17.1 15.0 13.2 7.3 6.8 28.1 39.2 7.4 9.7 1.6 1.6 Sources: Bloomberg, Company, CGIHK Research estimates for covered stocks 4

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Explanation on Equity Ratings BUY SELL HOLD : : share price will increase by >20% within 12 months in absolute terms share price will decrease by >20% within 12 months in absolute terms : no clear catalyst, and downgraded from BUY pending clearer signal to reinstate BUY or further downgrade to outright SELL Copyright Reserved No part of this material may be reproduced or redistributed without the prior written consent of China Galaxy International Securities (Hong Kong) Co., Limited. China Galaxy International Securities (Hong Kong) Co. Limited, CE No.AXM459 Room 3501-3507, 35/F, Cosco Tower, Grand Millennium Plaza, 183 Queen s Road Central, Sheung Wan, Hong Kong. General line: 3698-6888. 5