China / Hong Kong Company Guide China Resources Version 4 | Bloomberg: 291 HK EQUITY| Reuters: 0291.HK Refer to important disclosures at the end of this report

DBS Group Research . Equity 3 Apr 2018

Move up a gear BUY Last Traded Price( 29 Mar 2018):HK$34.00(HSI : 30,093) Mid-to high-end products to reach 50% of sales. We continue to see CR Price Target 12-mth:HK$39.05 (15% upside) (Prev HK$36.80) Beer’s effort to tap into the mid-to high-end market and boost A nalyst Vincent YANG +852 28204918 [email protected] profitability. According to channel checks, the company has ramped up Mavis HUI +852 2863 8879 [email protected] its high-end “Opera Mask” product series to double the sales volume What’s New since July FY17, and launched its new flagship product – “SuperX” to  Product mix enhancement in multiple fronts is catch attention of young customers. Overall, we estimate that the paying off company could further improve product-mix of its mass: mid-to high-end products to 50:50 by FY20, versus 61:39 in FY17. Management also  Ongoing capacity and packaging revamp also targets to capture a similar market share in the premium segment as raises EBITDA margins compared to major foreign players in five years.  Estimated core earnings CAGR of 24.5% for FY17- 20 has yet to include potential M&As that could Upcoming optimization plans, in our view. At present, on average, c.54% happen earliest this year capacity of its production has been utilized. CR Beer targets to further

shore up its utilization level via consolidating dispersed capacity to create Price Relative mega plants. As such, more closures of inefficient plants will be expected. HK$ Relative Index While the company has not revealed its plans, our in-depth studies via 36.1 249

31.1 199 comparing regional industry data suggest further capacity cuts in Tianjin, 26.1 21.1 149 Shanxi, Liaoning, Sichuan and Anhui. Coupled with ample room to shift 16.1 99 11.1 towards canned beer production, we estimate core EBIT margin to reach 6.1 49 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 c.13% by FY20 (FY17:8.7%). China Resources Beer (LHS) Relative HSI (RHS) Potential M&A targets. We understand that CR Beer is proactively seeking Forecasts and Valuation FY Dec (RMBm) 2017A 2018F 2019F 2020F potential targets to strengthen its regional presence and premiumization, Turnover 29,732 32,348 34,297 36,342 including possibility to acquire a renowned brand in FY18. This should EBITDA 3,650 4,591 5,423 6,376 further increase its market share and raise its profile and branding in Pre-tax Profit 1,816 2,855 3,695 4,645 Net Profit 1,175 1,950 2,524 3,173 China. We try to gauge financial performance and enterprise value across Est. Core profit * 1,914 2,685 3,037 3,694 major foreign brands operating in China, and we currently expect its EPS (RMB) 0.36 0.60 0.78 0.98 rumored target of Heineken’s China business could involve at least EPS (HK$) 0.45 0.75 0.97 1.22 Core EPS (HK$) * 0.74 1.03 1.17 1.42 c.RMB5bn deal size, while other brands like Kirin and Molson Coors Core EPS (RMB) * 0.59 0.83 0.94 1.14 could be relatively more affordable options too. EPS Gth (%) 65.5 66.0 29.4 25.7 Core EPS Gth (%) * 55.1 40.3 13.1 21.6 Valuation: DPS (HK$) 0.17 0.30 0.39 0.49 Lifted EBITDA CAGR (FY17-19) from 18% to 22% due to better operating BV Per Share (HK$) 7.08 7.65 8.31 9.13 efficiency assumption. Our TP of HK$39.05 continues to base on 19x PE (X) 75.2 45.3 35.0 27.9 FY19F EV/EBITDA, similar to 1 S.D. above AB InBev’s 3-year average given CorePE (X) * 46.2 32.9 29.1 23.9 CR Beer’s relatively faster growth and margin enhancement potentials. P/Cash Flow (X) 22.2 19.6 19.0 16.6 Core earnings revised down 8% for both FY18/19, due to higher tax rate P/Free CF (X) 36.2 38.5 33.5 25.3 assumption. EV/EBITDA (X) 24.5 19.0 15.7 12.9 Net Div Yield (%) 0.5 0.9 1.1 1.4 Key Risks to Our View: P/Book Value (X) 4.8 4.4 4.1 3.7 Lower-than-expected ASP hikes; sales volume decline due to weather or Net Debt/Equity (X) 0.1 CASH CASH CASH market share changes; rising competition in the high-end segment. ROAE(%) 6.5 10.2 12.2 14.0 (*Excluded impairment losses from plant closures At A Glance #Excluded shortfall of previously assumed impairment losses vs. new Issued Capital (m shs) 3,244 assumptions) Total Mkt. Cap (HK$m/US$m) 110,302 / 14,051 Core earnings Rev (%) # (8) (8) New Major Shareholders Consensus EPS (RMB) 0.660 0.833 1.032 China Resources (Holdings) (%) 51.9 Consensus EBITDA (RMBm) 4,686 5,388 6,348 Hillhouse Capital Mgmt. Ltd. (%) 6.0 Other Broker Recs: B: 12 S: 4 H: 4 Gaoling Fund, L.P. (%) 5.2 Source of all data on this page: Company, DBSV, Thomson Reuters, HKEX H Shares-Free Float (%) 100.0 3m Avg. Daily Val. (US$m) 27.4 I CB Industry :Consumer Goods / Beverages

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Company Guide

China Resources Beer

WHAT’S NEW good moves of the company, especially to grab attention of (1) Upgrade in multiple fronts young customers, improve product-mix and enhance its sales in the premium segment, thanks to better and refreshed New SKU targeting at young customers. In Nov 2017, CR Beer packaging design and more importantly, attractive changed design of its major brand “” and updated a promotional strategies. To our belief, CR Beer might continue series of its existing products, with retail price lifted for more to launch new high-end products this year to further than 30%, as shown in the table below. Recently, it also rolled strengthen its brand profile. The company might introduce out its new flagship product - SuperX, under its umbrella new products with one-piece aluminum can packaging, as we brand, “Brave the World” (勇闯天涯), priced at RMB8-9 per already saw remarkable sales performance of premium beer unit (500mL) within the premium range. We view these as with this kind of packaging as presented below, according to channel checks.

New SKU – SuperX and its brand ambassador New packaging might boost sales

Source: Company Source: Corporate websites

Beer price hike summary

Retail Price as Retail Price as Volume Package CR Beer of 1 Jan 2017 of 26 Mar 2018 change % (ml)/unit unit (RMB/unit) (RMB/unit) Snow Premium (冰酷) 330 24 1.83 1.91 4.4% 330 24 2.04 2.25 10.3% Snow Refreshing (清爽) 500 12 3.25 3.33 2.5% 330 24 3.58 3.63 1.3% Snow - Brave the World Series (勇闯天涯) 330 6 4.15 4.67 12.5% 500 12 4.50 4.50 0.0% c. 33.3% price Snow - New Brave the World (勇闯天涯 500 12 6.00 n.a. increase after new 概念系列) Debut in Nov 2017 series debut 330 24 5.38 6.00 11.6% Snow Draft Beer (纯生) 500 12 7.16 7.25 1.3% c. 38% price increase Snow New Draft Beer (纯生 概念系列) after new series 500 12 n.a 10.00 n.a. Debut in Nov 2017 debut Snow Opera Mask (脸谱) 500 12 n.a 15.00 n.a. Source: JD, DBS Vickers

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Company Guide China Resources Beer

More attractive promotional strategies. CR Beer adopts a +0.5ppt market share gain (in terms of sales volume) and No. young customer oriented marketing strategy, as we can see 1 ranking as the most popular beverage brand among Chinese that the company spent more than RMB200m for the title young customers in 2016, according to BRANDZ. sponsorship of an online blockbuster talent show in China (“明 We also use Baidu’s search index as an influence proxy to 日之子”). To our understanding, this show received c.4.2bn understand the interest level of beer brands among customers. viewership in 2017, ranking No.1 among all the online shows, We see a clear trend of CR Beer’s improving brand and c.38% of the audiences are aged between 16 and 20, attractiveness, especially in the mobile channel, which is according to a report from Weibo. CR Beer is also building majorly dominated by young generation. This is further close association between its brands and young popular supported by the user portrait across different age groups singers, e.g. the company had just hired Jackson Wang (王嘉 empowered by Baidu’s search analysis, which indicates CR Beer’s increasing popularity among young customers aged 尔) as its brand ambassador for its flagship product “SuperX”. under 40. The brand perception improvement might be partly Wang currently has 8m and 9m followers on Weibo and attributable to CEO Mr. Hou Xiaohai’s forward-looking Instagram respectively as of Mar 2018, and he is doomed to promotional strategies and good execution, given his rich gain more popularity via the hot dancing talent show (“热血街 experience in the marketing field. On a separate note, he is 舞团”) in China, whose advertisement we believe could help also the key man contributing to the popularity of Snow’s support CR Beer’s sales volume in the upcoming summer. umbrella brand - “Brave the World”. Similar strategy had been adopted by Harbin , a subsidiary of AB-InBev in 2016, when they hired popular rappers MC Hotdog and Chang Chen-yue (张震岳) as brand representatives, partly contributed to its

CR Beer gradually received attention from young customers Search interest comparison in mobile channel (age<40)

Adjusted Baidu (age<40)% gap Search Index* between those who searched brands 200 10 ppt and those who searched “beer” 100 8 ppt

0 6 ppt -100 4 ppt -200 2 ppt -300 0 ppt -400 -2 ppt -500 Jan 2016 - Dec 2016 Jan 2017 - Dec 2017 YTD -4 ppt 1H16 2H16 1H17 2H17 Snow Beer + Brave the World Tsingtao Beer + Laoshan Beer Snow Beer + Brave the World Tsingtao Beer + Laoshan Beer 雪花啤酒+勇闯天涯 青岛啤酒 + 崂山啤酒 雪花啤酒+勇闯天涯 青岛啤酒 + 崂山啤酒 Budweizer Beer + Harbin Beer Yanjing Beer + Huiquan Beer + Liquan Beer Budweizer Beer + Harbin Beer Yanjing Beer + Huiquan Beer + Liquan Beer 百威啤酒 + 哈尔滨啤酒 燕京啤酒 + 惠泉啤酒 + 漓泉啤酒 百威啤酒 + 哈尔滨啤酒 燕京啤酒 + 惠泉啤酒 + 漓泉啤酒

Note: Baidu Search Index is a weighted sum of search frequency Note: bar chart presents the gap between young customers’ (<40 of certain keyword(s) years old) search of specific brands versus their search of the word “Beer” alone *All indices shown here are offset by the search index of keyword “Beer” alone, e.g. adjusted search index of “Snow Beer+Brave the word” = search index of “Snow Beer+Brave the World” – search index of “Beer”

Source: Baidu Search Index, DBS Vickers Source: Baidu Search Index, DBS Vickers

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Company Guide

China Resources Beer

Euromonitor has projected a segmental CAGR of -4.3% for the mass beer segment, and +12.8% for the mid- to high-end beer segment in China for 2017-2020. As we believe CR Beer should continue to outperform the industry, we expect the company to maintain FY17 mass beer sales and deliver 16.0% CAGR for its mid- to high-end beer sales during the same period. Based on such assumptions, CR Beer’s mid- to high-end product sales should reach c.50% of total sales in 2020, versus 39% in 2017. Such performance should help beefing up group profitability.

CR Beer mass product sales vs. mid-to high-end product sales

2018 2019 2020 industry mid-to high-end sales grow th 13.2% 12.7% 12.8% industry mass beer sales grow th -4.5% -4.5% -4.0% CR Beer mid-to high-end sales grow th 20.0% 15.0% 13.0% CR Beer mass beer sales grow th 1.0% 0.0% -1.0%

100%

80%

60%

40%

20%

0% FY17A FY18F FY19F FY20F

mid-to high-end mass

Source: Euromonitor, DBS Vickers

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Company Guide China Resources Beer

(2) Optimization matters exceeded the local market production volume, which can be used as a proxy to the local consumption given brewery’s close Capacity revamp as a medium to long-term catalyst. We delivery nature. The aforementioned markets are also largely understand that CR Beer plans for production optimization to dominated by CR Beer and we opine that the company could ramp up its utilization level. This should start from divesting start focusing on trimming down the overcapacity in these overcapacity in its dominant markets, as evidenced in earlier places. plant closures, which should further support margin expansion. Another advantage of cutting capacity is to reduce labor costs, We believe CR Beer would likely shut down 5-6 small factories as we see CR Beer reduced more than 10% (c.6,200) of its and might continue to expand capacity in its growing markets. employees in 2017. By stripping out impairment losses, we see In our estimation, the amount of impairment losses due to a steady control over general & admin (G&A) expenses, as the capacity optimization in FY18 could reach a similar amount of G&A expense over sales stayed manageable at 10.9% in FY17 FY17’s RMB739m. Looking ahead, we would closely monitor vs. 10.7% in FY16. Along such schedule, we estimate CR Beer the company’s future strategy for capacity optimization, given to achieve c.13% core EBIT margin (excl. impairment losses) by its near-term M&A potentials. If a deal is to materialize, we the end of FY20F (vs. 8.7% in FY17). might see some realignment in CR Beer’s production capacity in a way that could maximize synergies, such as production of Potential strategy for further capacity consolidation. By premium beer for the acquired brand. comparing CR Beer’s current production capacity to our estimated FY17 industry production, we find that CR Beer’s capacity in Tianjin, Shanxi, Liaoning, Anhui, Sichuan has

CR Beer overcapacity analysis

FY 17 A B C D E=C/A F=C-A G=A*D H=G/C CR Beer # CR Beer * ** capacity est. CR Beer * CR Beer production est. CR Beer local market beer est. CR Beer exceed local FY17 beer production production capacity as % of capacity local market production growth market share in market production (mkL) capacity local market utilization level (% yoy) local market production volume (mkL) (mkL) production (mkL) 北京 Beijing 1.29 (4.8%) 0.2 6% 16% (1.1) 0.08 39.0% 天津 Tianjin 0.33 4.8% 0.6 60% 179% 0.3 0.20 33.8% 河北 Hebei 1.73 5.0% 0.7 35% 40% (1.0) 0.61 87.5% 山西 Shanxi 0.34 (1.1%) 0.4 60% 119% 0.1 0.20 50.9% 内蒙古 Inner Mongolia 0.71 (28.5%) 0.4 10% 56% (0.3) 0.07 18.0% 辽宁 Liaoning 2.22 (4.4%) 2.5 60% 112% 0.3 1.33 53.9% 吉林 Jilin 1.31 (4.3%) 0.8 50% 61% (0.5) 0.66 82.9% 黑龙江 Heilongjiang 1.99 (0.8%) 1.3 40% 65% (0.7) 0.80 61.9% 上海 Shanghai 0.56 (7.6%) 0.4 20% 71% (0.2) 0.11 28.4% 江苏 Jiangsu 1.80 1.0% 1.3 40% 72% (0.5) 0.72 55.8% highest 浙江 Zhejiang 2.53 2.7% 2.5 30% 99% (0.1) 0.76 30.7% potential 安徽 Anhui 0.95 (10.0%) 1.5 70% 157% 0.5 0.67 44.9% 福建 Fujian 1.60 (0.4%) 0.2 5% 12% (1.4) 0.08 40.5% of plant 山东 Shandong 6.05 0.8% 0.8 8% 13% (5.3) 0.48 61.1% closures 河南 Henan 4.05 2.0% 1.1 15% 27% (3.0) 0.61 55.8% 湖北 Hubei 1.80 (0.4%) 1.3 25% 72% (0.5) 0.45 34.9% 湖南 Hunan 0.73 1.6% 0.2 20% 28% (0.5) 0.15 73.4% 广东 Guangdong 4.14 2.1% 1.6 25% 39% (2.6) 1.04 65.4% 广西 Guangxi 0.77 (11.4%) 0.1 3% 6% (0.7) 0.02 23.5% 四川 Sichuan 2.44 5.2% 2.7 75% 111% 0.2 1.83 68.5% 贵州 Guizhou 1.06 5.4% 1.0 70% 95% (0.1) 0.74 74.8% 陕西 Shaanxi 0.91 (2.0%) 0.2 15% 22% (0.7) 0.14 68.9% 甘肃 Gansu 0.52 (11.6%) 0.2 25% 38% (0.3) 0.13 66.0% 宁夏 Ningxia 0.23 (0.8%) 0.2 10% 86% (0.0) 0.02 11.7% Note: (sum of G) total est. FY 17 production volume= 11.891mkL vs. reported 11.819mkL sales volume (+0.6% difference); (average of H) FY17 est. simple average utilisation level at 51.3% (* Based on pro-rata estimation of 11M17 data from National Bureau of Statistics of China , # based on FY17 company presentation, ** based on China Beer Association, Zhiyan Consulting and our estimation) Source: National Bureau of Statistics of China, China Beer Association, Zhiyan Consulting, Company, DBS Vickers

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Company Guide

China Resources Beer

CR Beer production capacity change summary (FY16&FY17) CR Beer segmental EBIT margin ex. impairment losses

Year FY16 FY17 16% Plant number Capacity Plant number Capacity 14.6% Province changed changed changed changed 14% 12.8% Guizhou - +0.1mkL - +0.3mkL 12% 10.7% Shangdong - - - +0.1mkL 8.3% 8.7% Sichuan - -0.3mkL -1 +0.1mkL 10% 7.8% Heilongjiang - - -1 - 7.9% 7.7% 8% Henan -1 - - - 4.6% 6.9% Liaoning - -0.1mkL - -0.1mkL 6% Guangdong - - - -0.1mkL 3.7% Hubei +1 +0.1mkL - -0.1mkL 4% Fujian - +0.1mkL - -0.1mkL 2% 0.8% Zhejiang - - -1 -0.1mkL Shanxi - - -1 -0.2mkL 0% Anhui -1 - -1 -0.4mkL Eastern Central Southern Overall Jilin - +0.2mkL - - Hebei - -0.2mkL - - FY15 FY16 FY17 Reduced capacity -2 -0.6mkL -5 -1.1mkL Added capacity +1 +0.5mkL - +0.5mkL Source: Company, DBS Vickers Source: Company, DBS Vickers

CR Beer plant closures in FY17

Heilongjiang Potential plant closures in FY18F: -1 1. Tianjin 天津 2. Shanxi 山西 3. Liaoning 辽宁 Jilin 4. Anhui 安徽 5. Sichuan 四川

Liaoning Xinjiang Beijing Gansu Inner Mongolia Tianjin Hebei Ningxia Shanxi -1 Shandong Qinghai Jiangsu Henan Shaanxi Tibet A nhui -1 Shanghai Sichuan Hubei -1 Chongqing Z hejiang -1

Jiangxi Hunan Guizhou Fujian Dominating markets (highest market share within local Yunnan Guangdong market; market share >60%) Guangxi

Hong Kong Plant(s) Presence

Hainan

Source: China Beer Association, Zhiyan Consulting, Company, DBS Vickers

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Company Guide China Resources Beer

Higher one-off tax due to plant closures. Different from the Pack aging shift: glass to aluminum. We understand that consensus’ c.25% tax rate assumption, we opine that the currently CR Beer’s aluminum can products takes up less than effective tax rate of CR Beer in FY18-20 should be higher, 20% of its total beer packaging, with large room to catch up especially given impacts from the impairment of deferred tax compared to other developed countries, e.g. Japan (c.90%) asset(DTA) related to the future plant closures. Since the and the US (c.60%). Given less manual labor, higher company would more likely shut down those inefficient and production efficiency (90-100 thousand can per hour) and non-profitable plants (which more likely see a larger DTA), we lower packaging costs using the aluminum can packaging as should see full impairment of such factories’ DTA, leading to a compared to glass bottles, we would continue to see a higher tax rate. We understand that the almost doubled tax in double-digit CAGR in canned beer for the company in the FY17 compared to FY16 was majorly attributable to the near to medium-term. In China, it is estimated that metal can additional tax on exchange gain and the impairment of DTA. beer packaging could account for 26% of total beer Given recent rally of CNY exchange rate against HKD, we packaging by 2021F (vs. 22% in 2017). As packaging cost might also see a high tax on exchange gain in FY18. normally takes up more than 30% of COGS for breweries, the gradual shift to aluminum can should further lower overall packaging costs as well as delivery expenses and lift CR Beer’s margin.

Beer packaging breakdown worldwide (2017) Beer packaging breakdown (PRC, 2010-2021F)

100% 90% 100% 80% 90% 70% 80% 60% 70% 50% 40% 60% 30% 50% 20% 40% 10% 30% 0% 20%

USA 10%

China

Japan

World

France Taiwan

Canada 0%

Belgium

Vietnam

Australia

Germany

Singapore

South Korea South

2010 2011 2012 2013 2014 2015 2016 2017

2018F 2019F 2020F 2021F United Kingdom United Glass Can Glass Can

Source: Euromonitor Source: Euromonitor

(3) M&A catalysts could be a possible benchmark for upcoming M&As in China, if there is any. M&A potentials. Given recent rumors and the company’s proactiveness in seeking acquisitions, we could likely see a Possible deal structure. First, share swap or asset swap seems reasonable deal in FY18, such as acquisition of a renowned to be an attractive transaction method, which could lower CR brand. We opine that CR Beer would be better off acquiring Beer’s finance cost. Cash payment for small deals could be an established brand to enhance its portfolio and sales simpler, especially if the target happens to be Kirin, Molson performance in the premium segment, and potentially Coors or San Miguel’s China business, so that the potential improving its market share in non-dominant local markets. deal size could be RMB2bn or less. Yet, there could also be Aside from the recently rumored potential target of Heineken chances that CR Beer would set up a joint venture with other NV’s China division, Henan Jinxing and Molson Coors might renowned international brands to distribute their products in also be CR Beer’s potential targets, in our view. We have also China. In any case, we see that a reasonable deal could bring listed the potential value of the top foreign breweries along positive synergies for CR Beer, given its vast and operating in China below. We opine that an 18x EV/EBIT or effective distribution channel in China, strong back-end 29x forward PE valuation of recent deal support, marketing resources as well as product development.

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Company Guide

China Resources Beer

Foreign Brand Value Estimation

Foreign Breweries Overview (PRC, 2017) ## Valuation FY16 retail sales FY16 retail sales # est. FY17 Top 8 Foreign sales volume est. revenue est. FY17 EBIT based on 18x volume market value market retail sales value Breweries (million liter) (RMB mn) (RMB mn) EV/EBIT share (%) share (%) (RMB mn) (RMB mn) Anheuser-Busch InBev 16.2 17.1 *7,448 98,128 *31,591 *9,132(EBITDA) ^125,100 Carlsberg 5.0 5.7 *2,286 32,588 *7,286 *1,428 25,704 Suntory 1.1 1.0 509 5,899 **1,382 **207 3,732 Blue Ribbon 0.7 1.1 327 6,582 **1,542 **232 4,164 Heineken 0.5 1.3 234 7,274 **1,704 **256 4,602 Kirin Holdings 0.2 0.4 80 2,061 **483 **72 1,304 Molson Coors Brewing 0.2 0.2 69 965 **226 **34 610 San Miguel 0.1 0.1 41 582 *138 *15 274 Top 8 Sub-total 24.0 26.9 11,011 154,079 n.a. n.a. n.a. Note: * Revenue and EBIT(DA) of AB InBev, Carlsberg and San Miguel are found based on company annual report and presentation information # Estimated based on 6.7% yoy industry growth in FY17, according to Euromonitor ** Revenue of other companies are derived by assuming wholesale prices to be 25% of retail value (AB InBev: 34%, CR Beer: 29%, Carlsberg: 24%, San Miguel: 22%) Assume EBIT margin as 15%, [EBITDA margin: AB InBev (29%), EBIT margin: Carlsberg (20%), CR Beer (6.5%), San Miguel (11%)] ## EV/EBIT multiple is based on recent Tsingtao Brewery deal (18x forward EV/EBIT) ^ Based on an estimated EBIT margin of 22% Source: Euromonitor, Company, DBS Vickers

Beer industry major M&As (2015 - 2018)

Enterprise Value (EV) EV/EBITDA EV/EBIT PE Announce Date Target Name Acquirer Name Region (USD mn) (x) (x) (x) Dec-17 Tsingtao Brewery Fosun International China 846 18.0 28.8 AmBev Brasil (AB InBev’s Dec-17 Cerveceria Nacional Dominicana Dominican Republic 927 Brazilian unit ) Feb-17 Brasil Kirin Heineken Brazil 1,298 Dec-16 Punch Taverns Heineken United Kingdom 1,982 7.2 7.5 24.4 Dec-16 Eastern European breweries Asahi Group Europe 7,756 Oct-16 Obregon Brewery Constellation Brands Mexico 600 Mar-16 China Resources Snow Breweries China Resources Beer China 1,600 Feb-16 European breweries Asahi Group Holdings Europe 2,863 Nov-15 MillerCoors Molson Coors United States 12,000 Oct-15 AB InBev Anheuser-Busch InBev Worldwide 122,966 6.7 8.1 13.3 Oct-15 Desnoes & Geddes ,GAPL Pte Heineken Jamaica, Singapore 781 Aug-15 Myanmar Brewery Kirin Myanmar 560 Aug-15 Myanmar Brewery Myanma Economic Myanmar 560 Average 6.9 11.2 22.2 Source: Bloomberg

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Company Guide China Resources Beer

FY17 Results Summary

P&L RMB m F Y16 F Y17 y -o-y % 2H16 2H17 y -o-y %

Turnover 28,694 29,732 3.6% 13,481 13,958 3.5% Cost of sales (19,021) (19,703) 3.6% (8,928) (9,211) 3.2% Gross profit 9,673 10,029 3.7% 4,553 4,747 4.3% Other income 723 903 24.9% 427 504 18.0% Selling and distribution expenses (5,033) (5,012) -0.4% (2,601) (2,471) -5.0% General & Admin expense (3,535) (3,976) 12.5% (2,234) (2,556) 14.4% Profit from operations 1,828 1,944 6.3% 145 224 54.5% Finance costs (89) (128) 43.8% (9) (27) 200.0% Profit before taxation 1,739 1,816 4.4% 136 197 44.9% Taxation (320) (630) 96.9% 63 (189) -400.0% Profit before minority interests 1,419 1,186 -16.4% 199 8 -96.0% Minority interests 790 11 -98.6% 175 3 -98.3% Attributable profit 629 1,175 86.8% 24 5 -79.2% Est. core profit 1,093 1,914 75.1%

Profitability (%): Gross profit margin 33.7% 33.7% 33.8% 34.0% Operating margin 6.4% 6.5% 1.1% 1.6% Net profit margin 2.2% 4.0% 0.2% 0.0% 3.8% 6.4% Core net profit margin

Source: Company, DBS Vickers

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Company Guide

China Resources Beer

CR Beer’s share price performance (Jul 2015 - 2018)

HK$ 16 40.0 15 35.0 14 12,13 30.0 11 10 25.0 7 9 5 6 8 20.0 2 3 4

15.0

10.0

5.0

0.0

Jul-15

Jul-16

Jul-17

Jan-16

Jan-17

Jan-18

Jun-16

Jun-17

Oct-15

Feb-16

Oct-16

Feb-17

Oct-17

Feb-18

Sep-15

Apr-16

Sep-16

Apr-17

Sep-17

Dec-15

Dec-16

Dec-17

Nov-15

Nov-16

Nov-17

Mar-16

Mar-17

Mar-18

Aug-15

Aug-16

Aug-17

May-16 May-17

Date Ev ents 1 Jun-15 CRE announced its 1Q15 net profit of HK$360m, vs. consensus 349m 2 Oct-15 News report of AB InBev's potential acquisition of SABMiller would lead to the disposal of latter's 49% stake in Snow 3 Mar-16 CR Beer agrees to buy 49% of Snow Breweries for US$1.6bn 4 Mar-16 CRE announced FY15 net loss of HK$4.0bn, vs. consensus 161m loss. 5 Jun-16 CR Beer to offer 811m shares at 31% discount, to raise HK$9.5bn for SABMiller deal 6 Aug-16 CR Beer reported 1H16 net profit (from continuing operations) of RMB605m vs. consensus 417m 7 Sep-16 CR Beer said to mull bid for US$6bn SABMiller units 8 Jan-17 Asahi looked for exit of c.20% stake in Tsingtao Brewery 9 Mar-17 CR Beer reported its first annual profit in three years in 2016 10 Aug-17 CR Beer reported a 93.4 per cent increase in interim profits 11 Oct-17 Market's speculation of CR Beer as a buyer of Tsingtao Brewery's 20% stake 12 Dec-17 Molson Coors to sell China's Snow beer in UK 13 Dec-17 Fosun bought c.18% stake in Tsingtao Brewery 14 Jan-18 CR Beer share price surged on report prices have been boosted 15 Jan-18 CR Beer confirmed price increases 16 Mar-18 Rumours of CR Beer to acquire Heineken China at c.US$1bn via share swap (source: Reuters) 17 CR Beer announced FY17 results with core profit above market consensus Mar-18 Source: Company, DBS Vickers

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Company Guide China Resources Beer

CRITICAL FACTORS TO WATCH Company Product Mix by Volume 100% Critical Factors 95% Product mix as a key focus. Amidst flattish industry volume 90% 85% growth, continuous premiumization has helped to improve CR 80% Beer’s product mix and hence drive up ASP and sustain revenue 75% growth. CR Beer commenced to move up the value chain by 70% introducing its mid-end beer brand "Brave the World" (勇闯天 65% 涯) in 2005, and high-end “Snow Stout” (纯生) in 2008 and 60% 2010 2011 2012 2013 2014 2015 2016 2017F “Opera Mask”(脸谱) in 2013. In 2017, it lifted price for its Economy Lager Mid-Priced Lager major nationwide product via updating packaging and recently Source: Euromonitor in 2018 it also launched a flagship premium product “SuperX” ASP Growth under umbrella brand “Brave the World”, targeting at young 9.0% 7.9% customers. Currently, contribution from mid- to high-end beer 8.0% only stands at c.30-40% of sales for CR Beer, as compared 7.0% with Tsingtao's 50% level. CR Beers' average ASP is also c.20% 6.0% 5.0% 5.0% 5.0% lower than Tsingtao's, pointing to ample room for further 4.0% 2.7% product mix improvement. 3.0% 2.3% 2.0% 1.0% Industry volume growth: a critical foundation. China beer 0.0% industry volume has been lackluster, in fact, declining for the FY16A FY17A FY18F FY19F FY20F past three years (-4.5% in 2015 and -4.4% in 2016, -0.7% in Sales Volume Growth 2017). Contributing reasons were soft demand due to anti- 1.2% corruption campaigns, weather reasons, etc. but CR Beer 1.0% 1.0% 0.9% managed to record better-than-industry volume growth during 0.9% 0.9% the same period (-1.3% in 2015, +0.3% in 2016 and +0.9% in 0.8% 2017). Any recovery in industry volume growth trend could 0.6% help CR Beer to perform better. 0.4% 0.3%

0.2% Continuing market expansion the recipe to success. Founded in 0.0% 1994, "Snow" brand is a relatively young brand as compared FY16A FY17A FY18F FY19F FY20F with peers. But it has emerged fast due to its successful market strategy, overtaking Tsingtao's market leadership position since EBIT Margin Expansion (excl. impairment losses) 14.0% 13.1% 2005. In 2008, "Snow" brand overtook Budweiser to become 11.7% the No.1 brand in the world. Continued market expansion has 12.0% 10.8% 10.0% 8.7% fueled CR Beer's success - the group's market share further 7.7% rose to 25.6% in 2016. We believe further market share gains 8.0% 6.9% within the mid-to-high segment could drive the group's market 6.0% share to nearly 30%. 4.0% 2.0% M&A takes CR Beer to new heights. CR Beer has been pursuing 0.0% FY15A FY16A FY17A FY18F FY19F FY20F the M&A path to achieve inorganic growth and clinch the industry leadership position. Domestically, M&As have helped Est. Core Net Margin CR Beer to leverage on the acquired network to push "Snow” 12% brands, improve efficiency by streamlining capacities, and gain 10.2% 10% 8.9% better pricing power through market consolidation. On top of 8.3% launching its own mid- to high-end series of products, the 8% 6.4% group is also keeping an open mind for acquisition of 6% established foreign premium brands, which we think is a crucial 3.8% step for the group to compete with its global peers. 4% 2%

0% FY16A FY17A FY18F FY19F FY20F

Source: Company, DBS Vickers

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Company Guide

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Balance Sheet: Strong financial health to support potential M&A deal. The Leverage & Asset Turnover (x) improving business should greatly contribute to CR Beer’s 0.9 0.50 operating cash flow, while capital expenditure is expected to 0.9 0.40 stay within a manageable range, mainly for maintenance 0.8 purposes in FY18F/19F. CR Beer has paid out c.RMB3.8bn debt 0.30 0.8 in FY17 and reduced its net gearing ratio to 5.6%, which 0.20 reserves great room for the company to finance potential M&A 0.7 deal, if there is any. 0.10 0.7

0.00 0.6 Share Price Drivers: 2016A 2017A 2018F 2019F 2020F Excellent performance of newly launched product. We opine Gross Debt to Equity (LHS) Asset Turnover (RHS) Capital Expenditure that if the newly launched product is more than well-received RMBm among Chinese customers and becomes phenomenally popular, 2,500.0 we might see a better product mix in CR Beer’s sales portfolio, 2,000.0 leading to an increasing sales volume and improving 1,500.0 profitability. 1,000.0

Potential industry volume recovery. China beer industry volume 500.0 has been lackluster, in fact, declining for the past three years (- 0.0 0.9% in 2014, -4.5% in 2015 and -4.4% in 2016). 2016A 2017A 2018F 2019F 2020F Contributing reasons were soft demand due to anti-corruption Capital Expenditure (-) campaigns, weather reasons, etc. but CR Beer managed to ROE 14.0% record better-than-industry volume growth during the same period (+1.0% in 2014, -1.3% in 2015 and +0.3% in 2016). 12.0% Any recovery in industry volume growth trend could help CR 10.0% Beer to perform better. 8.0%

6.0%

Potential future M&As. CR Beer has been pursuing the M&A 4.0% path to achieve inorganic growth and clinch the industry 2.0% leadership position. In the past few years, its share price rallied 0.0% on the group's restructuring to focus on the beer business, as 2016A 2017A 2018F 2019F 2020F well as the acquisition of a 49% stake in CRSB from SAB Miller. Forward PE Band We expect a meaningful renowned brand acquisition to bring (x) the group's business and share price to the next level. 35.7 +2sd: 33.6x 30.7 Key Risks: +1sd: 29x 25.7 Key downside risks include weak performance of CR Beer’s Avg: 24.4x new products, sales volume decline due to bad weather, 20.7 -1sd: 19.9x potential market share loss, as well as intense competition against global peers in the high-end segment. 15.7 -2sd: 15.3x

10.7 Jan-15 Jan-16 Jan-17 Jan-18 Company Background China Resources Beer (CR Beer) is the largest brewer in China, PB Band (x) with sales volume of 11.8m kl (million kiloliters) in year 2017, 5.2 accounting for 25.6% of market share in the country. As at 4.7 end-2017, the group owned 91 breweries across 25 4.2 +2sd: 4.19x provinces, directly administered municipalities and 3.7 +1sd: 3.62x autonomous regions in China, running on production capacity 3.2 of c.22m kl per year. About 90% of the group's beer sales Avg: 3.06x 2.7 volume is contributed by its key brand "Snow" (雪花), which -1sd: 2.49x 2.2 encompasses all segments including low- to high-end series. -2sd: 1.92x 1.7 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17

Source: Company, DBS Vickers

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Company Guide China Resources Beer

FY Dec 2017A 2018F 2019F 2020F Eastern sales volume growth -1.7% -1.2% -0.6% 0.0% Central sales volume growth 2.4% 2.1% 2.0% 1.9% Southern region volume growth 5.0% 4.1% 3.0% 2.2% ASP Increase 2.7% 7.8% 5.0% 5.0%

Segmental Breakdown (RMB m)

FY Dec 2016A 2017A 2018F 2019F 2020F R e venues (RMB m) Eastern region 15,016 15,154 16,207 16,983 17,832 Central region 6,588 6,930 7,636 8,178 8,716 Southern region 7,090 7,648 8,506 9,136 9,794 T otal 28, 694 29, 732 32, 348 34, 297 36, 342 Source: Company, DBS Vickers

Income Statement (RMB m) FY Dec 2016A 2017A 2018F 2019F 2020F Revenue 28,694 29,732 32,348 34,297 36,342 Cost of Goods Sold (19,021) (19,703) (20,880) (21,816) (22,612) Gross Profit 9, 673 10, 029 11, 468 12, 482 13, 731 Other Opng (Exp)/Inc (7,845) (8,085) (8,593) (8,781) (9,080) O pe rating Profit 1, 828 1, 944 2, 875 3, 700 4, 650 Other Non Opg (Exp)/Inc 393 652 676 460 429 Net Interest (Exp)/Inc (18) (41) 39 47 86 Exceptional Gain/(Loss) (464) (739) (735) (513) (521) Pre -tax Profit 1, 739 1, 816 2, 855 3, 695 4, 645 Tax (320) (630) (885) (1,145) (1,440) Minority Interest (790) (11) (20) (25) (32) Ne t Profit 629 1, 175 1, 950 2, 524 3, 173 Core Profit. 1,093 1,914 2,685 3,037 3,694 EBITDA 3,549 3,650 4,591 5,423 6,376 Growth Revenue Gth (%) 2.6 3.6 8.8 6.0 6.0 EBITDA Gth (%) (3.6) 2.8 25.8 18.1 17.6 Opg Profit Gth (%) (6.3) 6.3 47.9 28.7 25.7 Net Profit Gth (%) (5.7) 86.8 66.0 29.4 25.7 M a rgins & Ratio Gross Margins (%) 33.7 33.7 35.5 36.4 37.8 Opg Profit Margin (%) 6.4 6.5 8.9 10.8 12.8 Net Profit Margin (%) 2.2 4.0 6.0 7.4 8.7 ROAE (%) 4.5 6.5 10.2 12.2 14.0 ROA (%) 1.5 2.8 4.8 6.0 7.1 ROCE (%) 5.7 5.1 8.5 10.8 12.6 Div Payout Ratio (%) 41.3 38.7 40.0 40.0 40.0 Net Interest Cover (x) 101.6 47.6 NM NM NM Source: Company, DBS Vickers

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Interim Income Statement (RMB m) FY Dec 2H2015 1H2016 2H2016 1H2017 2H2017 Revenue 12,536 15,213 13,481 15,774 13,958 Cost of Goods Sold (8,967) (10,093) (8,928) (10,492) (9,211) Gross Profit 3, 569 5, 120 4, 553 5, 282 4, 747 Other Oper. (Exp)/Inc (2,797) (3,437) (4,408) (3,562) (4,523) O pe rating Profit 772 1, 683 145 1, 720 224 Net Interest (Exp)/Inc (155) (80) (9) (101) (27) Pre -tax Profit 617 1, 603 136 1, 619 197 Tax (48) (383) 63 (441) (189) Minority Interest (709) (615) (175) (8) (3) Ne t Profit ( 140) 605 24 1, 170 5

Growth Revenue Gth (%) (1.4) 7.5 3.7 3.5 Opg Profit Gth (%) 42.7 (81.2) 2.2 54.5 Net Profit Gth (%) (25.0) N/A 93.4 (79.2)

M a rgins Gross Margins (%) 28.5 33.7 33.8 33.5 34.0 Opg Profit Margins (%) 6.2 11.1 1.1 10.9 1.6 Net Profit Margins (%) (1.1) 4.0 0.2 7.4 0.0 Source: Company, DBS Vickers

Balance Sheet (RMB m) FY Dec 2016A 2017A 2018F 2019F 2020F Net Fixed Assets 20,900 20,449 20,569 20,625 20,453 Invts in Associates & JVs 0 0 0 0 0 Other LT Assets 10,702 10,816 10,798 10,782 10,768 Cash & ST Invts 3,590 2,440 2,178 3,757 6,690 Inventory 6,110 5,826 6,195 6,607 6,849 Debtors 1,253 1,006 1,229 1,303 1,381 Other Current Assets 75 114 114 114 114 T otal Assets 42, 630 40, 651 41, 083 43, 188 46, 254

ST Debt 4,314 2,383 321 93 88 Creditors 16,411 16,605 17,855 18,655 19,336 Other Current Liab 80 207 207 207 207 LT Debt 2,953 1,087 595 172 163 Other LT Liabilities 1,205 1,884 2,135 2,354 2,589 Shareholder’s Equity 17,601 18,421 19,885 21,598 23,730 Minority Interests 66 64 84 109 141 T otal Cap. & Liab. 42, 630 40, 651 41, 083 43, 188 46, 254

Non-Cash Wkg. Capital (9,053) (9,866) (10,524) (10,838) (11,199) Net Cash/(Debt) (3,677) (1,030) 1,261 3,492 6,439 Debtors Turn (avg days) 17.7 13.9 12.6 13.5 13.5 Creditors Turn (avg days) 350.1 334.8 328.2 331.6 332.0 Inventory Turn (avg days) 132.9 121.0 114.5 116.3 117.6 Asset Turnover (x) 0.7 0.7 0.8 0.8 0.8 Current Ratio (x) 0.5 0.5 0.5 0.6 0.8 Quick Ratio (x) 0.2 0.2 0.2 0.3 0.4 Net Debt/Equity (X) 0.2 0.1 CASH CASH CASH Net Debt/Equity ex MI (X) 0.2 0.1 CASH CASH CASH Capex to Debt (%) 21.8 44.5 241.9 762.9 724.1 Z-Score (X) 2.8 3.2 3.2 3.4 3.4 Source: Company, DBS Vickers

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Company Guide China Resources Beer

Cash Flow Statement (RMB m) FY Dec 2016A 2017A 2018F 2019F 2020F

Pre-Tax Profit 1,739 1,816 2,855 3,695 4,645 Dep. & Amort. 1,721 1,706 1,715 1,723 1,726 Tax Paid (769) (630) (885) (1,145) (1,440) (Pft)/ Loss on disposal of FAs (28) 32 2 17 9 Chg in Wkg.Cap. 1,338 401 332 110 149 Other Operating CF 319 659 495 253 227 Ne t Operating CF 4, 320 3, 983 4, 514 4, 652 5, 316 Capital Exp.(net) (1,583) (1,544) (2,217) (2,016) (1,817) Other Investing CF 19 467 480 453 502 Ne t Investing CF ( 1,564) ( 1,077) ( 1,737) ( 1,563) ( 1,314) Div Paid 0 (260) (454) (779) (1,008) Chg in Gross Debt 879 (3,797) (2,554) (652) (13) Capital Issues 8,149 0 0 0 0 Other Financing CF (11,213) 159 (20) (6) (6) Ne t Financing CF ( 2,185) ( 3,898) ( 3,028) ( 1,437) ( 1,027) Chg in Cash 571 (991) (252) 1,651 2,975 Opg CFPS (RMB) 1.04 1.10 1.29 1.40 1.59 Free CFPS (RMB) 0.95 0.75 0.71 0.81 1.08

Source: Company, DBS Vickers

Target Price & Ratings History

HK$ S.No. Date Closing 12-mth Rating Price T arget 35.0 4 Price 33.0 1: 11-Jul-17 HK$18.94 HK$21.66 Buy 31.0 3 2: 22-Aug-17 HK$19.54 HK$21.86 Buy 29.0 1 2 3: 10-Nov-17 HK$23.50 HK$25.46 Buy 27.0 4: 14-Mar-18 HK$33.55 HK$36.80 Buy 25.0 23.0 21.0 19.0

17.0

Jul-17

Jan-18 Jan-18

Jun-17

Oct-17

Feb-18

Sep-17 Apr-17

Dec-17

Nov-17

Mar-17 Mar-18

Aug-17 May-17

Source: DBS Vickers

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Appendix

Breweries Overview (PRC, 2016)

Sales V olume Sales V olume Retail Sales Value Retail Sales Value Company Name (million liter) Market Share (%) (RMB mn) Market Share (%) China Resources Beer 11,681 25.6 98,588 18.3 Tsingtao Brewery 7,849 17.2 86,056 16 Anheuser-Busch InBev 7,397 16.2 91,966 17.1 4,250 9.3 40,454 7.5 Carlsberg 2,286 5.0 30,542 5.7 Henan Jinxing Brewery 1,283 2.8 12,974 2.4 Guangzhou Zhujiang Brewery 1,162 2.5 13,298 2.5 Suntory 509 1.1 5,528 1 Blue Ribbon 327 0.7 6,169 1.1 Heineken 234 0.5 6,817 1.3 Qiandaohu Brewery 166 0.4 1,062 0.2 Kirin 80 0.2 1,932 0.4 Molson Coors Brewing 69 0.2 904 0.2 San Miguel 41 0.1 545 0.1 Asahi 36 0.1 424 0.1 Others 8,259 18.1 141,201 26.2

Total 45,627 100.0 538,461 100 Source: Euromonitor

CR Beer: New experience, New brand story & visual identity

Source: Weibo, Company

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Company Guide China Resources Beer

DBSVHK recommendations are based an Absolute Total Return* Rating system, defined as follows: S TRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame) B U Y (>15% total return over the next 12 months for small caps, >10% for large caps) H O LD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps) FU LLY VALUED (negative total return i.e. > -10% over the next 12 months) S ELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)

Share price appreciation + dividends

Completed Date: 3 Apr 2018 15:29:38 (HKT) Dissemination Date: 3 Apr 2018 20:25:22 (HKT) Sources for all charts and tables are DBS Vickers unless otherwise specified.

GEN ERAL DISCLOSURE/DISCLAIMER

Th is report is prepared by DBS Vickers (Hong Kong) Limited (“DBSV HK”). This report is solely intended for the clients of DBS Bank Ltd., DBS Bank (Hong Kong) Limited (DBS HK), DBSV HK, and DBS Vickers Securities (Singapore) Pte Ltd. (“DBSVS”), its respective connected and associated corporations and affiliates only and no part of thi s document may be (i) copied, photocopied or duplicated i n any form or by any means or (ii) redistributed without the prior written consent of DBSV HK.

The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS Bank Ltd., DBS HK, DBSV HK, DBSVS, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the “DBS Group”) have not conducted due diligence on any of the companies, verified any information or sources or taken into account any other factors which we may consider to be relevant or appropriate in preparing the research . Accordingly, we do not make any representation or warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contain ed in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, wh o should obtain separate independent legal or financial advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communica tion given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group, may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies.

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A N ALYST CERTIFICATION The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that th e views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her compensation was, is, or will be, directly or indirectly, related to specific recommendations or views expressed in the report. The research analyst (s) primarily responsible for the content of this research report, in part or in whole, certifies that he or his associate 1 does not serve as an officer of the issuer or the new listing applicant (which includes in the case of a real estate investment trust, an officer of the management company of the real estate investment trust; and in the case of any other entity, an officer or its equivalent counterparty of the entity wh o is responsible for the management of the issuer or the new listing applicant) and the research analyst(s) primarily responsible for the content of this research report or his associate does not have financial interests2 in relation to an issuer or a new listing applicant that the analyst reviews. DBS Group has procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of research reports. The research analyst(s) responsible for this report operates as part of a s eparate and independent team to the investment banking function of the DBS Group and procedures are in place to ensure that confidential information held by either the research or investment banking function is handled appropriately. There is no direct li nk of DBS Group's compensation to any specific investment banking function of the DBS Group.

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1 An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step -child, of the analyst; (ii) the trustee of a trust of which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person accustomed or obliged to act in accordance with the directions or instructions of the analyst. 2 Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an issuer or a new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or analysis. This term does not include commercial lending conducted at arm's length, or i nvestments in any collective investment scheme other than an issuer or new listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant.

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Company Guide China Resources Beer

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Company Guide

China Resources Beer

U nited Arab This report is provided by DBS Bank Ltd (Company Regn. No. 196800306E) which is an Exempt Financial Adviser as defined Em irates in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. This report is for information purposes only and should not be relied upon or acted on by the recipient or c onsidered as a solicitation or inducement to buy or sell any financial product. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situation, or needs of individual clients. should contact your relationship manager or investment adviser if you need advice on the merits of buying, selling or holding a particular investment. You should note that the information in this report may be out of date and it is not represented or warranted to be accurate, timely or complete. This report or any portion thereof may not be reprinted, sold or redistributed without our written consent. U nited States This report was prepared by DBSVHK. DBSVUSA did not participate in its preparation. The research analyst(s) named on this report are not registered as research analysts with FINRA and are not associated persons of DBSVUSA. The research analyst(s) are not subject to FINRA Rule 2241 restrictions on analyst compensation, communications with a subject company, public appearances and trading securities held by a research analyst. This report is being distributed in the United States by DBSVUSA, which accepts responsibility for its contents. This report may only be distributed to Major U.S. Institutional Investors (as defined in SEC Rule 15a-6) and to such other institutional investors and qualified persons as DBSVUSA may authorize. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein shou ld contact DBSVUSA directly and not its affiliate. O ther In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, j urisdictions professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions. D BS Vickers (Hong Kong) Limited 18th Floor Man Yee building, 68 Des Voeux Road Central, Central, Hong Kong Tel: (852) 2820-4888, Fax: (852) 2868-1523 Company Regn. No. 31758

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Company Guide China Resources Beer

D BS Regional Research Offices

H O NG KONG MA LAYSIA S INGAPORE D BS Vickers (Hong Kong) Ltd A llianceDBS Research Sdn Bhd D BS Bank Ltd C o ntact: Carol Wu C o ntact: Wong Ming Tek (128540 U) C o ntact: Janice Chua 18th Floor Man Yee Building 19th Floor, Menara Multi-Purpose, 12 Marina Boulevard, 68 Des Voeux Road Central Capital Square, Marina Bay Financial Centre Tower 3 Central, Hong Kong 8 Jalan Munshi Abdullah 50100 Singapore 018982 Tel: 852 2820 4888 Kuala Lumpur, Malaysia. Tel: 65 6878 8888 Fax: 852 2863 1523 Tel.: 603 2604 3333 Fax: 65 65353 418 e-mail: [email protected] Fax: 603 2604 3921 e-mail: [email protected] Participant of the Stock Exchange of Hong Kong Ltd e-mail: [email protected] Company Regn. No. 196800306E

I N DONESIA TH AILAND PT DBS Vickers Sekuritas (Indonesia) D BS Vickers Securities (Thailand) Co Ltd C o ntact: Maynard Priajaya Arif C o ntact: Chanpen Sirithanarattanakul DBS Bank Tower 989 Siam Piwat Tower Building, Ciputra World 1, 32/F 9th, 14th-15th Floor Jl. Prof. Dr. Satrio Kav. 3-5 Rama 1 Road, Pathumwan, Jakarta 12940, Indonesia Bangkok Thailand 10330 Tel: 62 21 3003 4900 Tel. 66 2 857 7831 Fax: 6221 3003 4943 Fax: 66 2 658 1269 e-mail: [email protected] e-mail: [email protected] Company Regn. No 0105539127012 Securities and Exchange Commission, Thailand

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