- http://bg.panlv.

net

Investment Focus
January 13, 2012
Peter Hongwei BAI
SFC CE Ref: AMB141

Real Estate

RESEARCH

baihw@cicc.com.cn

Risk is High, but will be Postponed

Property Trust Analysis

Eric Yu ZHANG
zhangyu3@cicc.com.cn

Action
The growth of property trusts has been much faster since the Chinese government rolled out real estate credit tightening measures, with ~Rmb500bn of new trusts launched over the past two years, accounting for 70% of the total outstanding. We estimate a total principle and interest of Rmb250bn/Rmb310bn have to be paid in 2012/2013. Given the sluggish market is aggravating the trust default risk, we expect to see feasible solutions such as price cuts, trust rollovers and project transactions. As 3Q12 is set to be the redemption amount peak, the market correction will therefore accelerate in our view. However, in general, systematic risk of trust defaults will be postponed to 2013. Most leading players have little or no trust exposure, while medium and small developers with relatively high trust exposure may have much higher risks. We suggest investors avoid risky names and hold large players and commercial names for their defensiveness.

Reasoning
Rmb700bn of property trusts will mature in three years: We estimate that the redemption amount will hit Rmb223bn and Rmb282bn maturing in 2012 and 2013 respectively, which after considering interests, will rise to Rmb250bn and Rmb310bn to be paid. Given that poor sales are aggravating trust default risks, we expect the deadlock to be broken by the following steps: 1) Developers save themselves by cutting prices to collect cash back; 2) trust companies would like to renew; 3) if the above fails, trust companies will buy them out using their own capital; and, 4) asset management companies may be involved for acquisition purposes. Systematic risk to be postponed to 2013: Given that neither developers nor trust companies are willing to fall into default troubles, we think that most of redemption amount can be had through price cuts or project transactions from the developers side and trust renewal from the trust companies side. As a result, systematic risk is to be postponed to 2013. We expect only 10~15% of the redemption amount may be defaulted. Three impacts: 1) To accelerate price corrections in 2Q: The Rmb223bn redemption amount is mainly allocated in 3Q, with an average monthly amount of Rmb36bn and 60% backed projects in tier-1/-2 cities, which means that developers will start to accelerate sales in 2Q, and tier-1/-2 cities may face higher pressure of price corrections. 2) To accelerate industry consolidation: Leading players with strong cash positions can acquire cheap land/projects more easily and further increase their market shares. And, 3) Medium to small listed developers are more risky.

Valuation and recommendation

Market corrections will be sharpened by trust risks. It will be hard for property stocks to perform given the expectation that earnings forecasts will be revised down and there will be further troubles for projects and developers. Medium to small developers with high leverage may face pressure of stock prices corrections. However, we suggest investors buy-on-dips leading players with low gearing and good sales, because systematic risk of trust default wont come out in 2012. For H-shares, our recommendation sequence is CRLand, COLI, Longfor, Franshion, Sino Ocean, and Sunac; and for A-shares, the sequence is Vanke, CMPD, Beijing Capital Development, Beijing Urban Construction, Financial Street, and China World Trade Center.

Risks
Housing prices correct too sharply with the global economy deteriorating, which will lead to lots of trust defaults.

Please read carefully the important disclosures at the end of this report

 - http://bg.panlv.net

CICC Research: January 13, 2012

Rmb700bn total; Rmb220bn to mature in 2012

According to the China Trust Association, total property-related trusts amounted to ~Rmb700bn (representing 16% of total assets in the trust sector), most of which are collective trusts. In the first 11 months of 2011, there were Rmb278bn of new collective trusts.

Collective trusts are investment funds established by institutional investors. Generally speaking, a collective trust is formed by collecting money from a number of members. The idea behind a collective trust is to combine the purchasing power of the member institutions so that the investors may engage in financial transactions that would not be feasible individually. Single trusts, which are different from collective trusts, have only one funding party, such as a bank (such a trust is called a bank-trust cooperation product).

Figure 1: 15~17% of trust funds asset invested in real estate

Breakdow n of trust assets by investment sector, 2010 (Rmb mn) Breakdow n of trust assets by investment sector, 3Q11 (Rmb mn)

Infrastructure Real Estate Stocks Funds Bonds Financial Institutes

679,769 , 17.24% 432,368 , 14.95%

Source: China Trustee Association, CICC Research

Manufacturing and commerce Others

Figure 2: New trust financing vs. new development mortgages and property investment
New trust financing / property investment 8% 7% 100% 6% 80% 60% 40% 2% 20% 0% 2010 1~3Q11 1% 0% 2010 1~3Q11 5% 48% 4% 3% 6%

New trust financing / new development mortgage 120%

109%

7%

Source: China Trustee Association, PBOC, CICC Research

Please read carefully the important disclosures at the end of this report 2

 - http://bg.panlv.net

CICC Research: January 13, 2012 Figure 3: ~50% of new collective trust funds are invested in real estate
2010 4.2% 11.0% 17.8% 0.1% Real estate 17.1% Manufacturing and commerce Infrastructure 8.8% 20.1% Finance 2011.1~11

18.9% 49.9%
Source: Yanglee, CICC Research

Others 42.0%

Figure 4: Less than Rmb20bn and 1% of new bank-trust cooperation products are invested in real estate
2010 8.3% 0.1% 0.3% Finance 21.3% Real estate Manufacturing and commerce Infrastructure 0.8% 69.4% Others 0.3% 2011 0.0% 1.6%

97.8%
Source: Yanglee, CICC Research

Figure 5: Collective real estate trusts grew fast in 2010 & 2011
Amount issued (Rmb bn) Amount issued YoY (RHS) 300 348% 250 199 Amount founded (Rmb bn) Amount founded YoY (RHS) 278 400% 350% 300% 250% 200% 150 150% 100% 100 40% 50% 0% -50% 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011.1~11 -100%

200

50

Source: Yanglee, CICC Research

Please read carefully the important disclosures at the end of this report 3

 - http://bg.panlv.net

CICC Research: January 13, 2012 The redemption amount in 2012 and 21013 will be Rmb223bn and Rmb282bn, according to data from the China Trust Association and Yanglee Trust Institution. Looking into each quarter, we found that 3Q12 will be the redemption peak, with a total amount of Rmb100bn (each month has >Rmb30bn), compared with Rmb35~50bn in other quarters in 2012. Figure 6: Maturity terms of most collective trust products are 1.5~2 years
3.5 3.3 3.1 2.9 2.7 2.5 2.3 2.1 1.9 1.7 1.5 Jan/03 Jul/03 Jan/04 Jul/04 Jan/05 Jul/05 Jan/06 Jul/06 Jan/07 Jul/07 Jan/08 Jul/08 Jan/09 Jul/09 Jan/10 Jul/10 Jan/11 50 150 200 (Year) Average term of collective trust products Average term of bank-trust cooperation products 300 (Days) 350

250

100

Source: Yanglee, CICC Research

Figure 7: Average yield of collective real estate trusts is ~10% and rising
Average yield of collective real estate trust products 12%

11%

10%

9%

8% 2010/01 2010/04 2010/07 2010/10 2011/01 2011/04 2011/07 2011/10

Source:

Yanglee, CICC Research

Figure 8: Maturity peak begins in 2012

Maturity simulation of collective property trust (Rmb bn) 300 250 200 150 100 50 0 2011
Source: Yanglee, China Trustee Association, CICC Research

282 223

2012

2013

Please read carefully the important disclosures at the end of this report 4

 - http://bg.panlv.net

CICC Research: January 13, 2012 Figure 9: A monthly amount of Rmb30bn becomes mature in 3Q12
Maturity simulation of collective property trust, 2012 Rmb bn 40 35 30 25 20 15 10 5 Jan
Source:

34 30

36

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Yanglee, China Trustee Association, CICC Research

Developers and trust companies will go through the hard times together
Default is a big trouble, not only for developers, but also for trust companies and banks, which means that these three parties are tied together. We see that an effective solution is forming, the steps are as follows: Firstly, developers cut prices to collect more cash back. Developers have an incentive to pay their trust loans since the cash flow generated by property projects has the first priority among all payment resources. If the above doesnt work, trust companies will like to renew; there are two methods of doing this: The first is to extend the maturity, and the second is to issue a new trust product to replace the old one. This is obviously a good solution for both developer and trust company, but it must be based on a presupposition that project cash flow only has a temporary problem, but will be fine in the end. If the above all fail for reasons such as poor cash flow expectations or too high financing costs, we believe that trust companies will buy themselves out using their own money to prevent their reputation from being hurt. After a trust defaults, asset management companies may be involved for acquisition purposes during the placement process.

Given that neither developers nor trust companies are willing to fall into default troubles, we think that most of the redemption amount can be had through price cuts or project transactions from the developer side and trust renewing from the trust company side. As a result, systematic risk is to be postponed to 2013. Only 10~15% of the redemption amount may be defaulted as we expect. Figure 10: Cases study: Sinyaoo the World project and trust financing
Proceeds from sales of the project arrived at Rmb2.6bn, while estimated trust interest arrived at Rmb0.85bn Sinyaoo acquired the land parcel at Rmb6.29bn in Oct 2007 Proceeds from sales dropped to Rmb1bn while estimated trust interest exceeded Rmb0.3bn for Huarong and HNGTrust Trust interest of Huarong was Rmb89mn & Rmb87mn for 1Q11 & 2Q11 respectively, while sales arrived at only Rmb30mn & Rmb89mn. 2Q interest payable was Rmb89mn and only Rmb59mn was paid. 1H11 total assets were Rmb12bn and liabilities were Rmb9bn, with total gearing at 75.5%. 2011.1~10 sales arrived at Rmb1bn. Huarong early terminated the plan in Nov 2011 Liquidity risk 2007 Financed Rmb3bn for the project through CITIC Kunming Sinyaoo plan in Dec 2007 2008 2009 2010 2011

Financed Rmb6.89bn through CITIC Shengjing Plan (net Rmb3.6bn excluding Sinyaoo Group contribution) to replace the prior plan in Sep 2008

Financed Rmb2.33bn through Huarong Trust in Jun 2010, Rmb1.83bn of which was used to repay the HNG trust

New trust financing?

Acquired by other companies? Bankruptcy?

Financed Rmb3.29bn through HNG Trust with maturity term of 2 years, mainly to repay the CITIC trust in Jul 2009

Financed Rmb1.02bn through a new trust plan with CITIC Trust in Jul~Sep 2011, believed to be repaid to Huarong Trust, but obviously not enough

Source: Yanglee, Soufun, CICC Research

Please read carefully the important disclosures at the end of this report 5

 - http://bg.panlv.net

CICC Research: January 13, 2012

Medium to small developers have higher risks

Developers have to accelerate sales by cutting prices in 2Q12. The redemption amount of Rmb220bn of trusts in 2012 equals a third of bank loans to developers, and 60% of them flowed into tier-1/-2 cities, which means that developers have to cut prices to collect as much cash as they can to pay trusts. Price corrections and volume picking up are expected in tier-1/-2 cities. Medium to small developers with high financing cost trusts are more risky. For those who have trusts, big names generally enjoy relatively lower financing costs, which mean the risks are limited. However, the situation is totally different for small names, especially single-project developers. Among listed companies, trust risk also concentrates in small names. Most of the HK-listed China developers are not highly exposed to trusts, given their higher financing costs. According to the companies information, the total trust exposure of the key HK listed developers is ~Rmb24bn and generally accounts for only 5~15% of the total debt, which is not too significant in our view. More importantly, leading names such as COLI, CRL and Longfor have no exposure to it. Figure 11: Breakdown of new collective real estate trust funds by investment methods
2010 0.2% 25.5% 14.5% 1~3Q11 3.7% 12.7% 21.0% Loans

Equity investment

Income investment

Combined 36.0% Others 23.7% 23.2% 39.4%

Source: Yanglee, CICC Research

Figure 12: Trust financing information of major H-share developers

Company Greentown China Sino Ocean Agile Sunac China R&F Shimao Property Glorious Country Garden CRLand COLI Longfor Franshion Beijing North Star Shenzhen Investment Note: Total debt is interest bearing liabilities as end of June 30,2011. Trust loan data is the most updated one No trust related loans Trust outstanding (Rmb mn) 5,255 4,080 3,300 ~3000 2,600 1,600 1,250 2,500 Cost 14% 8.50% 11.5%~14.5% 13%-17% 13%~15% 13%~14.5% 12% n.a Expire date 2013 2012 2012-2014 2012-2013 2012-2014 2012-2014 2013 n.a Total debt (Rmb mn) 35,301 28,469 20,894 6,948 30,743 37,445 16,719 27,473 Equity (Rmb mn) 15,496 37,842 22,012 5,319 20,714 33,480 17,051 26,910 Trust as % of total debt 15% 14% 16% 43% 8% 4% 7% 9% Trust as % of total equity 34% 11% 15% 56% 13% 5% 7% 9% Non-consolidated Consolidated:1) 1.0Rmb bn, expired 2013.3, ~15% Non-consolidated:1) 0.6Rmb bn, expired 2014, 14.5% 2) 0.99Rmb bn, expired 2012.03,13% Non-consolidated:1) 0.6Rmb bn, expired 2014, 14.5% 2) 0.99Rmb bn, expired 2012.03,13% Consolidated:1) 1.59Rmb bn, expired 2012.11, 11.5% 2) 0.99Rmb bn, expired 2012.03,13% Non-consolidated:1) 0.73Rmb bn, expired 2014, 14.5% Note

2bn expired this month, 1bn will expire in 2012 & 2bn in 2013 2 bn expired this month, 1 bn expired 2012 and 2 bn expired 2013

Source: Company data, CICC Research

Please read carefully the important disclosures at the end of this report 6

10%

20%

30%

40%

50%

60%

100%

120%

20%

40%

60%

80%

0%

1,000

2,000

3,000

4,000

5,000

0%

Source: Company data, CICC Research

Trust financing balance / equity, 3Q11

Source: Company data, CICC Research

Figure 13: Announced trust financing balance of A-share developers in last 3 years

Announced trust financing of A share developers in the last 3 years (Rmb mn)

Figure 14: Announced trust financing of A-share developers vs. equity & total liability

Trust financing balance / total liability, 3Q11

Su ns hi Zh ne ej C ia Pe ng La ity a r G ng l R ua old iv ng er s Ho ha ld in C gs al xo Ye n M la i H lord Ro nd eu R ng Sh ng ea A a n ko l E n do ng s t ng Ho ate Ty l di a ng La Hu n H s nd be om er i F e R ea uxi n lE g s H tat om e y Th Va ear Sh n AV aih to an gh IC ot ne ai R Gro ea u In du lE p st 21 s tr ia de l D Ris ate ve e es l o v e un pe lo C rs pm O av en F e t A CO r a ge sh ar Pro p e av ert er y ag G em e da Va l e nk e

Zh Su ej n s i a hi ng ne G C ua ity Pe ng ar l R L sha iv an er g o Ho ld ld in H C gs eu al ng R xo La kon on n nd g g A er Ho n R l di ea n g lE s st Sh Th Y ate an el do aih an ng ot d Ty Gro an up H AV o IC Ris me R es ea u lE n 21 H stat de om e Sh ve y an l o Va ea gh pe r ai rs n to In av ne du st Hu era ri a be g e i l M De F u i lo ve xi n rd lo g C Re pm O en F al t A CO Est at sh ar Pro e p e av ert er y a G ge em da Va l e nk e

Please read carefully the important disclosures at the end of this report 7

Su ns hi ne Zh C ej it ia ng Ca y G l xo ua n ng s R ha is es R un H ong ub ei A n Fu xi n Va g Sh nk an Ye e gh la ai In La nd du ng st ri a G old l D em C ev dal O e FC lo p e O me Pr nt op M i lo Va erty H r eu d R n to ng ea ne ko l E AV ng sta IC Ho te R l din ea l E gs s H tate Pe Tha om a r ih y e ar l R ot La ive Gro Sh nd r H up a n er R o ld in do e g ng a l Es s Ty ta an te H om e

- http://bg.panlv.net

CICC Research: January 13, 2012

 - http://bg.panlv.net

CICC Research: January 13, 2012 Figure 15: Valuations of comparables

Company Ticker Rating Price
(Rmb) 2012/1/12

Target Upside Price

Total Mkt_cap
2012/1/12

EPS
(Rmb)

P/E (x) 12E 09A 10A 11E 12E 09A

P/B (x) 10A 11E 12E

NAV/share Price to NAV Total liab./ Total GFA (Rmb) (Sqm mn) Disc./Prem. total assets 11E 12E 11E 12E 10A

09A

10A

11E

A share Property Mainly for development Vanke A Gemdale China Merchants Property Poly Overseas Chinese Town-A Financial Street Beijing Capital Devt. Zhongnan Construction Binjiang Real Estate Beijing Urban Construction Risesun Beijing North Star Citychamp Dartong Huafa Industrial Cosmos Group Nanjing Chixia 000002 600383 000024 600048 000069 000402 600376 000961 BUY BUY BUY BUY BUY BUY BUY BUY 7.5 5.2 18.3 10.4 7.1 6.0 9.6 8.1 6.9 11.9 8.4 2.8 6.4 7.4 4.5 3.3 4.6 9.5 3.9 4.0 3.2 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 81.8 23.3 28.3 61.8 39.4 18.2 14.3 9.5 9.4 10.6 15.7 8.1 4.7 6.0 2.3 3.4 4.8 11.2 5.5 3.0 3.8 0.48 0.40 0.96 0.59 0.30 0.45 0.62 0.48 0.48 0.96 0.33 0.17 0.39 0.83 0.33 0.21 0.20 0.18 0.45 0.36 0.35 0.66 0.60 1.17 0.83 0.54 0.59 0.90 0.63 0.71 1.35 0.55 0.06 0.70 0.92 0.44 0.27 0.30 0.75 0.50 0.58 0.46 0.89 0.75 1.51 1.17 0.52 0.77 1.14 0.90 0.75 1.13 0.73 0.14 0.98 1.02 0.60 0.25 0.23 0.82 0.48 0.74 0.35 1.07 0.85 1.89 1.45 0.63 0.89 1.43 1.18 1.34 1.36 0.95 0.17 1.13 1.10 0.69 0.28 0.26 1.00 0.50 0.36 0.48 15.5 13.1 19.1 17.6 23.1 13.3 15.3 17.0 14.5 12.4 25.8 16.2 16.5 8.8 13.6 15.4 23.0 54.2 8.7 11.1 9.1 17.3 15.4 11.4 8.6 15.6 12.6 13.0 10.2 10.6 12.8 9.7 8.8 15.4 46.1 9.0 8.0 10.3 12.1 15.4 12.8 7.9 6.8 7.0 12.6 10.6 8.4 6.9 12.1 8.9 13.5 7.8 8.4 9.0 9.2 10.5 11.5 20.4 6.5 7.2 7.5 13.0 19.6 11.6 8.2 5.4 9.2 10.2 9.0 7.0 6.1 9.7 7.1 11.3 6.7 6.7 6.9 5.2 8.7 8.9 16.1 5.6 6.7 6.6 11.8 17.2 9.5 7.9 10.9 6.7 8.7 7.1 2.2 1.6 1.9 2.5 3.8 1.2 1.5 2.4 2.2 2.2 4.1 1.0 2.3 1.2 1.3 1.3 1.5 1.6 1.5 1.5 1.3 1.9 1.6 1.9 1.3 1.7 2.1 3.0 1.1 1.3 1.8 1.6 1.9 3.0 1.0 1.9 1.0 1.2 0.9 1.4 1.1 1.3 1.3 1.1 1.6 1.3 1.5 1.1 1.5 1.6 2.1 0.9 1.1 1.5 1.4 1.6 2.3 1.0 1.4 0.9 1.0 0.9 1.2 1.0 1.1 1.0 1.0 1.3 1.1 1.3 1.0 1.3 1.3 1.8 0.8 1.0 1.2 11.5 9.2 32.6 15.6 11.3 13.8 18.9 15.1 12.5 9.7 32.5 16.0 12.0 15.2 19.0 17.9 -35% -40% -43% -46% -44% -44% -33% -35% -37% -41% -57% -60% -50% -50% -46% -55% 75% 71% 65% 79% 70% 68% 75% 78% 80% 69% 75% 64% 74% 68% 72% 56% 75% 61% 77% 56% 62% 70% 71% 81.0 17.5 14.7 63.2 9.6 9.1 19.4 10.9 5.0 5.5 16.8 7.3 3.2 9.0 1.2 3.2 4.2 8.2 2.3 1.5 2.8

002244 ACCUMULATE 600266 ACCUMULATE 002146 ACCUMULATE 601588 ACCUMULATE 600067 ACCUMULATE 600325 ACCUMULATE 002133 600533 HOLD HOLD HOLD HOLD HOLD HOLD HOLD

1.1 11.78 12.77 -41% -46% 1.3 1.8 0.9 1.2 0.8 0.9 0.8 1.2 0.9 1.0 0.9 0.8 1.1 1.0 18.8 9.0 6.1 11.2 14.7 6.5 4.3 6.5 21.1 6.0 6.0 4.9 19.8 10.0 6.1 11.7 16.2 6.6 4.8 6.6 23.4 6.0 6.1 5.1 -37% -40% -6% -16%

-55% -55% -43% -46% -50% -55% -31% -31% -24% -31% -30% -31% -55% -59% -34% -34% -34% -35% -34% -37% -39% -42% -37% -41%

Suzhou New District Hi-Tech Indu 600736 Shanghai Shimao China Enterprise Yangguang Yeland Group Average Median For development and investment China World Trade Center Jinqiao A Lujiazui A Average Median B Share Property Vanke B China Merchants B Jinqiao B Lujiazui B Average Median HK Listed Mainland Property COLI Longfor CRLand Sunac China Agile Franshion Beijing North Star Sino Ocean Glorious Shui On Country Garden Powerlong Greentown Shenzhen Investment SOHO China R&F Shimao Property Average Median 688 960 1109 1918 3383 817 588 3377 845 272 2007 1238 3900 604 410 2777 813 200002 200024 900911 900932 600823 600675 000608 000616

600007 ACCUMULATE 600639 600663 BUY HOLD

9.2 6.7 11.6

n.a. n.a. n.a.

n.a. n.a. n.a.

9.2 5.6 18.6

0.29 0.39 0.63

0.12 0.57 0.64

0.21 0.51 0.68

0.34 0.41 0.69

31.9 17.4 18.4 22.6 18.4

76.6 11.8 18.2 35.5 18.2

43.9 13.3 17.2 24.8 17.2

27.3 16.6 16.7 20.2 16.7

2.1 1.7 2.1 2.0 2.1

2.1 1.7 2.1 2.0 2.1

2.0 1.5 1.9 1.8 1.9

1.9 1.4 1.7 1.7 1.7

13.7 14.7 17.2

14.5 16.4 18.1

-33% -37% -54% -59% -32% -36% -40% -44% -33% -37%

54% 52% 49% 52% 52%

0.5 1.7 2.0

(HK$)

(HK$)

(HK$ bn)

(HK$)

(HK$)

(HK$)

(HK$)

(HK$)

(HK$)

BUY BUY BUY BUY

8.0 10.6 4.9 6.5

11.5 15.8 7.0 9.9

44% 49% 44% 54%

95.1 32.9 6.5 21.6

0.55 1.09 0.44 0.72

0.77 1.36 0.66 0.74

1.09 1.84 0.62 0.82

1.31 2.30 0.49 0.84

14.4 9.8 11.0 9.0 11.1 10.4

10.3 7.8 7.3 8.7 8.5 8.3

7.3 5.8 7.8 7.8 7.2 7.6

6.1 4.6 9.8 7.6 7.0 6.9

2.1 1.0 1.1 1.0 1.3 1.1

1.7 0.9 1.1 1.0 1.2 1.0

1.3 0.7 0.9 0.9 1.0 0.9

1.1 0.6 0.8 0.8 0.8 0.8

13.4 37.9 17.1 19.9

15.3 39.6 20.0 22.1

-41% -48% -72% -73% -72% -76% -68% -71% -63% -67% -70% -72%

75% 65% 52% 49% 60% 58%

81.0 14.7 1.7 2.0

(HK$)

(HK$)

(HK$ bn)

(HK$)

(HK$)

(HK$)

(HK$)

(HK$)

(HK$)

BUY BUY BUY BUY BUY BUY BUY ACCUMULATE ACCUMULATE ACCUMULATE ACCUMULATE HOLD HOLD HOLD HOLD HOLD HOLD

13.5 8.7 12.9 2.1 7.5 1.5 1.2 3.6 1.2 2.5 3.2 1.0 3.2 1.4 5.1 6.6 6.9

18.9 11.6 16.9 2.8 9.3 2.6 2.3 4.1 1.5 3.5 3.5 1.3 4.0 1.9 6.3 7.2 7.7

40% 34% 31% 36% 23% 76% 92% 15% 32% 41% 10% 33% 26% 31% 22% 9% 12%

110.7 44.8 69.4 6.3 26.1 13.7 9.4 20.2 9.0 12.9 52.9 4.1 5.2 5.0 26.7 21.2 24.4

0.79 0.33 0.48 0.30 0.61 0.11 0.22 0.21 0.21 0.50 0.15 0.34 0.54 0.22 0.37 0.95 0.77

1.20 0.51 0.67 0.60 1.20 0.12 0.12 0.41 0.27 0.17 0.30 0.30 0.83 0.23 0.78 1.32 0.96

1.62 1.02 1.00 1.04 1.45 0.19 0.21 0.56 0.36 0.26 0.38 0.41 1.59 0.30 0.26 1.58 1.28

1.86 1.28 1.30 1.43 1.72 0.20 0.25 0.69 0.42 0.33 0.41 0.45 1.84 0.35 0.87 1.75 1.45

17.1 26.0 27.0 7.1 12.3 13.1 5.4 16.9 5.5 5.0 21.3 2.9 5.9 6.4 14.0 6.9 8.9 11.5 8.0

11.3 17.0 19.3 3.5 6.3 12.9 10.3 8.6 4.3 14.7 10.6 3.4 3.8 6.3 6.6 5.0 7.2 8.5 6.9

8.4 8.5 12.9 2.0 5.2 8.0 5.7 6.4 3.2 9.5 8.3 2.5 2.0 4.8 20.1 4.2 5.4 6.6 5.5

7.3 6.8 9.9 1.5 4.4 7.7 4.8 5.2 2.7 7.6 7.7 2.2 1.7 4.1 5.9 3.8 4.7 5.0 4.8

2.6 3.2 1.8 4.0 1.6 0.8 0.3 0.8 0.7 0.5 2.2 0.4 0.5 0.4 1.4 1.1 0.9 1.3 0.9

2.0 2.4 1.5 1.2 1.2 0.6 0.3 0.6 0.5 0.4 1.8 0.3 0.4 0.4 1.2 0.9 0.8 0.9 0.7

1.7 1.8 1.3 0.8 1.0 0.5 0.2 0.5 0.4 0.4 1.5 0.2 0.4 0.4 1.1 0.7 0.7 0.8 0.6

1.4 1.5 1.1 0.5 0.9 0.5 0.2 0.5 0.3 0.3 1.4 0.2 0.3 0.3 0.9 0.6 0.6 0.7 0.5

19.4 15.5 19.6 8.6 20.6 3.8 7.5 8.4 5.1 7.0 4.8 3.4 20.4 5.3 7.1 17.6 14.0

18.9 15.5 19.9 7.9 20.0 3.9 7.4 7.7 5.0 8.6 4.6 3.1 19.7 5.0 7.1 17.6 13.3

-30% -29% -44% -44% -34% -35% -76% -73% -63% -62% -60% -62% -84% -84% -57% -54% -78% -77% -65% -71% -34% -31% -71% -68% -84% -84% -73% -72% -28% -28% -63% -63% -51% -48% -59% -59% -63% -62%

64% 76% 61% 70% 71% 48% 58% 64% 64% 54% 69% 54% 88% 57% 58% 74% 69% 65% 64%

44.3 33.3 26.7 7.2 39.2 2.4 7.3 24.5 19.2 14.1 52.1 8.5 40.0 22.5 1.9 24.5 33.4

Source: Bloomberg, CICC Research

Please read carefully the important disclosures at the end of this report 8

 - http://bg.panlv.net

CICC Research: January 13, 2012

Important legal disclosures

General Disclosures This report has been produced by China International Capital Corporation Hong Kong Securities Limited (CICCHKS). This report is based on information available to the public that we consider reliable, but CICCHKS and its associated company(ies)(collectively, hereinafter CICC) do not represent that it is accurate or complete. The information and opinions contained herein are for investors reference only and do not take into account the particular investment objectives, financial situation, or needs of any client, and are not an offer to buy or sell or a solicitation of an offer to buy or sell the securities mentioned. Under no circumstances shall the information contained herein or the opinions expressed herein constitute a personal recommendation to anyone. Investors are advised to make their own independent evaluation of the information contained in this research report, consider their own individual investment objectives, financial situation and particular needs and consult their own professional and financial advisers as to the legal, business, financial, tax and other aspects before participating in any transaction in respect of the securities of company(ies) covered in this report. Neither CICC nor its related persons shall be liable in any manner whatsoever for any consequences of any reliance thereon or usage thereof. The performance information (including any expression of opinion or forecast) herein reflect the most up-to-date opinions, speculations and forecasts at the time of the reports production and publication. Such opinions, speculations and forecasts are subject to change and may be amended without any notification. Past performance is not a reliable indicator of future performance. At different periods, CICC may release reports which are inconsistent with the opinions, speculations and forecasts contained herein. CICCs salespeople, traders, and other professionals may provide oral or written market commentary or trading ideas that may be inconsistent with, and reach different conclusions from, the recommendations and opinions presented in this report. Such ideas or recommendations reflect the different assumptions, views and analytical methods of the persons who prepared them, and CICC is under no obligation to ensure that such other trading ideas or recommendations are brought to the attention of any recipient of this report. CICCs asset management area, proprietary trading desks and other investing businesses may make investment decisions that are inconsistent with the recommendations or opinions expressed in this report. This report is distributed in Hong Kong by CICCHKS, which is regulated by the Securities and Futures Commission. This report is distributed in Singapore only to accredited investors and/or institutional investors, as defined in the Securities and Futures Act and Financial Adviser Act of Singapore, by China International Capital Corporation (Singapore) Pte. Limited (CICCSG), which is regulated by the Monetary Authority of Singapore. By virtue of distribution by CICCSG to these categories of investors in Singapore, disclosure under Section 36 of the Financial Adviser Act (which relates to disclosure of a financial advisers interest and/or its representatives interest in securities) is not required. Recipients of this report in Singapore should contact CICCSG in respect of any matter arising from or in connection with this report. This report is distributed in the United Kingdom by China International Capital Corporation (UK) Limited (CICCUK), which is authorised and regulated by the Financial Services Authority. The investments and services to which this report relates are only available to persons categorised by CICCUK as either a professional client or eligible counterparty. This report is not intended for retail clients. This report will be made available in other jurisdictions pursuant to the applicable laws and regulations in those particular jurisdictions. Special Disclosures CICC may have positions in, and may effect transactions in securities of companies mentioned herein and may also perform or seek to perform investment banking services for those companies. Investors should be aware that CICC and/or its associated persons may have a conflict of interest that could affect the objectivity of this report. Investors are not advised to solely rely on the opinions contained in this research report before making any investment decision or other decision. Compendium report: please see disclosures at http://research.cicc.com/disclosure_en. Disclosures applicable to the companies included in this compendium can be found in the latest relevant published research. Distribution of ratings is available at http://www.cicc.com.cn/CICC/english/operation/page4-4.htm. Explanation of stock ratings: BUY indicates analyst perceives absolute return of 20% or more within 12 months; ACCUMULATE 10%~20%; HOLD -10%~10%; REDUCE -20%~-10%; SELL -20% and below. Copyright of this report belongs to CICC. Any form of unauthorized distribution, reproduction, publication, release or quotation is prohibited without CICCs written permission.

 - http://bg.panlv.net

Beijing
China International Capital Corporation Limited
28th Floor, China World Office 2 1 Jianguomenwai Avenue Beijing 100004, P.R. China Tel: (86-10) 6505-1166 Fax: (86-10) 6505-1156

Shanghai
China International Capital Corporation Limited Shanghai Branch
32nd Floor Azia Center 1233 Lujiazui Ring Road Shanghai 200120, P.R. China Tel: (86-21) 5879-6226 Fax: (86-21) 5888-8976

Hong Kong
China International Capital Corporation (Hong Kong) Limited
29th Floor, One International Finance Centre 1 Harbour View Street Central, Hong Kong Tel: (852) 2872-2000 Fax: (852) 2872-2100

Singapore
China International Capital Corporation (Singapore) Pte. Limited
#39-04, 6 Battery Road Singapore 049909 Tel: (65) 6572-1999 Fax: (65) 6327-1278

United Kingdom
China International Capital Corporation (UK) Limited
Level 25, 125 Old Broad Street London EC2N 1AR, United Kingdom Tel: (44-20) 7367-5718 Fax: (44-20) 7367-5719

Beijing Jianguomenwai Avenue Branch

1st Floor, Capital Tower 6A Jianguomenwai Avenue Beijing 100022, P.R. China Tel: (86-10) 8567-9238 Fax: (86-10) 8567-9235

Shanghai Middle Huaihai Road Branch

398 Huaihai Road (M) Shanghai 200020, P.R. China Tel: (86-21) 6386-1195 Fax: (86-21) 6386-1180

Shenzhen Fuhuayilu Branch

Rooms 107 & 201, Annex Building Shenzhen Duty Free Commercial Tower 6 Fuhua 1st Road, Futian District Shenzhen 518048, P.R. China Tel: (86-755) 8832-2388 Fax: (86-755) 8254-8243

Hangzhou Jiaogong Road Branch

1st Floor, Euro American Center 18 Jiaogong Road Hangzhou 310012, P.R. China Tel: (86-571) 8849-8000 Fax: (86-571) 8735-7743

Nanjing Zhongshan Road (North) Branch

2nd Floor, Greenland Plaza 1 Zhongshan Road (North) Nanjing 210008, P.R. China Tel: (86-25) 8316-8988 Fax: (86-25) 8316-8397

Guangzhou Tianhe Road Branch

40th Floor, Teemtower 208 Tianhe Road Guangzhou 510620, P.R. China Tel: (86-20) 8396-3968 Fax: (86-20) 8516-8198

Chengdu Binjiang Road (East) Branch

1st & 16th Floors, Shangri-La Center Block 9B, Binjiang Road (East) Chengdu 610021, P.R. China Tel: (86-28) 8612-8188 Fax: (86-28) 8444-7010

Xiamen Lianyue Road Branch

4th Floor, Office Building, Paragon Center 1 Lianyue Road, Siming District Xiamen 361012, P.R. China Tel: (86-592) 515-7000 Fax: (86-592) 511-5527

Qingdao Middle Hongkong Road Branch

11th Floor, Shangri-La Center Block 9, Hongkong Road (M), South District Qingdao 266071, P.R. China Tel: (86-532) 6670-6789 Fax: (86-532) 6887-7018

Wuhan Jiefang Road Branch

4th Floor, New World Centre Tower 634 Jiefang Road, Qiaokou District Wuhan 430032, P.R. China Tel: (86-27) 8334-3099 Fax: (86-27) 8359-0535

Chongqing Honghu Road (West) Branch

1st & 10th Floors, Ourui Lanjue Center Block 9, Honghu Road (W), New North District Chongqing 401120, P.R. China Tel: (86-23) 6307-7088 Fax: (86-23) 6739-6636

Changsha Chezhan Road (North) Branch

3rd Floor, Annex Building, Securities Tower 459 Chezhan Road (North), Furong District Changsha 410001, P.R. China Tel: (86-731) 8878-7088 Fax: (86-731) 8446-2455

Foshan Jihua 5th Road Branch

12th Floor, Trend International Business Building 2 Jihua 5th Road, Chancheng District Foshan 528000, P.R. China Tel: (86-757) 8290-3588 Fax: (86-757) 8303-6299

Tianjin Nanjing Road Branch

10th Floor, Tianjin Global Trading Center 219 Nanjing Road, Heping District Tianjin 300051, P.R. China Tel: (86-22) 2317-6188 Fax: (86-22) 2321-5079

Dalian Jinma Road Branch

128B Jinma Road Economic-Technological Development Area Dalian 116000, P.R. China Tel: (86-411) 8755-5088 Fax: (86-411) 8801-7568