China Puti A diversifying casing leader

Transcription

1 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Juteng International 3336.HK China Puti A diversifying casing leader Rating Buy Initiation Target Price HKD 7.62 Current price HKD 5.00 Upside +52% A leader in notebook casing, harvesting from diversification Juteng is the largest plastic notebook casing maker, with ~30.0% share of the global notebook casing market followed by Hon Hai and Huan Hsin. The company is shifting focus from plastic casings to metal/ composite casings, and penetrating into tablet/ smartphone market from 2H12 and 2H13 respectively, supported by its comprehensive product offering and solid relationships with ODMs/ OEMs. Notebooks turning to metal/ composite casing We expect its notebook revenue decline to moderate to -2.7% in FY14E from -4.2% in FY13E, on the back of market decline slowdown and product-mix improvement. Revenue from metal/ composite material casings has been catching up, given the general trend for ultrabooks/ convertible notebooks, and higher ASPs of metal/ composite casings (>US$10/piece) compared with those of plastic casings (~US$5/piece). Growth coming from tablets and smartphones Tablet shipment surpasses notebook shipment from 2013, and smartphone shipment has been even 5.6 times of notebook one. With increasing market share from customers and higher ASPs, we expect tablet/ smartphone revenue to grow 71.0%/ 279.9% in FY14E. Its tablet/ smartphone sales mix will further expand to ~15.0%/10.0% in FY14E from ~10.0%/3.0% in FY13E. A large potential from Google/ Moto and Microsoft/ Nokia In 2013, Microsoft has announced the acquisition of Nokia, followed by the Google/ Moto acquisition in We believe Google and Microsoft are exercising the similar strategy to monetize their Android and Windows platforms, through the capabilities of their hardware devices. They could potentially be a major clan in the smartphone market. Juteng, one of the players in Google and Microsoft s supply chain, will probably catch up with their device strategies. We initiate coverage on Juteng with BUY We initiate coverage on Juteng with BUY. The company is trading at 6.1x FY14E PER, which is 47.5% lower than average 11.6x of the peers. With dominant industry position in casing with new growth driver of tablets/ smartphones, we believe Juteng s valuation will rise to near average of the peers. We initiate coverage on the stock with target price of HK$7.62, based on 9.3x FY14E PER and 20.0% discount to average of the peers. HKD million FY11A FY12A FY13E FY14E FY15E Revenue 8,235 9,201 9,242 10,534 12,031 Net Profit ,089 Consensus NP ,120 EPS (HKD) P/E (x) Sources: Bloomberg, CIRL estimates 28 January 2014 Susanna Chui susanna.chui@cinda.com.hk (852) Trading data 52-Week Range (HK$) 3 Mth Avg Daily Vol (m) No of Shares (m) Market Cap (HK$m) Major Shareholders (%) Auditors Result Due Company description 3.10/ , , Southern Asia Management (25%) ERNST & YOUNG FY13E: Mar Established in 2000, Juteng is the largest plastic notebook casing maker, with ~30.0% share of the global notebook casing market followed by Hon Hai and Huan Hsin. Its customers are mainly major notebook ODMs, such as Compal (2324.TT), Wistron (3231.TT), Quanta (2382.TT), Pegatron (4938.TT), and Inventec (2356.TT), for major PC-brand vendors, such as Lenovo (992.HK), HP (HPQ.US), ASUS (2357.TT), Acer (2353.TT), and Dell (DELL.US). The company is shifting focus from plastic casings to metal/composite casings, and penetrating into tablet market (Google (GOOG.US) s Nexus 7) from 2H12 and smartphone market (Moto X) from 2H13. Price chart HK$ Page 1 of 19

2 A leader in notebook casing, harvesting from diversification Established in 2000, Juteng is the largest plastic notebook casing maker, with ~30.0% share of the global notebook casing market followed by Hon Hai and Huan Hsin. Its customers are mainly major notebook ODMs, such as Compal (2324.TT), Wistron (3231.TT), Quanta (2382.TT), Pegatron (4938.TT), and Inventec (2356.TT). The company is shifting focus from plastic casings to metal/composite casings, and penetrating into tablet market (Google (GOOG.US) s Nexus 7) from 2H12 and smartphone market (Moto X) from 2H13. Exhibit 1: Global notebook casing market share Others, 40% Juteng, 30% Huan Hsin, 10% Hon Hai, 20% Exhibit 2: FY13E revenue mix by customers Inventec 15% Others 9% Compal 23% Pegatron 17% Wistron 19% Quanta 17% Page 2 of 19

3 Exhibit 3: Top 5 notebook ODMs market share and major customers FY13E Market share Major customers - OEMS Compal 25% Lenovo, Dell, Acer Wistron 12% Lenovo, Dell, Acer, ASUS Quanta 24% Apple, AUSU, HPQ Pegatron 6% Apple, AUSU, Toshiba Inventec 9% HP, Toshiba, Fujitsu Exhibit 4: FY13E revenue mix by product Smartphone 3% Tablet 10% Others 5% NB - Metal and composite material casings 27% NB - Plastic casing 55% Comprehensive product offering Jutung is market leader in notebook plastic casings, and has diversified into metal/composite casings, such as carbon fibre or glass fibre. Its metal notebook casings have been adopted by Samsung (5930.KS) and HP (HPQ.US) for their unibody aluminium and magnesium casings, while it is also supplying carbon fibre notebook casings to Sony (6758.JT), Dell (DELL.US), and Lenovo (992.HK). Exhibit 5: Juteng s product range Material Magnesium Aluminium Plastic Glass fibre Carbon fibre Process Thixomolding Unibody, stamping Injection Injection Thermoplastic, thermosets Major clients Dell, HP Samsung Major notebook OEMs (except Apple) Acer Sony, Dell, Lenovo GPM 30-35% 20-35% 10-20% 35% and above 35% and above Page 3 of 19

4 Currently, only Juteng, BYDE (285.HK) and Jabil (JBL.US) have such comprehensive product range. And Juteng is even two years ahead of competitors in its development of composite materials, and is able to deliver composite material products in a shorter throughput time, better production yield rate, and lower costs than those of its competitors. Exhibit 6: Only Juteng, BYDE and Jabil have such comprehensive product range Ju-Teng Foxconn Tech Huan Hsin Catcher Casetek BYDE Jabil / Green Point Stock ticker 3336.HK 2354.TT HUAN.SP 2474.TT 5264.TT 285.HK JBL.US EMS/ODM JVs with Compal 30% owned by JV with Inventec n.a. 68%-owned by n.a. 100%-owned by connection and Wistron Hon Hai Pegatron Jabil Precision Material - plastic Material - metal No. of CNC 3,000 16,000 n.a. 16,000 5,500 5,000 5,000 machines Material composite (carbon fibre) Material composite (glass fibre) Besides materials, Juteng has also diversified into tablets and smartphones. Juteng has penetrated the tablet market via Google s Nexus 7 from 2H12, and started to ship metal casings for tablets in 2H13, including Microsoft (MSFT.US) s new Surface. For smartphones, Juteng supplies the Moto X model with casings, which adopt sandwich-structured composite attaching two plastic skins to a fabric core. As composite casing and smart devices will be the trend, we think Juteng which is capable of dealing with comprehensive solutions will be the winner. Solid relationships with ODMs/ OEMs Juteng has strong long-term relationships with the Top 5 notebook ODMs (Quanta, Compal, Wistron, Inventec and Pegatron) and OEMs (Lenovo, HP, Acer (2353.TT), Asustek (2357.TT), Dell). The company is involved in several joint ventures with Page 4 of 19

5 Compal and Wistron, which are the two largest contributors to the company s revenue. We believe the solid relationships can secure good order allocations from these ODMS/ OEMs. Exhibit 7: Juteng s major joint ventures with ODMs JV Entity Stake owned by Juteng Product Compal Compal Precision (prev. Wah Yuen Holding) Wis Precision - Kunshan 57% Notebook metal and plastic casing Notebook plastic casing Wistron Lian-Yi Precision 71% TV casing Wis Precision - Taizhou Notebook plastic casing Page 5 of 19

6 mn units Notebooks turning to metal/ composite casing The notebook segment is still Juteng s key revenue contributor. We expect the rate of notebook revenue decline to slow to -2.7% in FY14E from -4.2% in FY13E, on the back of stabilized market and product-mix improvement from plastic casings to metal/ composite material casings. Revenue from metal/ composite material casings has been catching up, given the general trend for ultrabooks/ convertible notebooks to have thin-and-light designs, and higher ASPs of metal/ composite casings (>US$10/piece) compared to those of plastic casings (~US$5/piece) notebook shipment decline will moderate, and ultrabooks/ convertible notebooks will outperform Windows 8 launch in 4Q12 has admittedly failed to deflect 2013 s declining PC shipments. Due to the continuous cannibalization from more powerful and cheaper tablets, we believe notebook units will continue to decline into 2014 despite slower rate of decline. IDC also forecasts notebook decline to moderate to 6% in 2014 after declining 10% in Exhibit 8: Worldwide notebook shipment E 2014E 2015E Traditional notebook shipment Ultrabooks and convertible notebook shipments Source: IDC, CIRL Ultrabooks and convertible notebooks will outperform, however. To reduce cannibalization impacts from tablets, Intel, Microsoft and PC brand vendors took aggressive actions in 1) ultrabooks with thinner and lighter form factors, power-saving platforms and longer battery life; and 2) convertible notebooks with one product accounting for two (notebook and tablet) functionalities; Page 6 of 19

7 mn units As some PC vendors cut their selling prices to <US$600 to promote their ultrabooks/ convertible notebooks, we believe their penetration rate will increase to 19% of the total notebook, and the shipment will continue to grow at 48% in Exhibit 9: Ultrabooks and convertible notebook shipment E 2014E 2015E 30% 25% 20% 15% 10% 5% 0% Ultrabooks and convertible notebook shipments Penetration rate Source: IDC, CIRL And corporate notebooks will improve as Win XP is being phased out We believe corporate users may be at last transitioning away from Windows XP before the expiry of support in April It is clearly leading to more stability in the corporate segments. ODMs such as Inventec has also guided that commercial NB shipments will be flat but consumer NB shipments will decline. Metal/ composite casings catching up, given the trend for ultrabooks/ convertible notebooks with thin-and-light designs The trend of thinner and lighter ultrabooks/ convertible notebooks and corporate notebooks, will definitely favor demand for metal/ composite material casing, given their functionality and differentiation. Juteng has a comprehensive product range in casing material, ranging from plastic, aluminium, magnesium, carbon fibre, to glass fibre composite material. And it is two years ahead of competitors in its development of composite materials and is able to deliver composite material products in shorter throughput times, better production yield rate, and lower costs than those of its competitors. Therefore, we believe Juteng is well positioned to seize emerging opportunities in ultrabook/ convertible notebook and corporate notebook casings with its strength in offering composite material. Page 7 of 19

8 Stable notebook revenue growth from product-mix improvement Metal/ composite casings command much higher ASPs (>US$10/piece) compared with those of plastic casings (~US$5/piece). With better product-mix, we expect notebook revenue decline to moderate to -2.7% in FY14E from -4.2% in FY13E. Page 8 of 19

9 mn units Growth from tablets and smartphones Tablet shipment surpasses notebook shipment from 2013, and smartphone shipment has been even 5.6 times of notebook one. In order to capture these two huge markets, Juteng has penetrated tablet market (Google s Nexus 7) from 2H12 and smartphone market (Moto X) from 2H13. With robust market growth, increasing market share from new customers, and higher ASPs albeit using fewer pieces per set than notebooks, we expect its tablet/ smartphone sales mix will further expand to ~15.0%/10.0% in FY14E from ~10.0%/3.0% in FY13E. Exhibit 10: Google s Nexus 7 and Moto X Exhibit 11: Global smart device shipment 2,500 2,000 Smartphones 1,500 1, ,219 1, E 2014E 2015E Tablets Ultrabooks and convertible notebooks Traditional notebooks Source: IDC, CIRL Page 9 of 19

10 mn units Tablet shipment surpasses notebook shipment from 2013 The global tablet shipments will surpass notebook shipments significantly in We believe the momentum will persist in 2014, given increasing number of cheaper tablet products pushed by local brands in China and PC camps (needing tablet sales to help reduce slowing notebook demand impacts). We estimate global tablet shipments will grow by 35% yoy to 266m units in 2014 from 197m units in Exhibit 12: Global tablet shipment 1, , , , ,219 1, E 2014E 2015E Source: IDC, CIRL Exhibit 13: Tablet with Windows (most PC camp) platform is gaining market share 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 0% 1% 3% 5% 7% 32% 43% 41% 41% 42% 68% 56% 56% 54% 51% E 2014E 2015E ios Android Windows (mostly PC camp) Source: IDC, CIRL Page 10 of 19

11 mn units Continuous robust smartphone momentum, in the fashion story We see 2014 as another year of strong growth for smartphones, with still low penetration rate of 34% in We estimate global smartphone shipments will grow by 25% yoy to 1,219m units in 2014 from 976m units in However, consumers may get bored of specification migrations. We can see smartphone vendors flagship smartphones have moved up to quad-core processor/5 + display/13mp+ camera. With slow innovation curve, the fashion story like the one in notebook market will occur once again in smartphone market. After New HTC One (Metal + Plastic) and Moto X (sandwich-structured composite attaching two plastic skins to a fabric core, supplied by Juteng), more and more smartphones will be expected to turn from plastic casing to metal/ composite casing. Samsung has announced a new smartphone, Galaxy J, a device which mashes Galaxy S4 and Galaxy Note 3, in the metal look. It has been rumored the coming Galaxy S5 and Galaxy F (a premium edition of Galaxy S5) will be built from metal/ composite materials. And in Consumer Electronics Show (CES), China smartphone brands, such as ZTE and TCL, have adopted metal/ composite casing for the new models in Exhibit 14: Global smartphone shipment 1, , , , ,219 1, E 2014E 2015E Source: IDC, CIRL Page 11 of 19

12 Exhibit 15: Smartphone highlight in CES 2014 Huawei LG ZTE ZTE ZTE Sony Mate2 G Flex Grand S2 Iconic Phablet Sonata Z1S Plastic Plastic Metal Composite (metal + plastic) Sony TCL TCL Asus Z1 compact Idol X+ Idol Alpha Zenfone Plastic Asus Padfone mini Glass Acer Liquid Z5 Glass Plastic Composite (metal + transparent material) Plastic Plastic Plastic Rising tablet/ smartphone contribution Juteng has diversified into tablets and smartphones. The company has penetrated into tablet market via Google s Nexus 7 from 2H12, and started to ship metal casings for tablets in 2H13, including for Microsoft (MSFT.US) s new Surface. For smartphones, Juteng supplies the Moto X model from 2H13 with casings, adopting sandwich-structured composite attaching two plastic skins to a fabric core. These order gain has proven its capability in composite-material and tablet/ smartphone market, and also new relationship with internet/ software companies (Google and Microsoft). We believe there will be potential for the company to catch up with Google and Microsoft s device strategies. Page 12 of 19

13 And it can also leverage on these relationships with its long built customers, notebook ODMs and OEMs. ODMs have provided optimistic guidance about smart device shipments in 2014, due to OEMs more aggressive launch of cheaper tablets and smartphones. Exhibit 16: ODMs FY14E guidance Compal NB OEMs will reduce the number of ODM vendors to 2~3 from 3~4 and most orders will move to Compal and Quanta in FY14. It expects 40mn (2% yoy) NB units and 15mn/20mn (100% yoy) tablets/smartphones in Quanta It sets a NB shipment target of 42~44mn units (up 3~5% yoy), but flat tablet shipments of 20mn. Wistron It expects NB shipment to be 19~20mn units (down 18% yoy), but FY14 smart device shipment will grow to 32~33mn units (up around 15% yoy). Pegatron It forecasts a decline as industry level in the computing segment while the consumer and communication segment will continue to grow. Inventec It guides that commercial NB shipments will be flat but consumer NB shipments will decline. It expects its non-notebook businesses to drive its growth in Specifically, it is positive on growth from its smart device s and solar business; and expects stable growth for its server business. Therefore, we expect tablet/ smartphone revenue to grow 71.0%/ 279.9% in FY14E, with its customers increasing exposure to tablets and smartphones, of which market is delivering rapid growth. Page 13 of 19

14 A large Potential from Google/ Moto and Microsoft/ Nokia In 2013, Microsoft has announced the acquisition of Nokia, followed by the Google/ Moto acquisition in As Apple has a full stack of hardware (smart devices) and operating system (ios, the 2 rd mobile operating systems), Google and Microsoft are exercising the similar strategy to merchandise hardware devices, which would in turn solidify their foothold in operating system (Android and Windows platforms, the 1 st and 3 rd mobile operating systems) and monetize them. Especially for Windows Phone which is still a minority player, Nokia seems to be its ultimate solution in combating the threats from the popularity of smart devices that use Android and ios platform. Microsoft has aggressive target, and Google is not expected to be far behind Microsoft has set to have 15% market share and 255M unit shipments by Though it is a long way to this aggressive target, Nokia s Lumia series appears to be off to a solid start. Windows Phone s share in global smartphone market has increased to 3.6% in 3Q13 from 2.0% in 3Q12, thanks to the satisfactory sales of Lumia series in developing markets such as India. We believe Google s target will not be far behind. Therefore, there will be potential for Moto and Nokia to become the notable competitors to Apple and Samsung down the road. Exhibit 17: Google and Microsoft aim at increasing share and monetization of their platforms 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 69% 75% 79% 81% 75% 70% 57% 59% 53% 47% 36% 23% 23% 18% 19% 21% 14% 17% 15% 17% 13% 13% 3% 2% 1% 1% 2% 3% 2% 3% 3% 4% 4% 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 Android ios Windows Phone Page 14 of 19

15 Providing devices in differentiating form and in competitive price To fight for market share and monetization of their Android and Windows platform, Google and Microsoft probably have to cut margins in providing devices either in differentiating form for flagship devices or in competitive price for affordable devices. Exhibit 18: Moto X has provided the fresh look in alternate materials Moto X has tried the fresh look in alternate materials, of which woven white and black (supplied by Juteng) are sandwich-structured composite attaching two plastic skins to a fabric core. As for Nokia, its portfolio continues to expand from flagship devices like the Nokia Lumia 928/1020/1520, to affordable devices like the Lumia 520/625/1320. Potentially catching up with Google and Microsoft Google and Microsoft will prefer casing makers, with low exposure to Apple and also comprehensive product range. Therefore, Juteng has become one of the players in Google and Microsoft s supply chain and will probably catch up with their device strategies. Page 15 of 19

16 More metal/composite, higher GPM Riding on improving product mix (notebook - plastic casing segment decreasing from ~61% in FY12 to ~37% in FY15E), the overall GPM will be pulled up. It is because GPM on plastic casings is about 10-15%, but that for others can be 15-35%. Exhibit 19: Juteng s product mix 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 8% 10% 5% 5% 5% 0% 3% 4% 0% 10% 10% 15% 20% 15% 25% 27% 20% 25% 23% 72% 61% 55% 45% 37% E 2014E 2015E Others Smartphone Tablet NB - Metal and composite material casings NB - Plastic casing Exhibit 20: Juteng s FY13E margins GPM Notebook - Plastic casing 10-15% Notebook - Metal and composite material casings 30-35% Tablet 15-20% Smartphone 30-35% Overall 19% Page 16 of 19

17 Financial analysis and valuation We forecast revenue to grow by 0.4%/14.0%/14.2% for FY13E/FY14E/FY15E mainly driven by the growth of tablet/ smartphone segments. GPM keeps uptrend from 15.2% in FY12 to 20.2% in FY15E, riding on improving product mix (notebook - plastic casing segment decreasing from ~61% in FY12 to ~37% in FY15E). GPM on plastic casings is 10-15%, but that for others can be 15-35%. SG&A expense will increase from 6.0% in FY12 to 7.2% in FY15E, on the back of developing tablet/ smartphone segments. We expect that net profit will rise 18.9%/29.9%/17.4% to HKD714.6mn/ HKD928.1mn/ HKD1,089.5mn in FY13E/FY14E/FY15E. Payout will maintain a ~23.0% of net profit in FY13E-FY15E representing 2.8%/3.7%/4.3% of FY13E/FY14E/FY15E dividend yield. We initiate coverage on Juteng with BUY. The company is trading at 6.1x FY14E PER, which is 47.5% lower than average 11.6x of the peers. With dominant industry position in casing with new growth driver of tablets/ smartphones, we believe Juteng s valuation will rise to near average of the peers. We initiate coverage on the stock with target price of HK$7.62, based on 9.3x FY14E PER and 20.0% discount to average of the peers. Risk Factors Downside risks include: 1) slower than expected growth of tablets/ smartphones; 2) slower than expected expansion of market share; 3) slower than expected growth of its clients; 4) more-than-expected competition; and 5) rapidly changing technology trends. Page 17 of 19

18 Exhibit 21: Financial statement Income statement Cash flow Year to Dec (HKD mn) FY11A FY12A FY13E FY14E FY15E Year to Dec (HKD mn) FY11A FY12A FY13E FY14E FY15E Revenue 8,235 9,201 9,242 10,534 12,031 Pre-tax profit ,124 1,355 1,590 Gross profit (reported) 868 1,401 1,631 1,959 2,311 Taxes paid (47) (85) (173) (269) (257) EBITDA 830 1,440 1,810 2,103 2,394 Depreciation Depreciation (491) (589) (631) (672) (701) Associates EBIT ,179 1,431 1,693 CFO bef. WC change 774 1,292 1,581 1,758 2,034 Net interest income (exp.) (45) (62) (56) (77) (102) Change in working cap (73) (1,171) (72) (409) (475) Associates (7) Cashflow from operation ,510 1,349 1,559 Exceptionals/others CAPEX (1,590) (978) (1,014) (936) (936) Profit before tax ,124 1,355 1,590 Free cash flow (888) (857) Tax expenses (50) (129) (269) (257) (302) Dividends Minority interest 20 (59) (140) (169) (199) Balance sheet adj. (217) (152) Net profit ,089 Sharse issued 346 (80) Others Balance sheet Net cash flow (669) (951) Year to Dec (HKD mn) FY11A FY12A FY13E FY14E FY15E Net cash (debt) start (1,256) (1,924) (2,876) (2,189) (1,514) Cash & equiv 698 1,206 1,526 3,264 5,405 Net cash (debt) at year-end (1,924) (2,876) (2,189) (1,514) (604) Trade receivables 2,732 3,239 3,274 3,754 4,314 Other receivables Ratios Inventories 1, ,102 Year to Dec FY11A FY12A FY13E FY14E FY15E Other current assets Growth rate (%) Fixed assets 5,805 6,193 6,577 6,841 7,076 Revenue Intangible assets EBITDA (4.69) Investment, associates etc EBIT (25.59) Total assets 11,373 13,249 13,937 16,517 19,570 Net profit (22.51) EPS (23.30) Account payables 1,796 1,629 1,543 1,712 1,913 Margins (%) Other payables Gross margin (reported) Short-term debt 541 2,499 2,133 3,195 4,426 EBITDA Other current liabs 1, ,013 1,002 1,046 EBIT Long-term debts 2,081 1,583 1,583 1,583 1,583 Net margin Deferred tax and others Other ratios Other long-term liabs ROE (%) Total liabilities 5,474 6,633 6,275 7,496 8,973 ROA (%) Net gearing (%) Share capital Interest coverage (x) Reserves 4,630 5,271 6,176 7,366 8,743 Receivables days Shareholders' equity 4,742 5,386 6,291 7,481 8,858 Payables days Minorities 1,157 1,230 1,371 1,540 1,739 Inventory days Total equity 5,899 6,617 7,662 9,022 10,597 Effective tax rate (%) Net cash (debt) (1,924) (2,876) (2,189) (1,514) (604) Exhibit 22: Peer comparison Market cap PE (x) PB (x) Dividend yield (%) Ticker (HKD mn) FY12A FY13E FY14E FY12A FY13E FY14E FY12A FY13E FY14E Foxconn Technolo 2354.TT 22, Catcher Tech 2474.TT 38, Casetek Holdings 5264.TT 13, Byd Electronic 285.HK 8, Jabil Circuit JBL.US 28, Average Ju Teng Intl Hdg 3336 HK 5, Source: Bloomberg, CIRL Page 18 of 19

19 Rating Policy Stock Rating Sector Rating Rating Definition Buy Outperform HSI by 15% Neutral Between -15% ~ 15% of the HSI Sell Underperform HSI by -15% Accumulate Outperform HSI by 10% Neutral Between -10% ~ 10% of the HSI Reduce Underperform HSI by -10% Analysts List Antony Cheng Research Director (852) antony.cheng@cinda.com.hk Hayman Chiu Senior Research Analyst (852) hayman.chiu@cinda.com.hk Kenneth Li Senior Research Analyst (852) kenneth.li@cinda.com.hk Lewis Pang Research Analyst (852) lewis.pang@cinda.com.hk Susanna Chui Research Analyst (852) susanna.chui@cinda.com.hk Shawn Yang Research Assistant (852) xiaoxia.yang@cinda.com.hk Analyst Certification I, Susanna Chui hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was / were, is / are or will be directly or indirectly, related to the specific recommendations or views expressed in this report / note. Disclaimer This report has been prepared by the Cinda International Research Limited. Although the information and opinions contained in this report have been compiled or arrived at from sources believed to be reliable, Cinda International cannot and does not warrant the accuracy or completeness of any such information and analysis. The report should not be regarded by recipients as a substitute for the exercise of their own judgment. Recipients should understand and comprehend the investment objectives and its related risks, and where necessary consult their own financial advisers prior to any investment decision. The report may contain some forward-looking estimates and forecasts derived from the assumptions of the future political and economic conditions with inherently unpredictable and mutable situation, so uncertainty may contain. Any opinions expressed in this report are subject to change without notice. The report is published solely for information purposes, it does not constitute any advertisement and should not be construed as an offer to buy or sell securities. Cinda International will not accept any liability whatsoever for any direct or consequential loss arising from any use of the materials contained in this report. This document is for the use of intended recipients only, the whole or a part of this report should not be reproduced to others. Page 19 of 19