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研 [Table_Title] Company Report: Sinotrans Shipping (00368 HK) Spencer Fan 范明

究 (86755) 2397 6686 EquityResearch 公司报告： 中外运航运 (00368 HK) [email protected]

18 April 2018 Upturn[Table_S ummaryin the] Shipping Industry, Sustained Profit Recovery,

Maintain “Accumulate” 航运景气仍向上，盈利复苏可延续，维持“收集”

 2017 results were in line. Revenue rose 19.6% YoY to US$1,006 mn, while 公 [Table_Rank] shareholders’ profit reversed from a loss to US$32.27 mn. Continued Rating: Accumulate Maintained 司 recovery of dry bulk freights was the main reason for profit reversal.

报  Dry bulk shipping industry likely to sustain recovery. Due to insufficient 评级： 收集 (维持) 告 building orders from the past 3 years, we estimate supply growth of the industry in 2018/2019 to be 2.0%/1.5%, outperforming Clarksons' projected

CompanyReport 6[Table_Price-18m TP目标价] : HK$2.36 demand growth of 3.8%/3.0%. Iron ore imports from China are expected to Revised from 原目标价: HK$2.50 stay robust. The Company is expected to maintain its 80%/20% dry bulk capacity for price locked-in/trade-on-spot. We estimate 2018 revenue from Share price 股价： HK$2.040

the dry bulk segment to grow at around 16.5% YoY.

 Sino-U.S trade war should have little impact on container income. The Stock performance Company operates intra-Asia routes only; volume has been stable due to 股价表现 complimentary features of trade lines. As average box price has stabilized, [Table_QuotePic] we expect Sinotrans Shipping's container revenue to grow 4.1% YoY in 2018. % of return 60.0

 LNG JV launched in 2018 and profit may reach US$30 mn/year by 2020. 50.0

证 By 1Q18, two LNG carriers had been delivered and put into operation for the 40.0

券 告 Yamal project, with the remaining three LNG carriers to be delivered in 1Q19. 30.0

Accordingly, each vessel may contribute US$6 mn/year before-tax profit. 20.0 研 报

10.0

 Adjust TP to HK$2.36 and maintain "Accumulate" rating. Synergy with

究 究 0.0

CMES could be a catalyst for Sinotrans Shipping's share price. The

报 Company's valuation has a high safety margin against its net book value, with (10.0) 研

upward potential. Our TP reflects 0.66x/0.65x/0.64x 2018-2020 PBR. (20.0)

告 Apr/17 Jul/17 Oct/17 Jan/18 Apr/18 券

HSI index Sinotrans Shipping EquityResearch Report  2017 年业绩符合预期。公司收入同比升 19.6%至 10.06 亿美元，股东净利扭亏至 3,227

证 万美元。公司实现扭亏为盈主因是干散货航运市场运价出现的持续性改善所致。

[Table_PriceChange] [Tab  干散货运输大概率继续复苏。考虑过去 3 年较少的造船订单量，我们预计行业 2018/2019 Change in Share Price 1 M 3 M 1 Y

股价变动 1 个月 3 个月 1 年

年运力供给增速为 2.0%/1.5%，好于克拉克森预测的 3.8%/3.0%需求增速。同时，我们预 le_I 计国内的进口铁矿石量将维持强劲。公司预计维持其自有船队在锁价/即期市场 80%/20% Abs. % (14.0) (8.2) 12.8 绝对变动 % 航nfo1 运力的配置。我们预计 2018 年干散货分部收入同比增长 16.5%。 Rel. % to HS Index (10.1) (2.4) (13.6) 相对恒指变动 % 运  中美贸易战对集运收入影响较小。公司集运航线均在亚洲，由于货源属于互补型，货量一 ] Avg. share price（HK$） 2.3 2.3 2.1 物 直保持稳定。由于单箱运价已经稳定，我们预测中外运航运 2018 年集运收入同比升 4.1%。 平均股价（港元） 流 Source: Bloomberg, Guotai Junan International.  液化天然气运输业务于 2018 年开启，预计 2020 年开始年均可贡献 3,000 万美元利润。 行 截至 2018 年 3 月，亚马尔天然气项目的 2 艘冰级船已经交付并投入使用，另外 3 艘预计 业 将于 2019 年一季度交付。据悉，每艘船每年可贡献公司税前利润约 600 万美元。

 调整目标价至 2.36 港元并维持“收集”评级。我们认为公司与招商轮船间的协同效应有望成

Shipping & LogisticsShippingSector & 为公司股价的催化剂。考虑净资产账面价值具备较高安全边际，公司的估值水平具备进一 步上行空间。我们的目标价对应 0.66 倍、0.65 倍以及 0.64 倍的 2018 至 2020 年市净率。

Y[Table_ear End Turnover Net Profit EPS EPS PER BPS PBR DPS Yield ROE [Tab 年结Profit ] 收入 股东净利 每股净利 每股净利变动 市盈率 每股净资产 市净率 每股股息 股息率 净资产收益率 12/31 (US$ m) (US$ m) (US$) (△ %) (x) (US$) (x) (US$) (%) (%) le_I nfo2 2016A 841 (230) (0.058) n.a. (4.5) 0.448 0.6 0.005 1.9 (12.0) 2017A 1,006 32 0.008 n.a. 32.6 0.455 0.6 0.004 1.5 1.8 中] 中 2018F 1,120 43 0.011 37.5 23.7 0.454 0.6 0.003 1.3 2.4 外 2019F 1,212 56 0.014 27.3 18.6 0.463 0.6 0.004 1.6 3.1 外 运 2020F 1,311 63 0.016 14.3 16.3 0.472 0.6 0.005 1.8 3.4 运 航输 [Table_BaseData]Shares in issue (m) 总股数 (m) 3,992.1 Major shareholder 大股东 Sinotrans & CSC 68.2% Market cap. (HK$ m) 市值 (HK$ m) 8,143.9 Free float (%) 自由流通比率 (%) 31.8 运

3 month average vol. 3 个月平均成交股数 (‘000) 8,441.8 FY18 Net gearing (%) FY18 净负债/股东资金 (%) net cash 52 Weeks high/low (HK$) 52 周高/低 (HK$) 2.730/1.570 FY18 Est. NAV (HK$) FY18 每股估值（港元） 3.2 Source: the Company, Guotai Junan International.

Sinotrans Shipping (00368 SinotransHK) Shipping See the last page for disclaimer Page 1 of 8

[Table_PageHeader]Sinotrans Shipping (00368 HK)

Sinotrans Shipping’s (“the Company”) 2017 results were in line with expectations. In 2017, the Company recorded total

revenue of US$1.006 bn, up 19.6% YoY. 2017 shareholders' profit was US$32.271 mn, reversing] 1 r a fromM t a lossh g ofi US$R _ 229.579e l b mna T [

in 2016. Sinotrans Shipping announced final dividend of US$38 cents per share, corresponding to a 47.6% dividend payout ratio,

higher than our expectation. This move demonstrated the management's confidence on Sinotrans Shipping's future cash flow to some extent. Based on calculations, the Company recorded 2H17 shareholders' profit of US$24 mn, benefiting from continued recovery of the dry bulk shipping market. We believe that the global shipping market, represented by dry bulk shipping and container shipping, bottomed out after 2016. Trending from the recovery in 2017, BDI is still in its early stages of recovery and Sinotrans Shipping's profitability will enhance. 18 April2018

Figure-1: BDI Component Indexes Performance Figure-2: BDI and the Company's Breakeven Level

BCI: Capesize BPI: Panamax BDI BSI: Supramax BSI: Handysize 2,500 4,000 2,000 3,500 3,000 1,500 2,500

2,000 1,000

1,500 Sinotrans Shipping's breakeven level

1,000 500 ] 2 r a M t h g i R _ e l b a T [

500 0 0

Source: The Baltic Exchange, Guotai Junan International. Source: The Baltic Exchange, the Company, Guotai Junan International.

The dry bulk segment improved amid rising shipping freights, mixed with a well-structured vessel portfolio. The segment’s 2017 revenue grew 32.7% YoY to US$489.1 mn, slightly lower than our expectation. Average age of self-owned vessels reduced from 6.38 years in 2016 to 6.20 years at the end of 2017, indicating the Company’s high efficiency in optimizing

fleet portfolio. Average daily charter hire/time charter equivalent (“TCE”) rate of self-owned vessels was US$10,458, up 60.4% (00368 HK)

YoY. By March 2018, Sinotrans Shipping’s dry bulk fleet’s deadweight tonne ("DWT") capacity totaled 6.64 mn tonnes, of which, 50% capacity was chartered in. Regarding the remaining 50% of self-owned vessels, Sinotrans Shipping expected 80% of the

self-owned capacity to be price locked-in for 2018, while these locked-in freights guarantees relatively stable profit margins. In 中外运航运 our opinion, locked-in shipping prices (over spot market average) guarantees Sinotrans Shipping’s stable margins, while the flexible fleet structure also allows the Company to achieve a certain amount of exposure to arbitrage activities in the spot. So far, Sinotrans Shipping's dry bulk operating structure and strategy are forward-looking, and we expect the segment's revenue to increase 16.5% YoY in 2018 amid an overall upturn in industry trend.

Sinotrans Shipping Table-1: Dry Bulk Fleet Delivery and Capacity Breakdown of Sinotrans Shipping as at March 31, 2018 Sinotrans Shipping's Fleet: Self-owned Chartered-in Controlled Vessels Orderbook

No. DWT(‘000) TEU No. DWT(‘000) TEU No. DWT (‘000) TEU

Capesize 9 1,609 - 1 179 - 10 1,788 - 0 Panamax 11 908 - 28 2,201 - 39 3,109 - 0 Handy & Handymax 16 852 - 16 888 - 32 1,740 - 6 Dry Bulk Carriers 36 3,369 - 45 3,268 - 81 6,637 - 6 Container vessels 14 221 16,733 17 360 25,632 31 581 42,365 0 LNG 1 96 - - - - 1 96 - 4 Total vessels 51 3,686 16,733 62 3,628 25,632 113 7,314 42,365 10 Source: the Company.

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See the last page for disclaimer Page 2 of 8 [Table_PageHeader]Sinotrans Shipping (00368 HK)

After bottoming out in 2017, the dry bulk shipping market might continue to recover gradually in 2018. We believe that

Sinotrans Shipping will continue to benefit from industry recovery in 2018. Benefiting from] order1 r digestiona M t h andg i vesselR _ scrappinge l b a T [

over the past 3 years, the ratio of orders-on-hand/existing capacity had reached a historical low (7.0%) of the dry bulk shipping

industry in March 2018. Due to the slow pace of vessel delivery, we expect 2018/2019 dry bulk shipping capacity YoY growth to be 2.0%/1.5%. Considering the upcoming launch of the 2019 and 2020 Ballest Water Convention and tightened regulations of using low-sulfur fuel, we expect the dry bulk shipping industry's capacity growth to be more restrained after 2018. On the other hand, benefiting from global economic growth, we estimate 2018/2019 dry bulk shipping demand growth to be 3.8%/3.0%, exceeding growth from the supply side. Dry bulk shipping demand mainly consists of iron ore (around 28.4%), coal (23.6%), 18 April2018 grains (10.1%) and small bulks (37.9%), while iron is normally the most changeable factor. We expect China's iron ore imports to grow moderately in 2018 amid the market's cautiously optimistic expectation on China's 2018 real estate infrastructure investment.

Figure-3: Capacity of Dry Bulk Vessels and YoY Growth Figure-4: Dry Bulk Shipping Capacity Changes Old Vessels' Demolition Mn DWT Global Capacity YoY Changes Mn DWT New Vessels' Delivery 900 15.0% 831 16% Demand YoY % 793 817 758 777 Supply YoY % 15% 800 727 14% 100 12.2% 687 700 622 12% 80 600 10.5% 10% 541 10% ] 2 r a M t h g i R _ e l b a T [ 482 60 500 8% 40 400 5.8% 5% 7% 6% 300 4.3% 20 200 3.0% 4% 2.5% 0 0% 100 2% 2011 2012 2013 2014 2015 2016 2017 2018E 2019E 2.1% 1.7% -20 0 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018E -40 -5%

Source: Clarksons, Guotai Junan International. Source: Clarksons, the Company, Guotai Junan International.

The market believes that the recent heating up of Sino-U.S. trade relations might affect Sinotrans Shipping's container (00368 HK) shipping business, while we expect the segment to remain stable in 2018 due to the nature of fixed routes. First of all, Sinotrans Shipping's container shipping lines are all intra-Asia, and the Company’s underlying transported goods are complementary to Japan, Korea, and Australia (e.g. electronic devices and primary processed goods). Benefiting from robust cargo-trading demand, shipping volume of Sinotrans Shipping Containers grew 14% YoY in 2017, the highest growth rate in the 中外运航运 past 3 years. Clarksons predicted that demand for intra-Asia container shipping will increase 6.3%/6.1% YoY during 2018/2019, higher than projected global average growth of 5.0%/4.8%. For intra-Asia lines, Sinotrans Shipping provides high-frequency and port-to-port services tailored to customer needs. Meanwhile, competition patterns on each route has been relatively stable. In 2017, the Company ranked No.1 in China-Taiwan routes in terms of market share and No.3 in China-Japan routes in terms of market share. After 3 consecutive years of freight decline (2014-2016), the Company's container box average revenue was Sinotrans Shipping

US$329/TEU ("ASP"), the same as in 2016, and we believe that intra-Asia container shipping ASP bottomed out. Recent intra-Asia freights performed strongly, CCFIs in Japan, Australia, and Southeast Asia improved during 1Q18. For Japan-bound routes (Osaka, Kansai, Tokyo and Kanto), Shanghai-Kansai/Kanto's freights increased YoY by 1.0%/1.4% by the end of second week in April 2018. For the Australia and New Zealand-bound routes, SCFI surged 96.7% YoY by the end of second week in April 2018. Overall, we expect Sinotrans Shipping's container segment revenue to grow 4.1% YoY in 2018.

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See the last page for disclaimer Page 3 of 8 [Table_PageHeader]Sinotrans Shipping (00368 HK)

Figure-5: SCFI Intra-Asia Container Shipping Freights Figure-6: CCFI Intra-Asia Container Shipping Freights SCFI: Japan Kansai CCFI: Southeast] 1 Asiar a M t CCFI:h g Japani R _ e l b a T [ SCFI: Japan Kanto SCFI: Australia & NZ, Melbourne CCFI: Korea CCFI: Australia & NZ 1,500 SCFI: Korea Bushan 1,200 1,100 1,000 1,000 900

800 18 April2018 500 700 600 500 0 400

Source: Shanghai Shipping Exchange, Guotai Junan International. Source: Shanghai Shipping Exchange, Guotai Junan International.

The LNG joint venture (“JV”) is expected to gradually contribute profit starting 2018. By March 2017, two LNG carriers had been delivered and put into operation for the Yamal project. The remaining three LNG carriers are expected to be delivered in 1Q19. The total cost of the five carriers was US$1.59 bn, of which, 15% was paid by the parent company Sinotrans&CSC, while

] 2 r a M t h g i R _ e l b a T [ Sinotrans Shipping contributed US$75.62 mn, holding 25.5% of the profit share. The Company signed a 30-year long-term lease agreement with the Yamal project. The locked-in freight is not affected by the spot market and guarantees reasonable and stable returns. According to Sinotrans Shipping's guidelines, the JV may contribute shared profit of US$30 mn/year based on the contract value. We expect the LNG segment to contribute investment income of US$12 mn in 2018. Since the remaining three vessels are expected to start contributing to revenue in 2Q19, the LNG segment is expected to contribute approximately US$26 mn in investment income in 2019. After 2020, investment income from the JV will become stable at around US$30 mn/year according to the timeline.

Figure-7: Yamal LNG Project Share Breakdown Figure-8: LNG Profit Contribution Projection

(00368 HK)

US$ Mn LNG JV Profit Contribution YoY 35 140% Dynagas, 48.5% 30 30 117% 120% 26 中外运航运 CLNG (50%:50% owned by COSCO 25 100% SHIPPING Energy(600026 20 80% SH/01138 HK)and China Merchants Energy 15 12 60% Shipping(601872

SH), 26% 10 40% Sinotrans Shipping 15% 5 20%

Sinotrans 0 0% Shipping, 2018E 2019E 2020E 25.50% Source: the Company, COSCO SHIPPING Energy (600026 SH/01138 HK), Source: the Company, Guotai Junan International. Guotai Junan International.

Revise up earnings estimates as we remain optimistic on dry bulk shipping recovery and LNG contribution. Traditionally, dry bulk shipping’s off-season begins with the Chinese New Year and lasts until April. The industry’s peak season happens in the second half of the year, while BDI and its sub-indexes rise at the same time. As we stated above, we estimate dry bulk segment revenue to grow moderately at 16.5% YoY in 2018. Earnings contribution in the initial stage of the Yamal LNG JV may fluctuate but is expected to remain stable afterwards. After the gradual delivery of LNG carriers, Sinotrans Shipping’s capital expenditure pressure will be slightly reduced. Combining the expectation of rising fuel costs and other expenses, we project Sinotrans Shipping’s overall operation costs to increase YoY by 9.7%/8.3% in 2018/2019. In summary, we revise up Sinotrans Shipping’s

2018-2019 earnings estimates by 8.7% and 7.6%, respectively. Corresponding EPS estimates for 2018-2020 are US$0.011,

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US$0.014, and US$0.016, respectively, reflecting YoY improvement of 34.7%, 28.7% and 11.9%.

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See the last page for disclaimer Page 4 of 8 [Table_PageHeader]Sinotrans Shipping (00368 HK)

Table-2: Change in Earnings Estimates

] 1 r a M t h g i R _ e l b a T [

USD in million FY18F FY19F FY20F New estimates

Revenue 1,120 1,212 1,311 EBIT 39 39 47 Net Income 43 56 63

EPS (US$) 0.011 0.014 0.016 18 April2018 Original estimates

Revenue 1,238 1,333 n.a. EBIT 37 52 n.a. Net Income 40 52 n.a. EPS (US$) 0.010 0.013 n.a. % change

Revenue -9.5% -9.1% n.a. EBIT 6.5% -24.2% n.a. Net Income 8.7% 7.6% n.a. EPS (US$) 8.9% 7.8% n.a. Source: Guotai Junan International.

] 2 r a M t h g i R _ e l b a T [

Adjust TP to HK$2.36 to reflect Sinotrans Shipping’s attractive valuation. Currently, the ultimate parent company China Merchants Group (“CMG”) owns two listed shipping companies ("Sinotrans Shipping" and "China Merchants Energy Shipping", “CMES”, 601872 SH) that engage in dry bulk shipping, constituting horizontal competition. In 2017, CMG had successfully completed capital restructuring in its ports, highways, and logistics sectors. To our understanding, Sinotrans Shipping is expected

to continue cooperating with CMES in terms of route allocation and optimization of operating costs in the next 2 years, which could become a catalyst for Sinotrans Shipping’s stock price. Due to the downturn in the HK market, the Company's share price has been trading lower than its net assets for a long period of time. Up to the most recent week, Sinotrans Shipping was trading

at approximately 0.55x 2018 PBR, with relatively high safety margin. On the other hand, current Sino-U.S. trade relations is (00368 HK) shadowing China's exports future, destabilizing expectation on Hong Kong’s shipping sector profitability. Additionally, the valuation of the overall HK stock market underwent a downward adjustment recently. The expectation of uncertainty might put

pressure on the shipping industry's valuation. In our view, the valuation of Sinotrans Shipping is underestimated, yet is subject to 中外运航运 overall market pressure. As a result, we adjust TP to HK$2.36 to reflect its attractive valuation under an upturn in the dry bulk shipping environment. The TP represents 0.66x/0.65x/0.64x 2018-2019 PBR, and 27.7x/21.5x/19.2x 2018-2020 PER.

Major risks: 1) a slowdown in dry bulk shipping recovery in 2017 and beyond and 2) tariff or trade sanction escalation from the

recent Sino-U.S. trade war. Sinotrans Shipping

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See the last page for disclaimer Page 5 of 8 [Table_PageHeader]Sinotrans Shipping (00368 HK)

Table-3: Peers Comparison PE PB ROE(%) D/Y(%) EV/EBITDA ROA(%)

] 1 r a M t h g i R _ e l b a T [ Company Stock Code Currency Last price 17A 18F 19F 20F 17A 18F 19F 20F 18F 18F 18F 18F HK - Listed Companies

Sinotrans Shipping Ltd 368 HK HKD 2.00 32.6 23.7 18.6 16.3 0.6 0.6 0.6 0.6 2.4 1.3 n.a. 1.7

Sinotrans Limited-H 598 HK HKD 4.58 10.4 9.6 8.7 7.4 1.1 1.0 0.9 0.9 10.7 3.2 6.1 3.9

Cosco Shipping Energy Tran-H 1138 HK HKD 3.94 7.8 9.9 6.9 6.5 n.a. 0.4 0.4 0.4 4.3 3.9 11.1 2.1

Cosco Shipping Holdings Co-H 1919 HK HKD 3.78 12.6 13.5 12.8 10.7 1.6 2.1 1.8 1.5 16.9 0.0 14.1 5.3

Orient Overseas Intl Ltd 316 HK HKD 69.85 40.7 29.9 22.2 20.1 1.2 1.1 1.1 1.1 3.6 0.8 12.5 1.6

Pacific Basin Shipping Ltd 2343 HK HKD 2.03 289.4 14.0 7.6 7.1 1.0 0.9 0.9 0.8 7.2 3.1 7.6 3.8

18 April2018 Sitc International Holdings 1308 HK HKD 8.08 14.5 12.6 10.9 9.7 2.8 2.6 2.3 2.2 20.6 5.7 9.5 12.7

Simple Average 65.6 16.8 12.8 11.3 1.1 1.0 0.9 0.9 7.5 2.1 10.3 3.1 Weighted Average 34.2 17.0 13.7 12.0 1.3 1.3 1.2 1.1 9.7 1.5 11.6 3.5

China - Listed Companies

Cosco Shipping Holdings Co-A 601919 CH CNY 5.46 21.0 22.5 11.9 9.1 2.7 2.3 2.0 1.7 11.9 0.0 14.1 2.2

Cosco Shipping Developme-A 601866 CH CNY 2.99 23.9 23.0 17.6 n.a. 2.3 n.a. n.a. n.a. 10.6 0.7 n.a. 1.2

Cosco Shipping Energy Tran-A 600026 CH CNY 5.29 12.1 14.9 10.9 8.7 n.a. 0.7 0.7 0.6 4.5 2.6 10.1 2.7

Cosco Shipping Specialized-A 600428 CH CNY 4.54 40.9 24.4 19.3 15.0 1.0 1.0 0.9 0.9 3.8 0.7 n.a. 1.6

China Merchants Energy -A 601872 CH CNY 3.65 30.4 25.5 18.4 12.8 1.3 1.2 1.1 1.1 5.0 0.7 n.a. 1.8

Simple Average 25.7 22.1 15.6 11.4 1.8 1.3 1.2 1.1 7.2 0.9 12.1 1.9 Weighted Average 23.3 22.1 14.6 10.3 2.2 1.7 1.4 1.3 8.8 0.7 13.0 1.9

Other Area - Listed Companies

Ap Moller-Maersk A/S-B MAERSKB DC DKK 8,958.00 n.a. 24.6 12.6 10.7 1.0 1.0 0.9 0.9 5.4 3.2 7.9 2.8

] 2 r a M t h g i R _ e l b a T [ D/S Norden DNORD DC DKK 105.60 26.2 15.3 7.3 5.7 0.8 0.8 0.8 0.7 4.7 0.9 7.7 2.6

Hapag-Lloyd Ag HLAG GR EUR 34.84 183.4 20.7 11.3 9.2 1.0 0.9 0.9 0.8 5.4 1.0 8.5 2.6

Kirby Corp KEX US USD 86.40 15.4 29.7 23.4 19.3 1.7 1.6 1.5 1.4 5.7 n.a. 12.7 3.1

Golar Lng Ltd GLNG US USD 28.62 n.a. n.a. 35.7 12.2 1.7 1.7 1.5 1.3 1.9 0.7 25.2 0.7

Teekay Corp TK US USD 8.84 n.a. 29.0 88.4 16.1 1.1 0.4 0.3 0.3 (1.3) 2.5 n.a. n.a.

Seaspan Corp SSW US USD 6.88 7.3 6.7 5.6 4.4 0.8 0.4 0.4 0.4 11.6 7.3 7.6 2.0

Ship Finance Intl Ltd SFL US USD 14.75 13.9 16.4 13.4 11.2 1.4 1.3 1.3 1.2 8.4 9.5 10.4 4.3

Hyundai Merchant Marine 011200 KS KRW 4,575.00 n.a. n.a. n.a. n.a. 1.6 n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Korea Line Corp 005880 KS KRW 27,350.00 5.3 6.7 5.6 n.a. 1.0 0.8 0.7 n.a. 13.1 n.a. 7.8 3.6

Wan Hai Lines Ltd 2615 TT TWD 17.05 14.8 17.1 14.1 n.a. 1.1 1.0 n.a. n.a. 7.2 4.7 n.a. 3.8

Evergreen Marine Corp Ltd 2603 TT TWD 14.70 7.5 11.8 9.7 n.a. 0.9 0.9 0.8 n.a. 6.0 1.5 9.9 2.5

U-Ming Marine Transport Corp 2606 TT TWD 33.95 28.8 32.6 n.a. n.a. 1.3 1.2 n.a. n.a. n.a. n.a. n.a. n.a.

Yang Ming Marine Transport 2609 TT TWD 10.35 60.9 n.a. 12.3 n.a. n.a. 1.2 1.1 n.a. (11.7) 0.0 16.6 (0.7) (00368 HK)

Mitsubishi Logistics Corp 9301 JP JPY 2,384.00 19.6 19.6 18.8 18.2 0.8 0.7 0.7 0.7 3.9 1.2 9.7 2.5

Mitsui Osk Lines Ltd 9104 JP JPY 3,105.00 70.6 26.7 11.0 8.3 0.6 0.6 0.6 0.6 2.2 0.8 13.5 0.8

Nippon Yusen Kk 9101 JP JPY 2,174.00 n.a. 27.2 15.8 10.0 0.7 0.7 0.7 0.6 2.6 0.8 11.0 0.9

Kawasaki Kisen Kaisha Ltd 9107 JP JPY 2,459.00 n.a. 30.4 19.0 12.9 1.0 1.0 1.0 0.9 2.4 0.0 10.5 0.8

中外运航运 Simple Average 37.8 21.0 19.0 11.5 1.1 1.0 0.9 0.8 4.2 2.4 11.4 2.2 Weighted Average 70.6 23.7 15.6 11.4 1.1 1.0 0.9 0.9 4.8 2.4 10.0 2.4 Source: Bloomberg.

Sinotrans Shipping

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See the last page for disclaimer Page 6 of 8 [Table_PageHeader]Sinotrans Shipping (00368 HK)

Financial Statements and Ratios [Table_IncomeStatement] Income Statement [Table_BalanceSheet] Balance Sheet

] 1 r a M t h g i R _ e l b a T [

Year end 31 Dec (US$ m) 2016A 2017A 2018F 2019F 2020F Year end 31 Dec (US$ m) 2016A 2017A 2018F 2019F 2020F

Total Revenue 841 1,006 1,120 1,212 1,311 Property, plant and

-Dry bulk shipping 369 489 570 620 664 equipment 1,105 1,131 1,026 1,011 942 -Container shipping 473 518 539 567 619 Investments in JCEs 74 90 102 128 158 -Others (including LNG) 1 1 13 27 31 Other non-current assets 40 40 47 67 67 -Proportionate Revenue Driven Total Non-current Assets 1,219 1,260 1,174 1,205 1,166 (2) (2) (2) (2) (2)

by JVs 18 April2018 Cost of operations and SG&A (923) (977) (1,072) (1,161) (1,245) Cash & Cash Equivalents 283 199 224 230 151 Other operating income (164) 6 (9) (11) (19) Short-term bank deposits 361 527 560 500 580 Operating Profit (246) 36 39 39 47 Inventories 18 19 31 36 38 Interest income, net 5 11 7 9 7 Trade and other receivables 157 169 175 197 234 Share of profits/(losses) of JV 0 (1) 12 26 30 Other current assets 36 14 3 3 3 Total Current Assets 855 929 993 967 1,006 Profit Before Tax (241) 46 58 75 84 Total Assets 2,074 2,189 2,167 2,172 2,172 Income Tax (1) (6) (8) (10) (11) Profit After Tax (242) 40 51 65 73 Trade and other payables 178 279 212 173 115 Non-controlling Interest 13 (8) (7) (9) (10) Other current liabilities 30 19 26 45 60 Shareholders' Profit/Loss (230) 32 43 56 63 Total Current Liabilities 209 298 238 218 175 Basic EPS (0.058) 0.008 0.011 0.014 0.016 Borrowings 63 55 88 71 68 Other non-current liabilities 6 2 2 2 2

] 2 r a M t h g i R _ e l b a T [

Total Non-current Liabilities 69 57 91 73 71 [Table_CashFlowStatement] Cash Flow Statement Total Liabilities 278 355 329 291 246

Year end 31 Dec ($US m) 2016A 2017A 2018F 2019F 2020F Share capital 51 51 51 51 51 Profit before income tax (241) 46 58 75 84 Reserves 1,737 1,766 1,762 1,796 1,832 Depreciation and amortization 60 53 66 69 69 Total Shareholders' Equity 1,788 1,817 1,814 1,847 1,883 Loss (Gain) on disposal of Minority Interest 8 17 24 33 43 PP&E 214 (12) 15 22 10 Total Equity 1,796 1,834 1,838 1,881 1,926 Share of loss/(gain) of JCEs (0) 1 (12) (26) (30)

Finance costs, net (5) (8) (5) (8) (5)

Changes in working capital 12 90 (82) (66) (95) [Table_FinancialRatio] Interest received, net 10 15 15 16 15 Financial Ratios

Government subsidy 2016A 2017A 2018F 2019F 2020F (00368 HK)

recognized (49) (8) 0 0 0 EBITDA margin (%) (22.0) 8.8 9.4 8.9 8.8 Others 15 (20) 3 (39) (40) EBIT margin (%) (29.2) 3.5 3.5 3.3 3.6 Income tax paid (0) (6) (8) (10) (11) Net income margin (%) (27.3) 3.2 3.9 4.6 4.8

Cash from Operating Activities 16 150 50 33 (4) 中外运航运 ROA (%) (10.6) 0.9 1.7 2.2 2.6 CapEx (96) (23) (26) (54) (10) ROE (%) (12.0) 1.8 2.4 3.1 3.4 Decrease in bank deposits 113 (167) (33) 60 (80) Others 118 (16) 18 (10) 10 Current ratio (x) 4.09 3.12 4.17 4.43 5.74 Cash from Investing Activities 134 (206) (40) (4) (80) Quick ratio (x) 4.00 3.05 4.03 4.26 5.52

Dividends paid 0 (20) (20) (13) (17) Operating cash flow ratio (x) 0.08 0.50 0.21 0.15 -0.02 Changes in bank loans (14) (8) 35 (10) 21 Total asset turnover (x) 0.38 0.47 0.51 0.56 0.60 Sinotrans Shipping Cash from Financing Activities (14) (28) 15 (23) 4 Fixed asset turnover (x) 0.62 0.8 0.92 1.02 1.11

Cash at Beg of Year 155 283 199 224 230 Total liabilities/Total assets (%) 13.41 16.22 15.19 13.42 11.31 Net Changes in Cash 136 (84) 25 6 (79) Net gearing ratio (%) net net net net net Cash at End of Year 283 199 224 230 151 cash cash cash cash cash

Source: the Company, Guotai Junan International.

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Company

See the last page for disclaimer Page 7 of 8 [Table_PageHeader]Sinotrans Shipping (00368 HK)

Company[Table_CompanyRatingDefinition] Rating Definition

The Benchmark: Hong Kong Hang Seng Index ] 1 r a M t h g i R _ e l b a T [

Time Horizon: 6 to 18 months

Rating Definition

Buy 买入 Relative Performance>15%; or the fundamental outlook of the company or sector is favorable. Accumulate 收集 Relative Performance is 5% to 15%;

or the fundamental outlook of the company or sector is favorable. 18 April2018 Neutral 中性 Relative Performance is -5% to 5%; or the fundamental outlook of the company or sector is neutral. Reduce 减持 Relative Performance is -5% to -15%; or the fundamental outlook of the company or sector is unfavorable.

Sell 卖出 Relative Performance <-15%; or the fundamental outlook of the company or sector is unfavorable.

Sector[Table_ RatingIndustry DefinitionRatingDefinition] The Benchmark: Hong Kong Hang Seng Index Time Horizon: 6 to 18 months Rating Definition Outperform 跑赢大市 Relative Performance>5%;

] 2 r a M t h g i R _ e l b a T [ or the fundamental outlook of the sector is favorable. Neutral 中性 Relative Performance is -5% to 5%; or the fundamental outlook of the sector is neutral. Underperform 跑输大市 Relative Performance<-5%; Or the fundamental outlook of the sector is unfavorable.

DISCLOSURE OF INTERESTS

[Table_DISCLOSUREOFINTERESTS] (1) The Analysts and their associates do not serve as an officer of the issuer mentioned in this Research Report. (2) The Analysts and their associates do not have any financial interests in relation to the issuer mentioned in this Research Report. (3) Except for GREENLAND BROAD (01253 HK),KAISA GROUP (01638 HK),GUOTAI JUNAN I (01788 HK),BINHAI INVESTMENT (02886

HK),GFI MSCI A I (03156 HK),CAM SCSMALLCAP (03157 HK),ZHENRO PPT (06158 HK),LINK HOLDINGS (08237 HK),MR CSI300 (00368 HK) ETF-R (CNY) (83127 HK),GFI MSCI A I-R (CNY) (83156 HK),Guotai Junan and its group companies do not hold equal to or more than 1% of the market capitalization of the issuer mentioned in this Research Report. (4) Guotai Junan and its group companies have not had investment banking relationships with the issuer mentioned in this Research Report within the preceding 12 months.

(5) Guotai Junan and its group companies are not making a market in the securities in respect of the issuer mentioned in this Research 中外运航运 Report. (6) Guotai Junan and its group companies have not employed an individual serving as an officer of the issuer mentioned in this Research Report. There is no officer of the issuer mentioned in this Research Report associated with Guotai Junan and its group companies.

Sinotrans Shipping DISCLAIMER

This Research Report does not constitute an invitation or offer to acquire, purchase or subscribe for securities by Guotai Junan Securities (Hong Kong) Limited ("Guotai Junan"). Guotai Junan and its group companies may do business that relates to companies covered in research reports, including investment banking, investment services, etc. (for example, the placing agent, lead manager, sponsor, underwriter or invest proprietarily).

Any opinions expressed in this report may differ or be contrary to opinions or investment strategies expressed orally or in written form by sales persons, dealers and other professional executives of Guotai Junan group of companies. Any opinions expressed in this report may differ or be contrary to opinions or investment decisions made by the asset management and investment banking groups of Guotai Junan.

Though best effort has been made to ensure the accuracy of the information and data contained in this Research Report, Guotai Junan does not guarantee the accuracy and completeness of the information and data herein. This Research 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. Investors should understand and comprehend the investment objectives and its related risks, and where necessary consult their own financial advisers prior to any investment decision.

This Research Report is not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in

any jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation or which would subject

Guotai Junan and its group companies to any registration or licensing requirement within such jurisdiction.

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Website: www.gtja.com.hk

Company

See the last page for disclaimer Page 8 of 8