DAILY Navigator

China and Hong Kong September 2, 2010

Top Charts of the Day Highlight

CN Petrochemicals sector – Price spreads
widened MoM in August
HK Yanzhou Coal Mining (01171.HK, HK$16.24, N): Australian subsidiary to ramp
up output in 2010
Business back into high gear thanks to output ramp-up at Australian subsidiary. Coal business
to maintain solid profitability. China’s coal supply to outstrip demand mildly in 2H10; based
on 6M target price of Rmb17.3, we resume coverage with Neutral rating.

Upcoming Visits 02 Top Charts of the Day V 08 Trader Daily J

Date Company CN Petrochemicals sector – Price spreads CN GEM leading declining tape
widened MoM in August HK Shares up as China manufacturing
figures show gain
Recent In-depth Reports
03 Top Stock Ideas B
Date Company HK Yanzhou Coal Mining (01171.HK, 10 Statistics K
06/11 Global Sweeteners
HK$16.24, N): Australian subsidiary to HK Valuation table
(03889.HK/3889 HK)
ramp up output in 2010
11/11 Xiamen Int'l Port
(03378.HK/3378 HK)
19/11 Coking coal sector: Expansion &
06 Industry update G
price sensitivity are key themes CN Engineering plastics: PRET benefiting
20/11 Cross-strait investment strategy from robust car-use plastics demand
23/11 Power transmission & distribution CN Solar sector: Competition for materials
equipment: UHV & low-carbon highlights PV market vitality
concepts the focus in 2010
30/11 Viscose fiber sector: Sector upturn
to continue into 2010
08/12 China meat products sector: Big
players to emerge stronger from
consolidation
30/12 China market strategy – 1Q10
08/03 Bank of China
(03988.HK/3988 HK)
25/03 China market strategy – 2Q10
01/04 Want Want China (00151.HK/151
HK)
14/04 Traditional Chinese medicine
sector: Targeting cardiovascular &
cerebrovascular disease
03/05 Tianneng Power (00819.HK/819
HK)
20/05 Regent Manner (01997.HK/1997
HK)
11/06 Chigo (00449.HK/449 HK)
30/06 China market strategy - 3Q10

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 DAILY Navigator China Top Charts of the Day V

Petrochemicals sector – 1 Stephen Wang 1 Guo Zhang (Coordinator)

2 852.2878.6898 2 86.21.6125.8687
Price spreads widened 3 stephen.wang@kgia.com
MoM in August

Conclusion

In August, the spreads between main domestic petrochemicals prices and mark-to-market
naphtha price (naphtha price leads petrochemicals prices by one month) began to rise MoM,
as the spreads between the prices of LLDPE, HDPE, LDPE, PP, PS and ABS and the price of
naphtha expanded by a respective 24.1%, 28.9%, 21.1%, 15.0%, 6.2% and 13.7%. We
think that petrochemicals gross margins expanded in August because demand picked up,
while vendors began stocking up on products for the upcoming September-October high
season. Also, naphtha price was low in July, which helped lower production costs for plastics
and other petrochemicals. In July, Singapore naphtha FOB price averaged US$69.2/bbl, down
some 5% MoM. We think that, with adjustment of product mix speeding up and the peak
season approaching, sector profitability should rebound to benefit Sinopec (600028.SS),
Shanghai Petrochemical (600688.SS) and PetroChina (601857.SS).

In August, LLDPE and HDPE price spreads with naphtha widened

LLDPE and HDPE price spread with naphtha, Rmb/mt
7,000

6,000

In August, LLDPE and HDPE price 5,000

spreads with naphtha rose by 4,000
Rmb846/mt and Rmb954/mt, or 3,000
24.1% and 28.9% MoM Feb-08 May-08 Aug-08 Nov-08 Feb-09 May-09 Aug-09 Nov-09 Feb-10 May-10 Aug-10
LLDPE-naphtha HDPE-naphtha

Source: Bloomberg; Chemsino; KGI Research

In August, LDPE and PP price spreads with naphtha expanded

LDPE and PP price spread with naphtha, Rmb/mt

8,000

6,000

In August, LDPE and PP price

4,000
spreads with naphtha rose by
Rmb958/mt and Rmb641/mt, or 2,000
Feb-08 May-08 Aug-08 Nov-08 Feb-09 May-09 Aug-09 Nov-09 Feb-10 May-10 Aug-10
21.1% and 15% MoM
LDPE-naphtha PP-naphtha
Source: Bloomberg; Chemsino; KGI Research

In August, PS and ABS price spreads with naphtha fattened

PS and ABS price spread with naphtha, Rmb/mt

10,000
8,000
6,000
In August, PS and ABS price
4,000
spreads with naphtha rose by
2,000
Rmb340/mt and Rmb1,187/mt, or 0
6.2% and 13.7% MoM Feb-08 May-08 Aug-08 Nov-08 Feb-09 May-09 Aug-09 Nov-09 Feb-10 May-10 Aug-10
PS-naphtha ABS-naphtha

Source: Bloomberg; Chemsino; KGI Research

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 DAILY Navigator Hong Kong Top Stock Ideas B
doubling what it had owned. Felix operates four coalmines and
Yanzhou Coal Mining (01171.HK/1171 HK)
had an output of 9.28mn mt in 2009. Its Moolarben-based
Australian subsidiary to ramp up output in 2010 open-cut coalmine became operational in June 2010, with
designed capacity of 10mn mt annually. Output hit 220k mt in
HK$16.24 Neutral Company update 1H10 and will expand further in 2H10. The underground mine at
Resume coverage
Moolarben is designed with annual capacity of 3.5mn mt and
slated for operation in 2013.
1 Stephen Wang 1 David Yang (Coordinator)
2 852.2878.6898 2 86.21.6125.8676
3 stephen.wang@kgia.com Figure 2: Most new mines to ramp up production in 2010
Coal's Designed
Mine Coal type stake Reserves capacity Note
Ŝ Business back into high gear thanks to output ramp-up at (%) (mn mt) (mn mt)
Ashton (open-cut) Semi soft coking coal 60 117 Operational
Australian subsidiary Ashton (underground) Semi soft coking coal 60 119 3.9 Operational
Ŝ Coal business to maintain solid profitability Minerva (open-cut) Steam coal 51 323 2.5 Operational
Yarrabee (open-cut) PCI coal 100 79 1.7 Operational
Ŝ China’s coal supply to outstrip demand mildly in 2H10; Moolarben (open-cut) Steam coal 80 407 10.0 Operational since June, 2010
based on 6M target price of Rmb17.3, we resume Moolarben (underground) Steam coal 80 300 3.5 Slated for operation in 2013
Athena (underground) Steam coal 51 560 Under exploration
coverage with Neutral rating
Harry-brandt (open-cut) Steam coal 100 103 Under exploration
Wilpeena (open-cut) PCI coal 100 0 Under exploration
Business back into high gear thanks to Australian subsidiary Total 2,008 21.6

After going public in New York, Hong Kong, and Shanghai in 1998, Source: Company data; KGI Asia Limited

Yanzhou Coal actively pursued a number of acquisitions, including

Jining Coalmine No.2 in 1998 and Jining Coalmine No.3 in 2001
(both from parent company Yankuang Group); railways for coal
transport in 2002; Austar Coal Mine (Australia) in October, 2004;
two mines in Zhaolou and Wanfu in July, 2005 (from Heze Yining
Chemical of Yankuang Group); and Tianchi Coalmine in 2006 from
Yankuang Shanxi Energy and Chemical.
In 2006-09, Yanzhou Coal had 34mn metric tons (mt) of coal at its
Shandong-based core business, 2mn mt at Austar Coal Mine, and
1.2mn mt at Tianchi Coalmine. Zhaolou Coalmine, with capacity of
3mn mt, commenced operation in December, 2009 and recorded
output of 660k mt in 1H10. Given the depth, the mine will not run
at full capacity until two years later. A mining permit for Wanfu
Coalmine is still pending.
Subsidiaries Yankuang Shanxi Energy & Chemical and Yulin Energy
& Chemical currently have annual methanol capacity of 100k mt
and 600k mt, respectively. Once the methanol market improves to
above the break-even point, Yanzhou Coal will be able reduce
losses more effectively.
Raw coal output to grow 14% CAGR in 2010-12
A string of acquisitions has helped Yanzhou Coal boost raw coal
output to 43.28mn mt in 2003 from 20.69mn mt in 1998.
However, after 2004 coal output dwindled as some villages sat on
the coalmines. To address the output slowdown, the firm
continued with acquisition efforts, though the coalmines were of a
smaller scale. In 2005-09, raw coal output remained 36mn mt.
Since the Felix acquisition at end-2009, the firm has switched back
to a high growth trajectory. With the open-cut mine at Moolarben
cranking up in June, Felix’s raw coal capacity has risen to 18.1mn
mt from 8.1mn mt. As such, the capacity attributable to Yanzhou
Coal has also grown to 13.31mn mt from 5.31mn mt. We estimate
that Yanzhou Coal will report coal output of 49mn mt in 2010 and
55mn mt in 2012, for CAGR of 14%. Output increases will be
concentrated in 2010.
Figure 3: Coal output to enter a fast growth phase
Coking coal output & sales, mn mt
60
50

Figure 1: Breakdown of coalmines before end-09 40

Recoverable Sulphur Heating Designed 2008
Mine Location Launch reserves Coal type content value capacity output
year (mn mt) (%) (Kcal) (mn mt) (mn mt)
30
Austar Australia 2000 48 Semi-hard coking coal 1.10 7,900 2.0 1.9
Tianchi Shanxi 2006 28 Steam coal 1.45 6,307 1.2 1.1 20
Zhaolou Shandong 2009 106 1/3 coking coal 0.53 6,937 3.0 0.0
Nantun Shandong 1973 123 Steam coal 0.63 5,617 2.4 3.9 10
1997 2000 2003 2006 2009 2012F
Xinglongzhuang Shandong 1981 333 Steam coal 0.46 5,907 3.0 6.6
Baodian Shandong 1986 294 Steam coal 0.52 5,924 3.0 6.0 Output Sales
Dongtan Shandong 1989 464 Steam coal 0.55 5,811 4.0 7.0
Jining Coalmine No.2 Shandong 1997 418 Steam coal 0.53 5,560 4.0 3.9 Source: KGI Asia Limited
Jining Coalmine No.3 Shandong 2000 233 Steam coal 0.53 5,646 5.0 6.1
Total 2,048 27.6 36.5

Source: Company data; KGI Asia Limited

Coal business to maintain solid profitability
Yanzhou Coal currently operates coal mining, railway transport,
The Felix (Australia) acquisition at end-2009 brought Yanzhou Coal coal chemical, coal-fire power and thermal power businesses. In
2.52bn mt of coal reserves (or 1.89bn mt by equity), more than 2005-1H10, gross margin and net margin stayed at a respective

Institutional portal: http://research.kgi.com September 2, 2010 3

 DAILY Navigator
50% and 20%, both higher than the industry averages. In 1H10
gross margin and net margin were 47.8% and 23.4%, respectively,
which is more in line with the industry averages. The coal business
accounted for 95% of sales and 98.4% of gross profit. In 1H10, the
coal business maintained brisk profitability, as its gross margin was
49.8%, largely in line with the five-year average.
Hong Kong Top Stock Ideas B
Rmb35/mt) from the peak at end-May. The price of mixed coal
(5000 Kcal) in Yanzhou, Shandong, where the firm is based, has
dropped 7.1% (or Rmb50/mt) from the peak of Rmb700/mt in early
June. We think coal prices will remain in mild fluctuations for the
remainder of the year. The price of Australian BJ steam coal fell
further in August. In contrast, coking coal prices have fared well.

In 1H10, the railway transport business handled 9.93mn mt of cargo,
up 1.36mn mt (or 15.9%) YoY. Transport sales surged 121.7% YoY
to Rmb260mn in 1H10, as the firm raised the freight rate to
Rmb0.57/ton-km from Rmb0.32/ton-km from January 1, 2010.
Figure 4: Blended gross margin steady
Gross margin and net margin, percent
70
60
To achieve the carbon emission goal set for the 11th Five-Year Plan,
the government will step up efforts to phase out uncompetitive
capacity. This, coupled with a slowing domestic economy, will
undercut coal demand. We expect domestic coal prices to
consolidate in 2H10. As the price volatility will be mild, Yanzhou
Coal’s earnings will not take a big hit. The firm sources less than
30% of coal through contracts – the prices are set annually – and
nearly 70% from the spot market.

50 Figure 3: Coal prices in Yanzhou, Shandong reflect seasonality

40 Coal prices, Rmb/mt
30 1,400
20 1,200
10 1,000
1Q05 4Q05 3Q06 2Q07 1Q08 4Q08 3Q09 2Q10
800
Net margin Gross margin
600
Source: Company data; KGI Asia Limited 400

200
China is suffering from severe methanol oversupply, with capacity Jan-08 May-08 Oct-08 Feb-09 May-09 Aug-09 Nov-09 Feb-10 May-10 Aug-10

of 30mn mt and demand of 20mn m in the market. The domestic Mixed coal Clean coking coal

price has fallen to around Rmb2,000/mt currently from nearly Source: http://www.sxcoal.com; KGI Asia Limited
Rmb2,600/mt in early March. In 1H10, Yanzhou Coal recorded
methanol output of 2.45mn mt, including 2.12mn mt at Yulin Valuation and Recommendation
Energy & Chemical and 33k mt at Shanxi Energy & Chemical.
In 2H10, coal demand will be hurt by China’s slowing economy and
Production cost is Rmb1,815/mt at Yulin Energy & Chemical and
the government’s efforts to phase out uncompetitive capacity in
Rmb1,862/mt at Shanxi Energy & Chemical. In 1H10, Yulin Energy
high energy-consuming sectors. As such, coal supply will outstrip
& Chemical made losses of Rmb148mn and expenses were
demand slightly. Yanzhou Coal will increase coal output by 14%
estimated at Rmb685/mt. Judging from market conditions,
CAGR over the next three years, with output increases
domestic methanol prices are unlikely to pick up in 2H10, making it
concentrated in 2010. We forecast 2010-12 EPS of Rmb1.40,
for Yanzhou Coal to turn around methanol business any time soon.
Rmb1.53, and Rmb1.61, respectively. Considering moderate coal
oversupply in the broader market and the firm’s fast output growth
Figure 5: Coal business made up 95% of sales in 1H10
Sales weighting by business, percent
in 2010, we have set our 2011 target PE at 10x. Based on 10x our
Railway transport Coal-fired power
2011 EPS forecast, we have derived a 6-month target price of
Coal chemical
[1.7] [0.6] HK$17.3, implying 6.5% upside from the current price of
Thermal power
[2.7] [0.1] HK$16.24. As such, we have rated the stock Neutral.
Year-end Sales Gross profits EBIT EBITDA Net profits EPS
(Rmb mn) (Rmb mn) (Rmb mn) (Rmb mn) (Rmb mn) (Rmb)
2009A 20,253 9,130 5,310 7,115 4,117 0.84
2010F 32,461 14,607 9,349 11,901 6,880 1.40
2011F 35,928 16,204 10,311 13,098 7,524 1.53
95 2012F 37,872 17,156 10,945 14,001 7,918 1.61
Year-end EV/Sales EV/EBIT EV/EBITDA P/E EV/Inv. C. ROAE
(x) (x) (x) (x) (x) (%)
2009A 2.6 18.8 7.4 12.7 1.0 14.7
2010F 2.8 9.8 7.7 12.3 1.5 21.4
2011F 2.5 8.7 6.8 11.3 1.3 19.6
Source: Company data; KGI Asia Limited 2012F 2.2 7.7 6.0 10.7 1.1 17.5
Sector Engery 52-week trading range (HK$) 10.6-22
12M target price (HK$/shr) 17.30 Mkt cap-HK$ bn/US$ mn 31.3/4,007
Domestic coal prices to consolidate in 2H10 Upside/downside (%) 6.5 Outstanding shares (mn) 4,918
The percentile of excess return (%) 52 Free floating shares (%) 47
The exit price of Shanxi quality mixed coal (>5500 Kcal) at Dividend yield-Dec '10E (%) 2.9 The Largest Shareholder (%): Yan Kuang group 52.9
Qinghuangdao Port now averages Rmb725/mt, down 4.6% (or Book value/shr-Dec '10E (Rmb) 7.2 3M avg. daily trading (mn) 19.8
P/B-Dec '10E (x) 2.4 Abs. Performance (3,6,12M)(%) -6.4; -4.1; 46.5
Net debt/equity-Dec '10E (%) 19.4 Rel. Performance (3,6,12M)(%) -8.4; 1.4; 45.8

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 DA ILY Navigator Hong Kong Top Stock Ideas B
Balance Sheet Profit & Loss
Year to 31 Dec (Rmb mn) 2008A 2009A 2010F 2011F 2012F Year to 31 Dec (Rmb mn) 2008A 2009A 2010F 2011F 2012F
Total Assets 32,339 62,433 74,883 82,509 89,717 Sales 24,903 20,253 32,461 35,928 37,872
Current Assets 14,994 20,001 29,553 35,524 41,713 Cost of Goods Sold 12,452 11,123 17,854 19,724 20,716
Cash & ST Investments 9,612 12,092 17,458 22,249 28,244 Gross Profit 12,451 9,130 14,607 16,204 17,156
Inventories 820 886 1,373 1,409 1,381 Operating Expenses 3,832 3,820 5,259 5,892 6,211
Accounts Receivable 2,977 4,724 7,115 7,875 8,301 Operating Profit 8,619 5,310 9,349 10,311 10,945
Others 1,586 2,299 3,607 3,992 3,787 Net Interest Income 237 142 (127) (272) (382)
Non-current Assets 17,344 42,432 45,330 46,984 48,004 Interest Income 275 188 177 238 303
LT Investments 970 1,237 1,234 1,229 1,223 Interest Expense 38 45 304 510 685
Net fixed Assets 14,149 18,877 18,676 18,974 18,869 Net Investment Income/(Loss) 0 0 0 0 0
Others 2,225 22,318 25,421 26,782 27,912 Net other Non-op. Income/(Loss) 9 233 196 254 261
Total Liabilities 5,584 33,281 39,687 40,768 41,036 Net Extraordinaries 9 (15) 5 10 17
Current Liabilities 5,297 10,410 15,695 14,356 13,221 Pretax Income 8,875 5,671 9,423 10,304 10,841
Accounts Payable 910 1,367 2,446 2,702 2,838 Income Taxes 2,386 1,553 2,543 2,779 2,922
ST Borrowings 82 1,598 2,429 2,672 2,808 Net Profit After Extraordinaries 6,489 4,117 6,880 7,524 7,918
Others 4,305 7,445 10,820 8,982 7,574 EBITDA 9,763 7,115 11,901 13,098 14,001
Long-term Liabilities 287 22,870 23,993 26,412 27,816 EPS (Rmb) 1.32 0.84 1.40 1.53 1.61
Long-term Debts 176 20,912 21,859 24,045 25,275 Source: Company data; KGI Asia Limited estimates
Others 111 1,959 2,134 2,367 2,541
Shareholders' Equity 26,755 29,152 35,196 41,741 48,680
Common Stock 4,918 4,918 4,918 4,918 4,918
Capital Surplus 8,705 9,625 9,625 9,625 9,625 Cash Flow
Retained Earnings 13,132 14,608 20,652 27,197 34,137 Year to 31 Dec (Rmb mn) 2008A 2009A 2010F 2011F 2012F
Preferred Stock 0 0 0 0 0 Operating Cash Flow 6,983 6,995 9,703 7,553 9,515
Source: Company data; KGI Asia Limited estimates Net Profit 6,489 4,117 6,880 7,524 7,918
Depreciation & Amortization 1,144 1,805 2,552 2,787 3,056
Change in Working Capital (658) 1,071 268 (2,763) (1,465)
Others 7 2 3 5 6
Key Ratios Investment Cash Flow (2,216) (26,894) (5,454) (4,446) (4,081)
Year to 31 Dec (Rmb mn) 2008A 2009A 2010F 2011F 2012F Net CAPEX (1,769) (6,532) (2,351) (3,085) (2,951)
Growth (% YoY) Change in LT Investment 330 (269) 0 0 0
Sales 64.8 (18.7) 60.3 10.7 5.4 Change in Other Assets (777) (20,093) (3,103) (1,361) (1,130)
OP 97.1 (38.4) 76.1 10.3 6.1 Free Cash Flow 4,766 (19,899) 4,249 3,107 5,434
EBITDA 78.0 (27.1) 67.3 10.1 6.9 Financing Cash Flow (1,525) 22,379 1,117 1,683 561
NP 100.9 (36.5) 67.1 9.4 5.2 Change in Share Capital (1,151) (1,721) (836) (979) (979)
EPS 100.9 (36.5) 67.1 9.4 5.2 Net Change in Debt (72) 22,252 1,778 2,429 1,366
Change in Other LT Liab. (302) 1,848 175 233 174
Profitability (%)
Net Cash Flow 3,241 2,480 5,366 4,790 5,995
Gross Margin 50.0 45.1 45.0 45.1 45.3
Operating Margin 34.6 26.2 28.8 28.7 28.9 Source: Company data; KGI Asia Limited estimates
EBITDA Margin 39.2 35.1 36.7 36.5 37.0
Net Profit Margin 26.1 20.3 21.2 20.9 20.9
ROAA 22.2 8.7 10.0 9.6 9.2
ROAE 26.9 14.7 21.4 19.6 17.5 Rates of Return on Invested Capital
Stability Year to
1-
COGS
+
Dep./Amortization
+
SGA Exp.
=
Operating
Gross Debt/Equity (%) 1.0 77.2 69.0 64.0 57.7 31-Dec Revenue Revenue Revenue Margin
2008A 45.4% 4.6% 15.4% 34.6%
Net Debt/Equity (%) Net cash 35.7 19.4 10.7 Net cash 2009A 46.0% 8.9% 18.9% 26.2%
Interest Coverage (x) 232.3 126.7 32.0 21.2 16.8 2010F 47.1% 7.9% 16.2% 28.8%
Interest & ST Debt Coverage (x) 74.1 3.5 3.6 3.4 3.3 2011F 47.1% 7.8% 16.4% 28.7%
Cash Flow Interest Coverage (x) 182.0 155.1 31.9 14.8 13.9 2012F 46.6% 7.9% 16.4% 29.1%
Year to Operating Working capital Net PPE Other Assets Capital
Cash Flow/Interest & ST Debt (x) 58.0 4.3 3.6 2.4 2.7 1/ + + =
31-Dec Revenue Revenue Revenue Turnover
Current Ratio (x) 2.8 1.9 1.9 2.5 3.2 2008A 0.1 0.6 0.1 1.4
Quick Ratio (x) 2.7 1.8 1.8 2.4 3.1 2009A 0.0 0.9 1.1 0.5
Net Debt (Rmb mn) (7,697) 532 8,624 5,649 2,154 2010F 0.0 0.6 0.8 0.7
2011F 0.1 0.5 0.7 0.7
Per Share Data (Rmb) 2012F 0.1 0.5 0.7 0.7
EPS 1.32 0.84 1.40 1.53 1.61 Year to Operating Capital Cash 1 - Tax After-tax Return
x x =
CFPS 1.55 1.20 1.92 2.10 2.23 31-Dec Margin Turnover Rate on Inv. Capital
2008A 34.6% 1.4 73.1% 35.4%
BVPS 5.44 5.93 7.16 8.49 9.90
2009A 26.2% 0.5 72.7% 9.3%
SPS 5.06 4.12 6.60 7.30 7.70 2010F 28.8% 0.7 73.0% 15.3%
EBITDA/Share 1.75 1.08 1.90 2.10 2.23 2011F 28.8% 0.7 73.0% 15.3%
DPS N.D. 0.43 0.50 0.50 0.55 2012F 28.7% 0.7 73.0% 15.3%
Activity Source: Company data; KGI Asia Limited estimates
Asset Turnover (x) 0.9 0.4 0.5 0.5 0.4
Days Receivables 43.6 85.1 80.0 80.0 80.0
Days Inventory 12.0 16.0 15.4 14.3 13.3
Days Payable 13.3 24.6 27.5 27.5 27.4
Cash Cycle 42.3 76.5 67.9 66.9 66.0
Source: Company data; KGI Asia Limited estimates

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 DA ILY Navigator China Industry update g
Figure 1: PRET’s shipments growing fast
Engineering plastics PRET shipments, ‘000 mt (LHS); change YoY, percent (RHS)
PRET benefiting from robust car-use plastics demand 95 70
87 60
79
1 Stephen Wang 1 Guo Zhang (Coordinator) 50
71
2 852.2878.6898 2 86.21.6125.8687 63 40
55 30
3 stephen.wang@kgia.com 47 20
39
10
31
Ŝ Demand for car-use engineering plastics strong in China 23 0
Ŝ PRET growing on capacity expansion & new products 15 (10)
2006 2007 2008 2009 2010F 2011F 2012F
Ŝ Market competition boosts PRET’s value
Shipments Change

Source: Company data; KGI Research

Demand for car-use engineering plastics strong in China
Demand for car-use engineering plastics in China has been
Figure 2: PRET’s gross margin comparatively stable
growing on rising car sales, higher engineering plastics usage per
PRET gross margin, percent
car, the substitution of locally-made car components for imports
30
and government policy to reduce carbon emissions and save
energy. We forecast car sales will grow by 10% per annum, 25
engineering plastics consumption per car to rise by 5% per year
and the substitution rate of locally-made parts to increase 2.0 ppts 20

per year in the coming few years. We therefore estimate demand

15
for car-use engineering plastics will grow by around 19% per year
in China. Assuming car sales of 15.5mn units in 2010 and 10
engineering plastics demand of 115 kg per car, we forecast 2006 2007 2008 2009 1H10 2H10F 2010F 2011F 2012F
demand for car-use engineering plastics of 1.8mn metric tons (mt)
Source: KGI Research
in 2010 and 3.6mn mt by 2014, indicating great growth potential.

Market competition boosts PRET’s value

PRET’s earnings in 1H10 in line with consensus China’s engineering plastics market is fragmented, while the
Shanghai PRET (002324.SZ) posted sales of Rmb375mn in 1H10,
development of its car industry is accelerating. The use of
up 89% YoY, and net profits of Rmb56.1mn, up 31% YoY. Gross
engineering plastics in cars is growing. As such, PRET, a dedicated
margin dropped markedly, albeit within market expectation. engineering plastics maker, will benefit. Currently, over 90% of
sales are generated from car-use engineering plastics. However,
PRET’s earnings to grow on capacity expansion & new products
the accreditation of products takes a long time and the process is
Supported by robust demand, a strategic location and leadership in stringent. With the percentage of cars developed by Chinese firms
the car-use engineering plastics market, PRET’s new plant will
increasing and the concentration of the auto industry rising, PRET,
commence production as scheduled. We forecast shipments will
as a leading maker of engineering plastics, is set to benefit.
jump 35% YoY in 2011 to 72.9k mt and 26% YoY in 2012 to
91.5k mt. Shanghai PRET raised prices by 10% across the board in
May. By contrast, the prices of raw materials PP, PE, PS and ABS fell
Conclusion
in June-July from the first five months of the year, by a respective
6%, 12%, 7% and 1%. Hence, we forecast gross margin will
rebound in 2H10. However, we forecast it will decline 0.9 ppts in As PRET’s new plants come on stream, we estimate output will
2011 to 21.4% on reduced demand and intensified competition. grow at an annual rate of 25-30% over the next few years. In light
of the growing car-use engineering plastics market, PRET’s focus on
Shanghai PRET has been developing new materials/products and this market and its strong R&D, we think the company deserves a
expanding its market share in China. It plans to invest Rmb254mn higher PE. Current sector PE average is 35x. PRET’s shares are
in a liquid crystal polyester (LCP) project over three stages. The trading at a 2010 PE of 41x, which we consider fair.
company has patents on this product, which has a wide range of
applications. China imports 20-25k mt of LCP a year. We forecast
global demand for LCP will grow at an annual pace of 20-30%.

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 DA ILY Navigator China Industry update g
Figure 2: IRR still attractive post FiT cuts in Europe
Solar sector IRR, percent
Competition for materials highlights PV market vitality 12.0

10.0
1 Stephen Wang 1 Honda Wei (Coordinator) IRR in Italy
2 852.2878.6898 2 86.21.6125.8673 8.0
IRR in Germany
3 stephen.wang@kgia.com 6.0

4.0 IRR in France

Ŝ Competition for polysilicon supply spurs spot prices &
2.0 Germany's 10-year bond yield
highlights PV market vitality
0.0
Ŝ Little impact from FiT cuts in Europe
4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11
Ŝ India’s plan to ban PV components imports suggests it is
entering the PV market Source: KGI Research

Competition for polysilicon spurs spot prices, highlights PV Figure 3: PV power nearing grid parity
market vitality
Our channel checks reveal polysilicon strengthened for
small-quantity spot supply but held steady for bulky contract supply
in August, suggesting tense supply and demand near term in the
photovoltaic (PV) market. In August, we also saw the signing of
long-term contracts, which have been absent from the PV market
for a long while, in a bid to secure supply. This means order
visibility has extended. We are upbeat about the solar sector.

Figure 1: Reemergence of long-term contracts underpins

positive outlook
Contract date
S upplier Client Value Delivery
(2010)
O CI Chemi cal (KO R)Yingli G reen (YG E.US) Aug 31 US$442mn 2011-15
O CI Chemi cal (KO R)Motech (6244.TW) Aug 20 US$111mn 2011-15
O CI Chemi cal (KO R)G reen Energy (00979.HK) Jul 26 US$223mn 2011-15 Source:IEK
O CI Chemi cal (KO R)Comtec (00712.HK) Aug 2 US$122.4mn 2011-14
R eneSolar (US) N eo Solar (3576.TW) Aug 20 434MW 2010-13
Solartech (3561.TW) Aug 21 402MW 2010-13 India plans to ban PV components imports
G CL-Poly (03800.HK) Del Solar (TW; unlisted ) Aug 30 664MW 2010-15 It is reported that PV projects under the Indian government subsidy
Source: KGI Research program will not be allowed to use imported solar cell modules
from March 2011. According to its national solar program, India
Little impact from FiT cuts in Europe aims to expand its solar market to 1.0GW by 2013 and 22GW by
France, Italy and Germany have all revised down their solar feed-in 2022. We see the ban as a reasonable means of protecting the
tariffs (FiT) since 2010. Assuming PV cost reduction of 5% in 2011, homegrown solar industry. As India’s PV market totaled 120MW in
we still estimate the internal rate of return (IRR) will exceed the 2009, we foresee limited impact from the embargo. We expect
10-year bond yield based on the new FiT. Considering transparent India’s PV market to take off and the country to become the next
policies in major PV markets and a decent IRR, we foresee limited bright spot for PV investment.
impact from FiT cuts in Europe and even preemptive demand.

PV power is approaching grid parity. Some countries with high

Conclusion
electricity prices should reach grid parity by 2014. Heavyweight
First Solar (US) targets module-included BOS cost of
US$1.43-1.61/watt in 2014, which translates into generation cost Indications suggest PV demand is brisk worldwide. With improving
of €0.2 at German PV power stations, comparable to grid power. visibility for 4Q10, we are positive on companies with heavy
exposure to the PV business such as Haitong (600537.SS) and CSG
Holding (000012.SZ).

Institutional portal: http://research.kgi.com September 2, 2010 7

 DAILY Navigator China Trader Daily j
Indices
Trader Comments
Sep-1 Aug-31 Aug-30
SSEA 2,748 2,765 2,779
Turnover (Rmb bn) 138 124 120 GEM leading declining tape
↑ 265 488 939 Small-cap stocks lead decliners on Wednesday. The Shanghai A-shares index closed at 2,748,
↓ 693 456 21 down 0.59% on turnover Rmb137.6bn; meanwhile the Shenzhen A-share index fell 1.31% to
→ 176 190 176
1,151 on turnover of Rmb140.2bn. The two cities combined transaction volume was up 10%
SZSA 1,206 1,222 1,214
from the previous trading day.
Turnover (Rmb bn) 140 131 114
↑ 221 615 1,026
↓ 843 430 18
→ 36 51 52
Quick Bullets

Top 10 gainers
Companies Gain 㞕 Southern China's Shenzhen city has drafted new labor rules to smooth industrial relations
Shanghai Xidang Market (600723) 10.1 in the special economic zone (SEZ), after the manufacturing hub was stung by a series of
A-share Anyuan Industrial (600397) 10.4 worker strikes earlier in the year. (China Securities Journal)
LianHuan Phar.(600513) 10.0
Tibet Jinzhu (600773) 10.0 㞕 China's banking regulator will strictly implement the central government's
Chengdu Dept.Store (600828) 10.0 macroeconomic policies that aim to curb soaring housing prices, an official said. (China
Shenzhen Huludao Zinc Industry (000751) 10.1 Securities Journal)
A-share XiangTan Elec.(002125) 10.0
Sansteel MinGuang(002110) 10.0 㞕 US Commerce Department announced on Tuesday its decision not to initiate
ChenFei Tech.(002190) 10.0 investigation on allegations that China's currency practices constitute an unfair subsidy.
Kee Ever Bright Tech.(002464) 10.0 (China Securities Journal)

Top 10 active
Companies Turnover
(Rmb mn)
Shanghai Rare-Earth Hi-Tech (600111) 2,164
A-share Ningbo Yunsheng (600366) 1,451
China Merchants Bank (600036) 1,377
Pudong Dev. Bank (600000) 1,271
Shandong Gold-Mining (600547) 1,262
Shenzhen Zoomlion Heavy Industry (000157) 3,702
A-share HaiGe Communications(002465) 1,793
XJ Electric (000400) 1,404
Huludao Zinc Industry (000751) 1,314
DMEGC(002056) 1,125

SSEA performance
Daily trading volume, Rmb bn (LHS); SSEA (RHS)
300 4,000

250 3,500
200
3,000
150
2,500
100

50 2,000

0 1,500
Jun-09 Aug-09 Oct-09 Jan-10 Mar-10 Jun-10 Aug-10
Trading volume SSEA

Source: Wise

SZSA performance
Daily trading volume, Rmb bn (LHS); SZSA (RHS)
200 1,400

160 1,200

120 1,000

80 800

40 600

0 400
Jun-09 Aug-09 Oct-09 Jan-10 Mar-10 Jun-10 Aug-10
Trading volume SZSA

Source: Wise

Institutional portal: http://research.kgi.com September 2, 2010 8

 DAILY Navigator Hong Kong Trader Daily j
Major Indices
Trader Comments
Sep-1 Aug-31 Aug-30
HSI 20,623 20,536 20,737
HS Composite 2,917 2,896 2,915 Shares up as China manufacturing figures show gain
GEI 756 744 751 Hong Kong stocks advanced, led by shares of Chinese companies after the nation's
HS Info Tech 2,154 2,149 2,159 manufacturing expanded at a faster pace in August. Among large caps, HSBC (0005.HK)
HSMCI 6,582 6,542 6,591
rose 0.85% to HK$76.45, China Mobile (0941.HK) rose 0.06% to HK$79.20 and HKEX
HSCCI 4,014 3,990 3,996
(0388.HK) rose 1.14% to HK$123.30. Mainland insurers, China Life (2628.HK) rose 0.67% to
HSCEI 11,499 11,403 11,532
HS-FIN 30,594 30,387 30,818 HK$29.90. Ping An (2318.HK) was suspended from trading, and CPIC (2601.HK) rose 1.25%
HS-UTIL 41,581 41,582 41,602 to HK$28.30. Property stocks: Cheung Kong (0001.HK) rose 0.15% to HK$98.05, SHK
HS-PPT 26,886 26,958 27,052 (0016.HK) fell 0.18% to HK$108.80, Hang lung PPT (0101.HK) rose 0.71% to HK$35.00, and
HS-C&I 11,291 11,249 11,334 Henderson Land (0012.HK) fell 1.89% to HK$46.70. Energy stocks: PetroChina (0857.HK) and
Turnover ($mn) 56,519 56,889 49,249
Sinopec (386.HK) rose 0.59% and 0.48%. CNOOC (0883.HK) fell 0.07%. Hang Seng China
Advanced 719 398 660
Declined 322 668 419
Enterprises index rose 96 points, or 0.84%, to 11,498. The benchmark CEI fell 96 points
Unchanged 190 185 170 despite the Shanghai market sliding 0.59% in afternoon trading.

Futures Mining stocks: Chalco (2600.HK) rose 0.16% to HK$6.19, VTM Mining (0893.HK) rose 5.53%
Sep-1 Aug-31 Aug-30 to HK$2.86, and Jiangxi Copper (0358.HK) rose 1.65% to HK$17.16. Coal producers: China
HSI (Aug) 20,470 20,317 20,762 Shenhua (1088.HK) rose 1.23% to HK$28.70, Yanzhou Coal (1171.HK) rose 1.75% to
HSI (Sep) 20,482 20,314 20,671 HK$16.24, and China Coal (1898.HK) rose 1.64% to HK$11.14. Mainland lenders: ICBC
HSCEI (Aug) 11,449 11,315 11,539 (1398.HK) rose 0.53% to HK$5.68, CCB (0939.HK) rose 0.31% to HK$6.44 and BOC
HSCEI (Sep) 11,470 11,320 11,510
(3988.HK) fell 0.25% to HK$3.90. Meanwhile, CM Bank (3968.HK) rose 0.24% to HK$20.10,
Bocom (3328.HK) rose 0.97% to HK$8.33, and Minsheng Bank (1988.HK) rose 0.14% to
Top Ten
HK$7.08. Home appliance stocks: Skyworth Digital (751.HK) rose 4.20% to HK$4.21, TCL
Company Code Turnover
Multimedia (1070.HK) rose 2.92% to HK$2.46, and GOME (0493.HK) fell 2.54% to HK$2.30.
(HK$mn)
CHINA MOBILE 0941 1,718 Telecom equipment stocks: China Wireless (2369.HK) rose 1.55% to HK$3.27, Sim Tech
HSBC HOLDINGS 0005 1,440 (2000.HK) rose 3.12% to HK$1.65 and Comba (2342.HK) rose 0.87% to HK$8.03.
CHINA LIFE 2628 1,297
BANK OF CHINA 3988 976
Quick Bullets
CCB 0939 869
HUTCHISON 0013 819
ICBC 1398 813 㞕 R&F Properties (2777.HK) announced that its contracted sales grew 45% YoY to
LI NING 2331 723
Rmb3.06bn in August with a saleable area of 247,800 sqm. Contracted sales and
CNOOC 0883 630
saleable area rose 33% and 21% from last month. Since the Chinese government's roll
BOC HONG KONG 2388 614
out of a series of curbing policies in April 2010, R&F's contracted sales recorded steady
Hang Seng Index chart growth in the past two months. The results show buyers have regained confidence in the
Daily Turnover, HK$bn (LHS); HSI (RHS)
market and are reconsidering their purchase plans. Zhangzhou, Tianjin and Beijing
100 22,500 remain R&F’s three major markets, with aggregate contracted sales income of
22,000
80 21,500 Rmb18.2bn and saleable area of 1.48mn sqm, up 11% and down 12% from last year.
21,000
60
20,500
㞕 C C Land (1224.HK) Vice Chairman and Managing Director Peter Lam How-mun said the
40 20,000
company is confident it will achieve its 2010 sales target of Rmb3.4bn. By the third week
19,500
20 19,000 of August, contracted sales of C C Land exceeded Rmb3.1bn. Two new projects will also
6/23 7/5 7/14 7/23 8/3 8/12 8/23 9/1
Trading volume Share price be launched in the coming future. Contracted sales to the end of June surged 2.3 times
Source: Reuters; KGI Asia Limited to Rmb1.82bn. Construction area also expanded 1.9 times to 292,200 sqm.
㞕 Cheung Kong Infrastructure (1038.HK) Managing Director Kam Hing Lam said the
Hang Seng H-Share Index chart company is searching for over 10 potential M&A projects in Europe, North America,
Daily Turnover, HK$bn (LHS); HIS (RHS) Australia and New Zealand. Kam said capital will not be the main concern. The most
35 13,500
30 13,000 important thing is to find quality projects which can provide stable returns and strong
25
20
12,500
cash flow for the company.
12,000
15
10
11,500 㞕 Lumena (0067.HK) said interim net profit grew 40.1% to Rmb357mn for the six months
5 11,000
ended 30 June 2010. Basic and diluted EPS were Rmb 18.34 cents and Rmb 18.32 cents.
0 10,500
6/23 7/5 7/14 7/23 8/3 8/12 8/23 9/1 Revenue was Rmb1.02bn, up 72.6% with a gross profit of Rmb736mn, up 71.8%. The
Trading volume Share price

interim dividend will be HK 5.2 cents (2009: nil) per share, payable on or about 30
Source: Reuters; KGI Asia Limited
September.

Institutional portal: http://research.kgi.com September 2, 2010 9

 DAILY Navigator Hong Kong Statistics k
Valuation table
Code Company FYE Rating Mkt cap Price Target Up/down Absolute performance (%) Relative performance (%)
HK$ bn US$mn (HK$) (HK$) (%) 3m 6m 12m 3m 6m 12m
Auto 00203 Denway Motors Dec Outperform 32 4,077 4.23 4.40 4.0 34.3 (4.5) 17.8 26.9 (2.5) 13.5
00425 MINTH GROUP Dec Outperform 14 1,733 12.64 13.94 10.3 23.4 12.5 83.2 16.7 14.8 76.5
00489 Dongfeng Motor Dec Outperform 36 4,555 12.44 8.20 (34.1) 39.8 8.7 49.7 32.1 11.0 44.2
01114 Brilliance China Dec Underperform 12 1,557 3.31 0.56 (83.1) 36.8 61.5 255.9 29.3 64.9 242.9
01211 BYD Dec Neutral 26 3,292 45.20 12.30 (72.8) (27.3) (28.4) (7.0) (31.3) (26.9) (10.4)
01899 Xingda International Dec Outperform 8 1,057 5.95 6.40 7.5 33.4 62.1 120.4 26.1 65.5 112.3
02333 Greatwall Motor Dec Outperform 7 891 16.82 12.30 (26.9) 26.5 47.8 151.0 19.6 50.9 141.9
03808 SINOTRUCK Dec Outperform 21 2,648 7.48 8.10 8.3 26.1 (9.4) (16.9) 19.2 (7.5) (19.9)
Banking 00636 Fubon Ba nk (HK) Dec Neutral 1,223 156,732 3.66 3.78 3.3 13.0 7.0 14.0 6.8 9.3 9.9
00939 CCB Dec Neutral 1,505 192,943 6.44 7.89 22.5 3.5 5.4 10.1 (2.1) 7.6 6.1
01398 ICBC Dec Neutral 472 60,482 5.68 6.56 15.5 0.4 (1.6) 7.0 (5.1) 0.5 3.1
03328 Ba nk of Comm. Dec Neutral 192 24,632 8.33 8.50 2.0 7.8 1.5 (5.5) 2.0 3.6 (8.9)
03968 CMB Dec Neutral 54 6,860 20.10 22.50 11.9 11.7 7.9 26.9 5.6 10.2 22.3
03988 Ba nk of China Dec Neutral 990 126,920 3.90 4.15 6.4 1.8 (0.5) 2.1 (3.7) 1.6 (1.6)
Bio-tech 01066 Weigao Group Dec Neutral 41 5,319 38.55 31.20 (19.1) 30.0 29.1 82.7 22.9 31.9 76.0
Cement 00914 Anhui Conch Dec Neutral 102 13,067 28.85 26.60 (7.8) 15.2 20.7 17.4 8.9 23.2 13.1
01313 Chinares Cement Dec Outperform 25 3,201 3.83 3.75 (2.1) 13.0 8.2 N.A. 6.8 10.5 N.A.
Coal 01088 China Shenhua Dec Neutral 571 73,184 28.70 36.00 25.4 (5.6) (15.8) (7.1) (10.8) (14.1) (10.5)
01171 Ya nzhou Coal Dec Netural 80 10,240 16.24 17.30 6.5 (5.8) (4.0) 46.8 (10.9) (2.0) 41.5
Energy 01205 Citic Resources Holdiings Dec Outperform 10 1,295 1.67 1.80 7.8 17.6 (20.9) (23.7) 11.2 (19.2) (26.5)
01393 Hedili Industry Dec Outperform 14 1,777 6.73 8.25 22.6 3.4 (21.0) (12.9) (2.3) (19.4) (16.1)
Food 00151 Want Want China Dec Outperform 85 10,853 6.41 6.45 0.6 6.8 24.0 55.6 1.0 26.6 49.9
00168 Tsingtao Brewery Dec Outperform 56 7,179 41.45 13.22 (68.1) 15.1 9.2 51.6 8.8 11.5 46.0
00220 U-Presid China Dec Outperform 18 2,289 4.96 5.80 16.9 16.4 8.1 15.5 10.1 10.3 11.3
00322 Tingyi Dec Outperform 111 14,282 19.94 23.00 15.3 15.1 6.4 42.0 8.8 8.6 36.8
00538 Ajisen (China) Dec Outperform 12 1,555 11.36 6.30 (44.5) 42.0 64.8 117.7 34.2 68.3 109.8
00904 China Green Apr Outperform 7 860 7.59 8.90 17.3 4.3 (14.7) (5.7) (1.4) (12.9) (9.2)
00968 Little Sheep Dec Neutral 5 642 4.87 3.50 (28.1) 15.4 24.9 36.0 9.1 27.5 31.1
01068 Yurun Food Dec Outperform 44 5,683 28.95 22.00 (24.0) 37.9 27.5 115.4 30.3 30.2 107.6
02319 China Mengniu Dec Outperform 33 4,233 23.15 25.60 10.6 1.1 (2.5) 23.5 (4.4) (0.5) 19.0
03889 Global Sweeteners Dec Outperform 1 182 1.36 1.84 35.3 7.9 (26.1) 0.7 2.0 (24.5) (2.9)
Household Appllian 00449 Chigo Dec Outperform 3 364 5.55 9.05 63.2 14.9 11.2 N.A. 8.6 13.6 86.3
Industrial 01044 Hengan International Dec Outperform 80 10,227 69.80 49.00 (29.8) 25.2 30.7 62.1 18.4 33.5 56.2
01868 Neo-Neon Dec Outperform 4 548 4.67 7.20 54.2 14.2 (22.2) 66.8 7.9 (20.5) 60.7
01997 Regent Manner Dec Outperform 4 496 3.87 5.72 47.8 16.9 (0.8) 56.7 10.5 1.3 51.0
03393 Waison Group Dec Outperform 5 674 5.58 7.00 25.4 10.5 0.4 (19.6) 4.5 2.5 (22.5)
Infrastructure 00390 China Railway Group Dec Neutral 119 15,320 5.61 5.90 5.2 12.2 (4.9) (17.4) 6.1 (2.9) (20.4)
01186 China Railway Cons Dec Neutral 21 2,683 10.08 12.80 27.0 10.9 (1.4) (9.8) 4.8 0.7 (13.1)
01800 China Comm. Cons. Dec Neutral 31 3,990 7.03 9.10 29.4 10.4 (4.4) (22.0) 4.3 (2.3) (24.8)
Machinery 00317 Guangzhou Shipyard Dec Outperform 6 791 12.48 16.10 29.0 12.6 (4.0) (20.3) 6.5 (2.0) (23.2)
00569 China Automation Dec Outperform 4 557 4.80 6.45 34.4 (4.6) (12.2) 31.9 (9.8) (10.4) 27.1
01766 China South Locomotive Dec Outperform 13 1,728 6.66 5.48 (17.7) 28.1 21.5 47.3 21.1 24.1 42.0
02338 Weichai Power Dec Outperform 9 1,091 67.30 41.00 (39.1) 20.6 8.5 92.6 14.0 10.8 85.5
Petrochemica l 00196 Honghua Group Dec Neutral 3 368 0.89 1.10 23.6 (19.8) (26.4) (50.0) (24.2) (24.9) (51.8)
00338 Shanghai Petrochemica l Dec Outperform 22 2,862 3.10 5.58 80.0 7.3 10.7 (6.3) 1.4 13.0 (9.8)
00839 Tianda Oil Pipeline Dec Outperform 2 289 2.78 6.15 121.2 (2.5) (30.5) 5.3 (7.8) (29.0) 1.5
Port 02880 Dalian Port Dec Outperform 3 418 3.07 3.20 4.2 4.4 (10.8) (10.0) (1.3) (8.9) (13.3)
03378 Xiamen Port Dec Neutral 1 182 1.44 2.90 101.4 13.4 (6.5) 5.9 7.2 (4.5) 2.0
03382 Tianjin Port Dev Dec Neutral 3 392 1.71 2.00 17.0 8.9 (28.2) (43.0) 3.0 (26.6) (45.1)
Power 00902 Huaneng International Dec Neutral 56 7,202 4.66 5.20 11.6 10.7 (1.3) (14.8) 4.6 0.8 (17.9)
00991 Datang Power Dec Neutral 10 1,310 3.12 5.36 71.8 1.0 (14.3) (25.2) (4.5) (12.5) (27.9)
01071 Huadian Power Dec Neutral 12 1,563 1.80 2.14 18.9 1.7 (16.7) (27.7) (3.9) (14.9) (30.3)
Property 00410 SOHO China Dec Outperform 27 3,438 5.17 6.52 26.1 27.7 29.3 26.1 20.7 32.0 21.5
00688 China Overseas Land & InvestmDec Neutral 132 16,979 16.20 16.76 3.5 10.7 (1.6) 0.0 4.6 0.5 (3.6)
00755 Shanghai Zendai Dec Neutral 2 287 0.32 0.09 (71.6) 0.0 1.6 16.4 (5.5) 3.7 12.1
00817 Franshion Property Dec Neutral 19 2,499 2.24 2.61 16.5 (1.8) (13.2) (1.8) (7.1) (11.4) (5.3)
01109 China Resources Land Dec Outperform 602 77,169 15.22 19.05 25.1 9.0 (9.1) (8.3) 3.1 (7.2) (11.7)
01224 CC Land Dec Neutral 7 875 3.15 5.43 72.4 28.0 (3.1) (25.7) 21.1 (1.0) (28.4)
01813 KW G Property Dec Outperform 14 1,816 5.46 9.53 74.5 26.4 1.3 14.5 19.5 3.4 10.3
02868 BJ CAPITAL LAND Dec Outperform 5 637 2.45 5.59 128.2 8.9 (15.2) (14.9) 2.9 (13.4) (18.0)
Railway 00525 Guangshen Railway Dec Outperform 19 2,497 2.75 4.40 60.0 3.4 (13.8) (18.2) (2.3) (12.0) (21.1)
Retail 00210 Prime Success Int'l Dec Neutral 14 1,732 8.25 6.25 (24.2) 6.6 33.9 65.3 0.8 36.7 59.3
00825 Nwds China Jun Underperform 11 1,443 6.75 5.10 (24.4) 4.8 (3.6) 17.0 (0.9) (1.5) 12.7
00980 Lianhua Dec Outperform 6 815 30.70 11.70 (61.9) 11.4 28.2 102.8 5.3 30.9 95.4
00493 Gome Dec Neutral 29 3,762 2.30 1.76 (23.5) 2.7 (7.3) 3.6 (2.9) (5.3) (0.2)
01361 361 Degree Dec Outperform 14 1,744 6.80 8.00 17.6 24.5 25.5 110.5 17.7 28.1 102.9
01833 Intime Department Store Dec Outperform 18 2,263 10.08 10.03 (0.5) 48.0 50.2 101.6 39.9 53.4 94.3
01880 Belle International Dec Outperform 114 14,598 13.50 11.20 (17.0) 35.0 51.9 98.2 27.6 55.0 91.0
03308 Golden Ea gle Dec Outperform 40 5,091 20.45 16.00 (21.8) 29.9 43.6 82.6 22.8 46.6 75.9
03389 Xinyu Hengdeli Dec Neutral 9 1,144 3.59 1.34 (62.7) 10.1 20.1 73.2 4.1 22.6 66.8
08277 Wumart Dec Neutral 9 1,091 16.80 5.50 (67.3) 12.0 18.3 37.5 5.9 20.8 32.5
Shipping 01138 China Shipping Dev. Dec neutral 36 4,662 10.68 10.90 2.1 5.3 (21.2) 9.0 (0.4) (19.6) 5.0
01919 China COSCO Dec Neutral 21 2,726 8.24 10.20 23.8 (1.4) (17.3) (12.2) (6.8) (15.5) (15.4)
02866 CSCL Dec Outperform 32 4,119 2.75 3.70 34.5 7.0 (15.6) (4.5) 1.2 (13.9) (8.0)
Steel 00347 Angang New Steel Dec Outperform 12 1,562 11.22 21.24 89.3 7.3 (23.6) (23.2) 1.4 (22.0) (26.0)
Technology 00757 Solargiga Dec Neutral 3 361 1.56 1.95 25.0 20.9 (10.9) (30.4) 14.3 N.A. N.A.
00877 O-Net Dec Outperform 4 465 4.69 4.83 3.1 51.3 N.A. N.A. 43.0 N.A. N.A.
00819 Tianneng Power Dec Neutral 3 399 2.87 3.06 6.5 (31.2) (20.3) (14.8) (34.9) N.A. N.A.
02018 AAC Acoustic Dec Outperform 17 2,236 14.20 14.25 0.4 32.2 18.7 120.2 25.0 21.2 112.1
02342 COMBA Dec Outperform 10 1,219 8.03 11.69 45.6 (10.0) 3.4 84.7 (14.9) 5.6 77.9
03888 Kingsoft Corp Dec Neutral 4 534 3.75 4.86 29.6 (16.3) (43.2) (56.6) (20.9) (42.0) (58.2)
Textile / Apparel 01382 Pacific Textiles Mar Underperform 6 720 3.92 2.20 (43.9) (7.1) (24.0) 63.5 (12.2) (22.4) 57.6
00321 Texwinca Holdings Mar Outperform 10 1,337 7.86 6.80 (13.5) 2.1 7.1 29.3 (3.5) 9.3 24.6
Tollroad 00107 Sichuan Expressway Dec Outperform 5 613 5.34 2.75 (48.5) 32.8 17.1 64.8 25.6 19.6 58.8
00177 Jia ngsu Expressway Dec Neutral 9 1,216 7.76 5.30 (31.7) 10.7 4.6 26.4 4.7 6.8 21.8
00548 Shenzhen Expressway Dec Neutral 3 357 3.73 3.40 (8.8) 8.1 (8.1) (5.8) 2.2 (6.2) (9.2)
00576 Zhejiang Expressway Dec Neutral 10 1,259 6.85 6.25 (8.8) (5.5) (2.8) (8.5) (10.7) (0.8) (11.9)
00737 Hopewell Infra Jun Neutral 17 2,228 5.85 4.85 (17.1) 13.6 14.3 25.0 7.4 16.7 20.4
00995 Anhui Expressway Dec Neutral 2 319 5.05 3.70 (26.7) 11.2 (2.5) 16.6 5.2 (0.5) 12.4

Source: Company data; KGI Asia Limited estimates

Institutional portal: http://research.kgi.com September 2, 2010 10

 DAILY Navigator Hong Kong Statistics k
Valuation table
Code Company EPS (HK$/shr) EPS growth (%) P/E (x) P/B (x) EV/EBITDA (x) YIELD (%) ROAE (%)
2008 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010
Auto 00203 Denway Motors 0.41 0.44 0.48 5.2 9.9 9.7 8.8 2.0 1.8 (1781.5) (1635.0) 4.8 5.2 22.1 21.5
00425 MINTH GROUP 0.51 0.74 0.83 46.3 11.3 19.4 17.5 3.2 3.0 19.6 13.2 0.8 1.7 17.5 18.1
00489 Dongfeng Motor 0.54 0.68 0.81 27.1 18.6 18.3 15.4 3.5 2.9 9.0 4.2 N.A. N.A. 21.5 20.6
01114 Brilliance China (0.01) (0.02) (0.02) N.A. N.A. (190.4) (217.9) 1.8 1.8 81.7 108.1 N.A. N.A. N.A. N.A.
01211 BYD 0.77 0.74 1.09 (4.8) 48.6 61.5 41.4 5.6 5.0 7.7 5.2 2.5 2.8 9.4 12.7
01899 Xingda Internation al 0.34 0.45 0.70 30.9 55.8 13.2 8.5 1.4 1.1 7.2 4.8 N.A. N.A. 55.6 69.9
02333 Greatwall Motor 1.15 1.54 2.10 33.3 36.6 10.9 8.0 1.8 1.5 0.9 (0.3) 1.7 1.9 17.9 20.4
03808 SINOTRUCK 0.46 0.56 0.80 21.8 42.9 13.3 9.3 0.9 0.9 4.5 3.0 0.9 0.9 7.3 9.7
Banking 00636 Fubon Bank (HK) 0.05 (0.02) 0.23 (132.7) (1479.3) (223.8) 16.2 1.1 1.0 N.A. N.A. 0.8 3.7 0.5 6.0
00939 CCB 0.46 0.53 0.70 15.0 32.4 12.2 9.3 2.4 2.0 N.A. N.A. 3.6 5.4 20.8 0.0
01398 ICBC 0.38 0.45 0.53 0.2 0.2 12.7 10.8 2.5 2.1 N.A. N.A. 3.4 4.7 0.2 0.2
03328 Bank of Comm. 0.69 0.79 0.91 15.7 14.8 10.5 9.1 1.9 1.6 N.A. N.A. 2.2 2.2 19.8 19.3
03968 CMB 1.84 2.23 2.44 20.9 9.7 9.0 8.2 2.4 2.0 N.A. N.A. 1.1 0.8 29.7 26.4
03988 Bank of China 0.29 0.36 0.43 27.7 19.1 10.7 9.0 1.7 1.6 N.A. N.A. 4.1 5.8 17.5 19.3
Bio-tech 01066 Weigao Group 0.55 0.67 0.92 21.6 36.3 57.3 42.0 12.3 9.8 71.6 51.0 0.3 0.5 23.4 26.1
Cement 00914 Anhui Con ch 1.69 2.27 1.56 34.5 (31.2) 12.7 18.5 1.6 2.6 20.7 10.4 N.A. 1.2 13.3 15.3
01313 Chinares Cement 0.97 0.40 0.25 (58.5) (37.1) 9.5 15.1 2.0 1.8 18.4 11.4 0.2 0.5 12.2 12.7
Coal 01088 China Shenhua 1.53 1.82 2.10 18.8 15.2 15.8 13.7 2.9 2.5 8.7 7.6 1.8 2.0 20.4 19.8
01171 Yanzhou Coal 1.51 0.96 1.60 (36.5) 67.1 17.0 10.2 2.4 2.0 11.3 6.4 3.0 3.5 14.7 21.4
Energy 01205 Citic Resources Holdiings 0.06 0.03 0.12 (46.0) 275.7 51.0 13.6 1.2 1.1 15.4 7.8 N.A. N.A. 2.4 8.5
01393 Hedili Industry 0.49 0.14 0.35 (71.3) 150.5 48.1 19.2 2.2 2.0 32.6 16.3 1.2 1.2 6.7 11.0
Food 00151 Want Want China 0.16 0.18 0.24 18.3 30.3 35.7 27.4 11.3 10.0 29.3 22.2 2.5 2.8 32.6 38.6
00168 Tsingtao Brewery 0.61 1.06 1.32 N.A. 24.2 39.1 31.5 6.0 5.2 29.3 15.2 0.6 0.6 17.5 17.6
00220 U-Presid China 0.11 0.26 0.30 N.A. 15.6 19.2 16.6 2.5 2.4 10.5 8.7 2.6 3.0 13.7 14.7
00322 Tingyi 0.36 0.53 0.65 46.2 22.7 36.2 29.5 9.9 8.5 16.1 13.1 1.4 1.7 29.2 30.8
00538 Ajisen (China) 0.21 0.26 0.35 27.9 32.2 42.9 32.5 5.1 4.6 23.8 17.8 0.6 0.9 12.3 14.8
00904 China Green 0.59 0.71 0.83 N.A. 16.9 10.7 9.2 2.0 1.7 6.6 5.4 2.3 2.7 19.6 19.8
00968 Little Sheep 0.15 0.14 0.18 N.A. 24.8 34.3 27.5 4.4 4.0 19.8 15.1 1.5 1.8 13.1 15.3
01068 Yurun Food 0.74 0.96 1.11 29.2 15.5 30.1 26.1 7.6 6.3 30.1 22.0 0.9 1.0 26.5 26.3
02319 China Mengniu (0.73) 0.94 1.07 N.A. 14.2 24.7 21.6 4.1 3.6 10.3 8.1 0.8 0.9 20.5 17.6
03889 Global Sweeteners 0.15 0.13 0.24 (13.5) 87.7 16.6 7.5 0.9 0.8 8.3 5.0 N.A. N.A. 5.4 11.1
Household Applianc00449 Chigo 0.25 0.77 1.00 203.1 29.4 8.2 6.3 1.5 1.3 11.9 (15.6) 2.0 3.2 19.5 21.9
Indus trial 01044 Hengan International 1.17 1.78 2.11 51.6 18.7 39.3 33.1 11.8 10.5 28.7 22.7 1.6 2.0 30.7 33.5
01868 Neo-Neon 0.21 0.19 0.24 (8.6) 22.9 24.1 19.6 1.2 1.3 15.7 11.7 0.5 0.7 5.5 6.6
01997 Regent Manner 0.29 0.43 0.57 49.9 33.8 1.1 0.8 6.9 5.2 N.A. N.A. 30.0 42.5 14.8 17.9
03393 Wais on Group 0.33 0.34 0.37 N.A. 10.1 16.7 15.1 2.1 1.9 21.5 20.9 1.5 2.3 14.8 13.4
Infrastructure 00390 China Railway Group 0.07 0.31 0.40 330.7 28.7 18.0 14.0 1.7 1.5 9.1 7.8 1.1 1.4 9.9 11.5
01186 China Railway Cons 0.37 0.51 0.62 37.3 22.6 19.8 16.2 2.1 1.9 (1.1) (0.7) 1.7 2.0 11.0 12.4
01800 China Comm. Cons . 0.47 0.62 0.84 31.6 36.4 11.4 8.4 1.9 1.6 3.0 2.2 1.3 1.8 18.0 20.7
Machinery 00317 Guangzhou Ship yard 1.90 1.19 1.44 (37.2) 20.9 10.5 8.7 1.7 1.5 2.7 1.1 4.6 2.7 17.4 18.5
00569 China Automation 0.19 0.25 0.31 42.3 22.9 19.2 15.6 2.5 2.1 12.0 9.5 1.0 1.2 19.4 18.9
01766 China South Locomotive 0.18 0.17 0.24 (3.4) 40.0 38.3 27.4 3.9 3.4 2.9 2.1 0.5 N.A. 10.6 13.2
02338 Weichai Power 2.65 3.30 3.83 24.9 15.8 20.4 17.6 4.7 3.7 1.4 0.5 0.5 0.5 26.2 23.7
Petrochemica l 00196 Honghua Group 0.23 (0.05) 0.10 N.A. N.A. (19.7) 9.1 0.6 0.6 N.A. N.A. 11.5 N.A. N.A. 6.6
00338 Shangha i Petrochemical (0.99) 0.25 0.62 N.A. 143.8 12.3 5.0 1.3 1.1 15.3 4.2 3.3 1.1 11.2 23.3
00839 Tianda Oil Pipeline 0.45 0.30 0.52 (34.2) 73.8 9.3 5.4 1.3 1.0 10.1 3.1 2.1 2.1 14.2 21.4
Port 02880 Dalian Port 0.30 0.25 0.28 (17.3) 11.5 12.2 10.9 1.2 1.1 4.6 3.9 3.4 3.4 9.8 10.3
03378 Xiamen Port 0.17 0.18 0.20 4.8 9.0 8.0 7.4 0.8 0.8 0.7 0.3 7.1 7.9 10.8 11.2
03382 Tianjin Port Dev 0.07 0.08 0.10 3.2 36.7 22.6 16.6 0.8 0.8 10.8 9.2 2.7 2.8 3.7 4.9
Power 00902 Huaneng International (0.37) 0.47 0.43 N.A. (7.4) 10.0 10.8 1.2 1.1 18.5 8.4 N.A. 2.5 12.5 10.7
00991 Datang Power 0.73 0.91 0.00 24.7 N.A. 3.4 N.A. 0.4 0.4 3.0 N.A. N.A. N.A. 13.8 0.0
01071 Huadian Power (0.49) 0.20 0.03 N.A. (83.5) 9.2 55.8 0.7 0.7 9.4 11.9 16.6 N.A. 8.4 1.2
Property 00410 SOHO China 0.09 0.73 0.68 732.0 (6.2) 7.1 7.6 1.4 1.2 6.8 3.0 4.4 5.5 21.1 17.0
00688 China Overseas Land & Investm 0.65 0.92 1.26 41.4 37.3 17.7 12.9 3.1 2.6 12.0 8.6 1.2 1.6 17.7 20.4
00755 Shangha i Zendai 0.09 0.03 0.00 (61.3) (86.6) 9.6 71.8 1.0 1.0 9.9 35.4 N.A. N.A. 11.4 1.4
00817 Franshion Property 0.17 0.12 0.05 (27.8) (56.9) 18.4 42.8 1.2 1.2 6.7 9.3 0.9 1.0 7.4 2.8
01109 China Resources Land 0.46 0.90 1.22 96.7 35.0 16.9 12.5 2.0 1.7 128.4 79.4 1.6 1.6 13.0 14.8
01224 CC Land 0.13 0.13 0.77 (3.1) 511.9 25.1 4.1 0.7 0.6 572.7 7.8 0.8 4.9 2.7 15.0
01813 KWG Property 0.17 0.47 0.75 177.1 60.0 11.6 7.2 1.3 1.1 8.0 5.1 2.6 4.0 11.9 16.9
02868 BJ CAPITAL LAND 0.22 0.41 0.73 90.3 77.4 6.0 3.4 0.9 0.8 4.7 2.1 7.1 12.6 16.1 24.4
Railway 00548 Shenzhen E xpressway 0.26 0.25 0.23 (5.8) (8.3) 15.1 16.4 1.0 1.0 13.2 11.3 3.7 3.4 6.6 5.9
Retail 00210 Prime Success Int'l 0.30 0.36 0.47 20.5 29.8 22.6 17.4 5.7 4.5 13.0 10.4 0.9 1.4 28.3 28.8
00825 Nwds China 0.29 0.30 0.34 2.1 13.7 22.4 19.7 2.6 2.4 11.2 8.5 1.3 2.2 11.9 12.6
00980 Lianhua 0.71 0.78 0.90 9.5 15.4 39.3 34.0 6.1 5.4 (0.8) (1.0) 1.0 1.2 16.2 16.8
00493 Gome 0.09 0.10 0.11 (26.1) 12.4 23.2 20.6 2.9 2.6 10.6 7.0 1.4 1.6 14.7 15.1
01361 361 Degree N.A. 0.48 0.51 -- 6.6 14.2 13.3 4.7 3.5 13.8 8.8 N.A. 3.4 44.7 30.3
01833 Intime Department Store 0.24 0.30 0.33 25.8 10.8 33.4 30.1 4.5 4.1 34.0 24.6 1.5 1.3 13.8 14.3
01880 Belle International 0.24 0.30 0.37 26.1 21.7 44.9 36.9 7.4 6.4 32.9 27.5 0.6 0.6 17.6 18.6
03308 Golden Eagle 0.39 0.27 0.57 (31.8) 114.9 77.1 35.9 17.0 11.9 33.8 27.7 0.2 0.2 22.7 39.0
03389 Xinyu Hengdeli 0.21 0.19 0.24 (10.2) 25.0 18.8 15.0 3.3 2.8 11.9 10.1 1.6 2.0 18.5 20.1
08277 Wulmart 0.46 0.39 0.47 (15.2) 19.6 43.1 36.0 6.7 5.9 8.7 6.5 N.A. N.A. 16.3 17.5
Shipping 01138 China Shipping Dev. 1.80 0.36 0.65 (80.2) 83.2 29.9 16.3 1.5 1.5 14.8 9.1 5.4 1.1 5.0 9.1
01919 China COSCO 1.30 (0.44) 0.20 N.A. N.A. (18.8) 41.9 1.5 1.5 (15.6) 5.0 N.A. N.A. N.A. 3.6
02866 CSCL 0.00 (0.63) 0.10 N.A. N.A. (4.4) 27.3 1.1 1.1 (7.7) 13.0 N.A. 0.4 N.A. 4.0
Steel 00347 Angang New Steel 2.02 2.31 0.00 14.1 N.A. 4.9 N.A. 1.0 1.0 0.5 N.A. 3.1 N.A. 22.9 0.0
Technology 00757 Solargiga 0.06 (0.07) 0.06 N.A. N.A. (22.6) 27.5 1.6 1.6 (21.7) 23.9 1.1 1.1 N.A. 5.9
00877 O-Net N.A. N.A. 0.23 -- -- N.A. 20.5 N.A. 3.8 36.4 15.6 N.A. 0.0 N.A. N.A.
00819 Tianneng Power 0.27 0.30 0.22 13.7 (29.2) 9.4 13.3 1.5 1.5 7.7 10.4 3.1 2.3 18.4 11.4
02018 AAC Acoustic 0.58 0.57 0.96 (1.1) 67.2 24.8 14.8 4.1 3.4 20.9 12.2 1.5 2.1 18.0 24.9
02342 COMBA 0.22 0.54 0.66 145.3 21.7 14.8 12.2 3.2 3.0 11.0 7.8 2.2 2.5 21.8 24.3
03888 Kingsoft Corp 0.33 0.42 0.42 25.7 0.3 9.0 9.0 2.2 1.9 5.7 5.0 4.0 3.8 26.4 22.5
Textile / Apparel 01382 Pacific Textiles 0.28 0.26 0.28 (7.0) 6.0 14.9 14.1 1.8 1.6 7.3 6.5 3.8 3.6 12.7 12.1
00321 Texwinca Holdin gs 0.70 0.65 0.69 (7.1) 6.7 12.1 11.4 2.5 2.3 8.2 6.9 5.1 5.3 21.6 21.0
Tollroad 00107 Sichua n Expressway 0.24 0.23 0.25 (4.8) 7.7 23.1 21.4 2.0 1.9 4.8 4.1 1.7 1.9 8.7 8.9
00177 Jiangsu Expressway 0.36 0.31 0.39 (13.1) 25.5 24.7 19.7 2.3 2.3 5.1 4.2 3.8 4.1 9.5 11.7
00548 Shenzhen E xpressway 0.26 0.25 0.23 (5.8) (8.3) 15.1 16.4 1.0 1.0 13.2 11.3 3.7 3.4 6.6 5.9
00576 Zhejiang E xpressway 0.50 0.44 0.54 (12.3) 23.8 15.7 12.7 1.9 1.8 1.4 0.8 5.2 5.2 12.0 14.3
00737 Hopewell Infra 0.67 0.40 0.37 (40.0) (7.0) 14.5 15.6 1.6 2.0 11.3 11.3 19.5 4.8 10.6 11.3
00995 Anhui Expressway 0.52 0.49 0.49 (4.3) (1.0) 10.2 10.3 1.2 1.1 3.1 2.5 4.5 4.5 12.1 11.2
Source: Company data; KGI Asia Limited estimates

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