2019 Interim Results Beat Expectations, Maintain "Buy"

股

票

研 [Table_Title] Kevin Guo 郭勇 Company Report: ENN Energy (02688 HK)

究 (86755) 2397 6671 EquityResearch 公司报告：新奥能源 (02688 HK) [email protected]

27 August 2019 [Table_Summary] 2019 Interim Results Beat Expectations, Maintain "Buy"

2019年中期业绩超出市场预期，维持“买入”评级公

[Table_Rank] 司  The 2019 interim results of the Company were higher than market Rating: Buy Maintained 报 consensus and our expectations. Total revenue of the Company increased 33.2% yoy to RMB35.34 billion, and net profit attributable to shareholders 告评级：买入 (维持)

increased 88.7% yoy to RMB3.36 billion. CompanyReport  Maintain gas sales assumptions unchanged. The Company expects total 6[Table_Price]-18m TP 目标价 : HK$102.00 sales of natural gas of the Company to increase by 15%-20% in 2019. We Revised from 原目标价: HK$91.50 expect China’s natural gas consumption to benefit from the adjustment in energy consumption structure and environmental protection pressure in the Share price 股价: HK$83.050

long term. ENN’s sale of natural gas will continue to benefit from a favorable 告

policy environment and the Company’s growing city-gas projects.

证 Stock performance 报

 Revise down gas dollar margin of the Company. The profitability of gas 股价表现券 st

究 sales was seriously eroded in the 1 half of 2019 due to higher procurement 20.0

[ Table_QuotePic% of return]

研 cost of gas. We expect gas dollar margin of the Company to improve in the 15.0

研 nd 2 half of 2019. 10.0 究 5.0  券 Maintain connection service revenue assumptions unchanged. The 报 0.0

Company plans to connect 2.3-2.4 million new residential customers in 2019. (5.0) 证

告 (10.0) EquityResearch Report  Revise up TP of the Company to HK$ 102.00 and maintain "Buy". (15.0)

 公司 2019 年中期业绩超出市场一致预期和我们的估计。公司收入同比增长 33.2%至人民 (20.0)

币 353.4 亿元，股东净利增长 88.7%至人民币 33.6 亿元。 (25.0) (30.0)

[Tab  维持天然气销量假设不变。公司预计 2019 年的天然气销量将增长 15%-20%。我们预计中 Aug-18 Nov-18 Feb-19 May-19 Aug-19 le_I 国的天然气消费将长期受益于能源消费结构调整和环保压力。新奥的天然气销售将继续受 HSI Index ENN Energy 清益于有利的政策环境和公司增加的城市燃气项目。 nfo1 洁  下调公司销气价差假设。由于更高的天然气采购成本，公司销售天然气的盈利能力在 2019 ] Change[Table_PriceChange] in Share Price 1 M 3 M 1 Y 能年上半年被严重侵蚀。我们预计公司的销气价差在 2019 年下半年将改善。

股价变动 1 个月 3 个月 1 年

Natural Gas Natural - 源维持接驳收入假设不变。公司预计在年新接驳万居民用户。  2019 230-240 Abs. % 4.6 21.6 12.5 行绝对变动 %  上调公司目标价至 102.00 港元，维持“买入”评级。 Rel. % to HS Index 14.2 27.7 19.7 业相对恒指变动 % - Avg. Share price(HK$) 81.9 77.5 73.1 天平均股价（港元）然 Source: Bloomberg, Guotai Junan International. 气

CleanSector Energy

[Tab le_I Y[Table_ear End Turnover Net Profit EPS EPS PER BPS PBR DPS Yield ROE 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 nfo2 12/31 (RMB m) (RMB m) (RMB) (△ %) (x) (RMB) (x) (RMB) (%) (%) ] 2017A 48,269 2,802 2.590 30.2 26.7 18.686 3.7 0.900 1.3 17.6 新 2018A 60,698 2,818 2.560 (1.2) 28.5 23.239 3.1 1.040 1.4 14.7 2019F 74,001 5,483 4.987 94.8 14.7 27.358 2.7 1.247 1.7 23.4 奥 2020F 85,977 6,088 5.536 11.0 13.2 31.927 2.3 1.384 1.9 21.9 能 2021F 99,590 6,883 6.259 13.1 11.7 37.080 2.0 1.565 2.1 21.1 源 [Table_BaseData]Shares in issue (m) 总股数 (m) 1,099.6 Major shareholder 大股东 Mr Wang 30.1% Market cap. (HK$ m) 市值 (HK$ m) 91,321.8 Free float (%) 自由流通比率 (%) 69.9%

3 month average vol. 3 个月平均成交股数 (‘000) 2,304.4 FY19 Net gearing (%) FY19 净负债/股东资金 (%) 14.5 ENN Energy ENN (02688 HK) 52 Weeks high/low (HK$) 52 周高/低 (HK$) 88.000 / 55.250 FY19 Est. NAV (HK$) FY19 每股估值（港元） 98.6

Source: the Company, Guotai Junan International.

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[Table_PageHeader] ENN Energy (02688 HK)

The 2019 interim results of ENN Energy ("ENN" or the "Company") were higher than market consensus and our

expectations. Total revenue of the Company increased 33.2% yoy to RMB35.34 ] billion1 r , a andM t neth profitg i R attributable_ e l b toa T [

shareholders increased 88.7% yoy to RMB3.36 billion. The significant growth in profit was mainly attributed to fair value change

of financial assets, more sale of gas and fast growth of integrated energy business. Total sale of gas increased by 19.4% yoy to 13.20 billion m3, and revenue contributed by connection services decreased by 29.3% yoy to RMB3.62 billion. Natural gas consumed by residential customers increased by 16.9% yoy to 1.89 billion m3; natural gas consumed by industrial/commercial customers increased by 16.4% yoy to 7.29 billion m3; and natural gas consumed by gas refilling stations declined by 3.3% yoy 3 3 to 0.59 billion m . Total wholesale of gas increased by 33.6% yoy to 3.44 billion m as the Company continued to expand the 27 August2019 trade of LNG. The Company added about 1.29 million residential customers and 12,100 industrial/ commercial customers in 1H19 and had a total of 19.8 million residential customers and 133,209 industrial/ commercial customers. The gross margin of the Company was 15.8% in 1H19, 1.8 ppts lower comparing to the same period last year due to increased sale of gas.

Maintain gas sales assumption unchanged. The Company expects total sales of natural gas of the Company to increase by 15%-20% in 2019. ENN’s sale of natural gas will continue to benefit from a favorable policy environment and its growing city-gas projects. The need to adjust energy consumption structure will drive natural gas consumption in the long term. Natural gas currently only accounts for around 6.5% of total energy consumption of China, which is much lower than the 2020 10% target and the 15%-20% target in the long term. According to the Natural Development and Reform Commission (NDRC), 3

China’s natural gas consumption increased by 10.8% yoy to 149.3 billion m in the first half of] 2019.2 r Althougha M t h theg i growthR _ e speedl b a T [

was a bit lower compared to the same period last year due to the warm winter of 2018, it was still maintained at a relatively high speed. Natural gas consumed by all sectors maintained fast growth in the 1st half of 2019 and is expected to accelerate in the 2nd half of 2019. We also expect natural gas consumption to maintain fast growth speed in the next 3-5 years. The NDRC and 13 central authorities jointly issued "the Opinions on Accelerating the Use of Natural Gas" in 2017, which planned to develop natural gas into one of the major types of energy in China’s modern clean energy system, and maintain its target unchanged till now. On the other hand, environmental protection pressure will also drive natural gas consumption. In March 2017, the Ministry of Environmental Protection of the People's Republic of China, the NDRC, the Ministry of Finance and governments of six

relevant provinces and municipalities issued the "2017 Work Plan on the Prevention and Control of Atmosphere Pollution in the

Beijing, Tianjin and Hebei Areas and Surrounding Regions", clearly specifying the 2+26 key areas for implementing "coal-to-gas conversion". All the favorable policies for natural gas consumption and the setting target of governments remain unchanged; we

expect "coal-to-gas conversion" and similar policies to continue to strongly drive gas consumption in China. As the Company is (02688 HK) expanding its operating area, city-gas projects run by the Company are still growing. The Company acquired 17 new city-gas projects in 1H19 and plans to acquire more than 20 new projects and 30 new concessions nearby existing projects in 2019.

New projects and connections will also bring more gas sales. We expect the natural gas supply situation to remain stable in the 新奥能源 2nd half of 2019 due to more imported gas. We expect natural gas consumed by residential customers to grow by 20%-25% in 2019, and natural gas consumed by industrial/ commercial customers is expected to grow at a speed of 15%-20%. We maintain

gas sales assumption unchanged. ENN Energy

Figure-1: Total Retail Sales of Gas Figure-2: Connection Fees of ENN Energy

million cubic million RMB metres total retail sale of gas yoy connection fees yoy 35,000 45% 7,000 35%

40% 30,000 6,000 30% 35% 25% 25,000 5,000 30% 20% 20,000 25% 4,000 15% 15,000 20% 3,000 10% 15% 10,000 2,000 10% 5% 5,000 1,000

5% 0%

0 0% 0 -5% 2009 2011 2013 2015 2017 2019F 2021F 2009 2011 2013 2015 2017 2019F 2021F

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

Revise down gas dollar margin of the Company. Gas dollar margin of the Company was badly eroded in the first half of Company 2019 due to higher procurement costs. The merge of citizen and non-citizen city-gate price led to higher gas procurement prices and the Company only passed part of the price hike to downstream customers. Besides, upstream suppliers raised gas See the last page for disclaimer Page 2 of 6 [Table_PageHeader] ENN Energy (02688 HK)

price during heating seasons and during summer as well, which also led to higher gas procurement costs. As a result, gas

dollar margin was negatively impacted and was lower compared to the same period last ] year1 .r Wea expectM t h gasg i dollarR _ margine l b of a T [

the Company to improve in the 2nd half of 2019. We expect natural gas supply situation to improve in the second half of 2019 nd due to more sufficient supply. As a result, procurement cost of natural gas is expected to be more stable in the 2 half of 2019. Besides, the Company will continue to negotiate with its customers and pass more proportion of the price hike to them. We revise down annual average gas dollar margin considering the low result in the 1st half of 2019, but expect gas dollar margin of the Company to improve in the 2nd half of 2019. We expect gas dollar margin of gas distribution companies to be more stable

under the new price mechanism. 27 August2019

Maintain connection service revenue assumptions unchanged. The Company plans to connect about 2.3-2.4 million new residential customers in 2019. The Company connected 1.29 million new residential customers in 1H19, which was in line with its plan. The Company is expected to continue to add more customers as the current gas penetration rate remains low and more gas projects are being acquired. Besides, more "coal to gas" projects stimulated by local governments will also bring

more customers. Although the push forward of "coal to gas" transition will continue to slow down in 2019, we expect it to continue to bring large numbers of new customers. On the other hand, the Company still holds great growth potential for industrial customers in its existing areas of operation. We expect the Company to continue to develop more industrial customers at a fast speed. Hence, we expect revenue contributed by connection services to remain flat in 2019. We maintain connection service revenue assumptions unchanged.

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

Revise up TP to HK$102.00 and maintain "Buy". ENN Energy is one of the largest gas distributors in China and operates gas distribution business across China. We expect the Company to continue to acquire new gas distribution projects and expand into new areas. We expect total sale of piped gas of the Company to benefit from the restructuring of the energy structure in China and continue to maintain fast growth over the next few years. We maintain gas sales assumptions unchanged, and the Company expects total sale of piped gas to increase by more than 15%-20% in 2019. We revise down annual average gas dollar margin considering the low result in the 1st half of 2019, but expect gas dollar margin of the Company to improve in the 2nd half of 2019. The Company expects connection services to be flat in 2019, and energy trading

business to maintain fast growth. The Company is determined to be an integrated energy supplier that also supplies electricity,

air conditioning services and heating services, possessing synergistic effects with its gas distribution business. The Company has already operated several integrated energy projects, and this business is expected to accelerate greatly in 2019. Revenue

contributed from integrated energy business grew fast in 1H19 and we expect it to maintain fast growth in 2H19. We revise up (02688 HK)

EPS estimations of the Company due to gains from fair value change of financial assets and fast growth of integrated business and value-added services. We believe that market PE valuation level for gas distribution companies will rise due to

bright prospects of city-gas sectors. As a result, we revise up our target price to HK$102.00, which represents 18.0x FY19 PE, 新奥能源 and maintain "Buy".

ENN Energy

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Company

See the last page for disclaimer Page 3 of 6 [Table_PageHeader] ENN Energy (02688 HK)

Table-1: Peers Comparison PE (fiscal year) PB (fiscal year) ROE(%)

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

Company Stock Code Currency Last price 18A 19F 20F 21F 18A 19F 20F 21F 19F Large Cap. Gas Distributors

Hong Kong & China Gas 3 HK HK$ 15.52 28.2 31.4 29.3 28.0 4.2 4.0 3.9 3.7 12.7

Kunlun Energy Co Ltd 135 HK HK$ 6.48 9.5 7.7 6.9 6.3 1.1 1.0 0.9 0.8 13.8

Beijing Enterprises Hldgs 392 HK HK$ 36.80 6.1 5.7 5.1 4.7 0.7 0.6 0.5 0.5 10.9

China Gas Holdings Ltd 384 HK HK$ 30.90 25.1 19.0 16.6 13.8 5.4 4.6 3.7 3.1 25.8

Enn Energy Holdings Ltd 2688 HK HK$ 83.05 27.4 16.9 14.8 12.8 3.8 3.3 2.8 2.5 21.1 27 August2019

China Resources Gas Group Lt 1193 HK HK$ 36.50 17.9 16.0 14.4 12.8 3.4 2.9 2.6 2.3 19.6

Towngas China Co Ltd 1083 HK HK$ 5.10 11.6 9.8 9.1 8.4 0.9 0.8 0.8 0.7 8.8

Simple Average 18.0 15.2 13.8 12.4 2.8 2.5 2.2 2.0 16.1 Weighted Average 20.0 14.9 13.2 11.4 3.5 3.0 2.6 2.2 20.2

Small Cap. Gas Distributors

China Oil And Gas Group Ltd 603 HK HK$ 0.30 5.2 n.a. n.a. n.a. 0.5 n.a. n.a. n.a. n.a.

China Tian Lun Gas Holdings 1600 HK HK$ 8.50 12.4 8.4 6.6 5.6 2.3 1.8 1.5 1.3 25.2

Zhongyu Gas Holdings Ltd 3633 HK HK$ 8.08 33.0 n.a. n.a. n.a. 5.2 n.a. n.a. n.a. n.a.

Binhai Investment Company Lt 2886 HK HK$ 1.20 13.5 6.3 4.3 3.8 1.5 0.9 0.8 0.7 15.9

Tianjin Jinran Public Util-H 1265 HK HK$ 0.74 31.2 n.a. n.a. n.a. 0.7 n.a. n.a. n.a. n.a.

Chinese People Holdings Co 681 HK HK$ 0.05 1.6 2.3 n.a. n.a. 0.2] 2 0.2r a M n.a.t h g n.a.i R _ e l 8.3b a T [

Simple Average 16.1 5.7 5.4 4.7 1.7 1.0 1.2 1.0 16.5 Weighted Average 18.6 6.2 4.5 3.9 2.4 0.9 0.9 0.7 16.2

A-share Gas Distributors

Guanghui Energy Co Ltd-A 600256 CH CNY 3.31 11.8 10.0 8.2 7.1 1.5 1.4 1.2 1.1 13.2

Shenergy Company Limited-A 600642 CH CNY 5.66 14.1 12.4 10.4 9.4 1.0 0.9 0.9 0.8 7.3

Shenzhen Gas Corp Ltd-A 601139 CH CNY 6.08 16.9 15.4 13.1 12.4 1.9 1.8 1.6 1.5 11.3

Shaan Xi Provincial Natura-A 002267 CH CNY 6.98 19.2 17.9 15.2 12.9 1.4 1.3 1.2 1.2 6.9

Changchun Gas Co Ltd -A 600333 CH CNY 5.20 n.a. n.a. n.a. n.a. 1.5 n.a. n.a. n.a. n.a.

Sichuan Datong Gas Develop-A 000593 CH CNY 6.15 n.a. n.a. n.a. n.a. 2.4 n.a. n.a. n.a. n.a.

Simple Average 15.5 13.9 11.7 10.4 1.6 1.3 1.2 1.1 9.7 Weighted Average 16.6 15.0 12.7 11.5 1.5 1.4 1.3 1.2 8.8

Source: Bloomberg, Guotai Junan International. (02688 HK)

新奥能源 ENN Energy

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Company

See the last page for disclaimer Page 4 of 6 [Table_PageHeader] ENN Energy (02688 HK)

Financial Statements and Ratios

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

Income Statement Balance Sheet

Year end 31 Dec (RMB m) 2017A 2018A 2019F 2020F 2021F Year end 31 Dec (RMB m) 2017A 2018A 2019F 2020F 2021F

Total Revenue 48,269 60,698 74,001 85,977 99,590 PPE 25,490 31,073 38,128 45,058 51,837

COGS (39,930) (51,188) (62,554) (73,138) (85,130) Prepaid lease payments 1,262 1,401 1,471 1,545 1,622

Gross profit 8,339 9,510 11,446 12,839 14,460 Intangible assets 1,873 5,285 5,337 5,401 5,476

Distribution and Selling expenses (635) (790) (888) (989) (1,095) Interests in associates 1,505 3,049 3,201 3,362 3,530

Administrative expenses (2,377) (2,673) (3,034) (3,353) (3,685) Interests in joint ventures 3,929 3,620 3,910 4,222 4,560 27 August2019 other gains and losses (219) (685) 1,304 1,206 1,193 Deferred tax assets 941 1,159 1,275 1,402 1,543

Operating Profit 5,108 5,362 8,828 9,704 10,872 Others 6,584 1,831 286 309 334

Share of results of associates 129 275 325 357 393 Total Non-current Assets 41,589 52,375 57,484 64,593 71,702 Share of results of JV 505 601 649 701 757 Finance costs (552) (637) (663) (741) (830) Cash & Cash Equivalents 7,972 7,923 8,880 8,598 8,565

Profit Before Tax 5,190 5,601 9,139 10,021 11,192 Inventories 744 1,331 1,480 1,634 1,793

Income Tax (1,517) (1,783) (2,285) (2,505) (2,798) Trade and other receivables 4,423 6,068 8,560 9,250 10,747

profit After Tax 3,673 3,818 6,854 7,516 8,394 Others 2,838 2,378 1,675 1,776 1,882

Non-controlling Interest (871) (1,000) (1,371) (1,428) (1,511) Total Current Assets 17,626 21,539 22,131 23,616 25,568

Shareholders' Profit / Loss 2,802 2,818 5,483 6,088 6,883 Total Assets 59,215 73,914 79,615 88,210 97,270

Basic EPS 2.590 2.560 4.987 5.536 6.259

Trade and other payables 11,217 7,103 8,140 8,770 9,461

] 2 r a M t h g i R _ e l b a T [ Amounts due to customers 2,134 0 0 0 0 Amounts due to JV 1,677 1,693 1,862 2,049 2,253

[Table_CashFlowStatement] Cash Flow Statement Taxation payables 982 782 845 912 985

Year end 31 Dec (RMB m) 2017A 2018A 2019F 2020F 2021F Bank loans within one year 1,737 8,621 5,918 6,528 5,818

Profit before tax 5,190 5,601 9,139 10,021 11,192 Others 7,858 3,885 3,792 4,102 4,441

Results from JV & associates (634) (876) (974) (1,058) (1,150) Total Current Liabilities 25,605 33,017 31,257 33,702 34,981

Income tax (1,517) (1,783) (2,285) (2,505) (2,798)

Adjust for depre.&amort. 990 1,052 1,272 1,508 1,807 Bank loans after one year 523 2,101 2,664 3,095 3,585

Change in WC 634 (9,338) 215 (935) (1,071) Corporate bond 4,860 2,491 3,986 4,384 5,699 Convertible bonds 0 0 0 0 0

Others 552 637 663 741 830

Cash from Operating Activities 5,215 (4,707) 8,030 7,771 8,811 Deferred tax liabilities 428 1,001 1,081 1,168 1,261

Deferred income 3,185 520 546 573 602

Dividend from JV & associate 164 208 227 246 266 Total Non-current Liabilities 13,393 15,343 18,274 19,400 21,514 (02688 HK) Purchase of PPE (3,810) (6,001) (8,100) (8,205) (8,345)

Investment in JV & associate (380) (1,235) (442) (473) (506) Total Liabilities 38,998 48,360 49,531 53,102 56,495

Others 359 371 384 397 411 Total Shareholders' Equity 16,952 21,385 25,498 30,063 35,225 新奥能源 Cash from Investing Activities (3,666) (6,657) (7,931) (8,035) (8,174) Minority Interest 3,265 4,169 4,586 5,044 5,549

Total Equity 20,217 25,554 30,083 35,108 40,774

Proceeds from issuance of bonds (141) 125 1,495 399 1,315

Net cash flow from borrowings (1,881) 8,462 (2,140) 1,041 (220) [Table_FinancialRatio] Financial Ratios ENN Energy Interest paid (552) (637) (663) (741) (830) Dividend paid (1,751) (1,983) (2,277) (2,501) (2,778) 2017A 2018A 2019F 2020F 2021F

Others 3,586 5,348 4,444 1,784 1,843

Cash from Financing Activities (739) 11,315 858 (18) (670) Gross margin 17.3% 15.7% 15.5% 14.9% 14.5%

Net Changes in Cash 809 (49) 957 (282) (33) Net margin 1.8% 1.6% 1.9% 1.7% 1.5%

Cash at Beg of Year 7,163 7,972 7,923 8,880 8,598 ROE 17.6% 14.7% 23.4% 21.9% 21.1%

Foreign exchange rate changes 0 0 0 0 0 ROA 6.2% 5.2% 8.6% 8.5% 8.6%

Cash at End of Year 7,972 7,923 8,880 8,598 8,565 Free CF 868 -12,107 -685 -1,088 -231

Net gearing -5.0% 24.7% 14.5% 18.0% 18.6%

Source: the Company, Guotai Junan International.

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Company

See the last page for disclaimer Page 5 of 6 [Table_PageHeader] ENN Energy (02688 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.

Neutral 中性 Relative Performance is -5% to 5%; 27 August2019 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.

[DISCLOSURETable_DISCLOSUREOFINTERESTS OF INTERESTS ] (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 KAISA GROUP (01638 HK),GUOTAI JUNAN I (01788 HK),JXR (01951 HK),BANK OF GANSU (02139 HK),JINSHANG BANK (02558 HK),ZHONGLIANG HLDG (02772 HK),BINHAI INVESTMENT (02886 HK),CAM SCSMALLCAP (03157 HK),HAITIANTIAN (08227 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 (02688 HK) 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 Report.

(6) Guotai Junan and its group companies have not employed an individual serving as an officer of the issuer mentioned in this Research 新奥能源 Report. There is no officer of the issuer mentioned in this Research Report associated with Guotai Junan and its group companies.

ENN Energy 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

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