6 March 2017 Asia Pacific/ Equity Research Household Durables Electronics Group Co.,

Ltd. (1169.HK / 1169 HK) Rating (from NEUTRAL) OUTPERFORM Price (02-Mar-17, HK$) 14.70 UPGRADE RATING Target price (HK$) (from 13.50) 18.20 Upside/downside (%) 23.8

Mkt cap (HK$/US$ mn) 41,044 / 5,287 Upgrade to OUTPERFORM on better outlook + Enterprise value (Rmb mn) 26,005 Number of shares (mn) 2,792 cheap valuations Free float (%) 43.8 52-wk price range (HK$) 15.02-11.04 ■ We upgrade Haier to OUTPERFORM on: (1) strong sales, ADTO-6M (US$ mn) 5.8 driven by mix upgrade and home appliance industry recovery; (2) improving Target price is for 12 months. ICS earnings outlook on channel restructuring and operating leverage; (3) Research Analysts accelerating logistics sales on strengthened relationship with Alibaba; and (4) Raymond Ching 852 2101 7852 attractive valuation plus stronger EPS growth of 16%/12% in 2017E/18E vs [email protected] flat in 2016E. Our forecasts are 6%/4% above consensus for 2017/18. Carey Shi 852 2101 7729 ■ Mix upgrade and strong market expected to drive product sales. We see [email protected] accelerating product sales on stronger industry demand in 2017 after the recent industry price hike, the delayed positive impact from the strong property cycle in 2016 and rising replacement demand. While the potential property slowdown may affect industry sales mainly in 2018 (on ~9 months’ delay impact), we see it largely offset by the replacement cycle for products that were bought between the 2008 and 2013 government subsidy programmes. Haier is also more aggressive in launching gas heat water heaters and front load washing machines at higher selling prices to gain market share and lift ASP. ■ We expect integrated channel service (ICS) sales to accelerate to 10% from flat in 2016 on: (1) stronger market demand and channel reform bearing fruit in 1H16 and (2) faster logistics sales (14% of ICS and 10% of group) with stronger cooperation with Alibaba after it transfers stakes in Jan-2017. We expect ICS margin to improve on efficiency enhancement and scale increase. ■ Cheap valuation with better earnings outlook. Valuation looks cheap at 11x 2017E/18E P/E, below its historical average 13x P/E. We raise our earnings by 4%/6% in 2017/18E and lift our TP to HK$18.2 (from HK$13.5) based on SOTP. We assign 15x for its manufacturing business, 10x for the ICS business, and 20x for the logistics business.

Share price performance Financial and valuation metrics

Year 12/15A 12/16E 12/17E 12/18E Revenue (Rmb mn) 62,826.1 62,972.7 69,440.9 75,044.3 EBITDA (Rmb mn) 3,398.8 3,492.6 4,032.8 4,510.1 EBIT (Rmb mn) 3,139.5 3,246.6 3,761.6 4,217.1 Net profit (Rmb mn) 2,703.0 2,728.7 3,130.8 3,503.3 EPS (CS adj.) (Rmb) 0.97 0.97 1.13 1.26 Change from previous EPS (%) n.a. (0.7) 5.3 7.1 Consensus EPS (Rmb) n.a. 0.98 1.07 1.21 EPS growth (%) 8.2 (0.2) 16.2 11.9 The price relative chart measures performance against the P/E (x) 13.5 13.5 11.6 10.4 MSCI CHINA F IDX which closed at 6,635.57 on 02/03/17. Dividend yield (%) 0.8 0.9 1.0 1.2 On 02/03/17 the spot exchange rate was HK$7.76/US$1 EV/EBITDA (x) 8.1 7.5 6.1 5.1

Performance 1M 3M 12M P/B (x) 2.43 2.11 1.81 1.57 Absolute (%) 7.3 10.5 22.5 ROE (%) 20.7 17.0 16.8 16.2 Relative (%) 3.7 3.1 0.7 Net debt/equity (%) Net Cash Net Cash Net Cash Net Cash

Source: Company data, Thomson Reuters, Credit Suisse estimates

DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

6 March 2017

Focus charts and tables

Figure 1: Trading at 11x P/E, below historical Figure 2: We expect its earnings and revenue to average; earnings growth drives re-rating pick up in 2017/18E from 2016

(Rmbmn) (%) PE x % 120,000 25 50 25 44.5 20 90,000 40 20 15

10 20.2 30 15 60,000 20.4 20.1 5 20 10 15.1 0 12.2 30,000 10.5 10 5 -5 1.0 0 -10 0 0 2012 2013 2014 2015E 2016E 2017E 2018E 2011 2012 2013 2014 2015 2016 2017 2018 Net revenue Net revenue YoY chg - RHS Net profit YoY chg - RHS earnings growth(LHS) PE (RHS)

Source: Bloomberg, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Figure 3: Positive property sales in 2016 should Figure 4: We expect replacement needs to increase drive solid market growth in 2017 but negative to from 2017 as sales during government subsidies 2018 programmes should enter into replacement cycle

9,000 20.0% Rmb 100 mn Government 25.0% 22.5% 8,000 subsidies 15.0% 7,000 20.0% 17.3%

15.0% 6,000 10.0% 10.1% 5,000 10.0% 6.5% 5.0% 5.4% 4,000 5.0% 1.2% 3,000 0.0% 0.0% 2,000 -5.0% -3.0% -5.0% -5.0% 1,000 -7.6% -10.0% 0 -10.0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017E 2018E Market size (LHS) Growth YoY(RHS)

Source: CEIC, Credit Suisse estimates Source: CEIC, Credit Suisse estimates, CMM, IOL

Figure 5: We expect market growth to pick up in 2017, driven by ASP increase, rising replacement Figure 6: We use SOTP to value the company at needs and positive property growth in 2016 HK$18.2 Volume Market Replacement New ASP change + = growth Category PE multiple Valuation (HKD) needs demand Water heater 15x 8.6 2014 1.1% 0.4% 0.5% 2% Washing machine 15x 3.8 2015 1.8% -0.2% -1.0% 1% ICS (exclude logistics) 10x 4.6 2016 2.2% 0.7% 0.5% 3% Logistics 20x 1.2 2017E 2.7% 1.3% 4.0% 8% 18.2 2018E 2.3% -0.8% 2.5% 4%

Source: Company data, Credit Suisse estimates Source: Credit Suisse estimates

Haier Electronics Group Co., Ltd. (1169.HK / 1169 HK) 2 6 March 2017

Haier Electronics Group Co., Ltd. (1169.HK / 1169 HK) Price (02 Mar 2017): HK$14.70; Rating: (from NEUTRAL) OUTPERFORM; Target Price: (from HK$13.50) HK$18.20; Analyst: Raymond Ching Income Statement (Rmb mn) 12/15A 12/16E 12/17E 12/18E Company Background Sales revenue 62,826 62,973 69,441 75,044 Haier Electronics Group is a home appliances manufacturer Cost of goods sold 52,833 52,687 57,862 62,492 covering washing machines, water heaters, and integrated channel EBITDA 3,399 3,493 4,033 4,510 services. It is a subsidiary of Haier (600690.SS). EBIT 3,140 3,247 3,762 4,217 Net interest expense/(inc.) (193) (234) (287) (314) Blue/Grey Sky Scenario Recurring PBT 3,344 3,480 4,048 4,531 Profit after tax 2,734 2,784 3,239 3,625 Reported net profit 2,703 2,729 3,131 3,503 Net profit (Credit Suisse) 2,703 2,729 3,131 3,503 Balance Sheet (Rmb mn) 12/15A 12/16E 12/17E 12/18E Cash & cash equivalents 10,244 11,410 11,796 13,669 Current receivables 4,971 5,381 5,844 6,286 Inventories 4,399 4,261 4,616 5,143 Other current assets 3,673 3,564 3,737 4,051 Current assets 23,288 24,616 25,993 29,150 Property, plant & equip. 3,322 4,221 5,212 6,283 Investments 1,611 1,611 1,611 1,611 Intangibles 531 527 522 516 Other non-current assets 1,545 1,665 1,792 1,926 Total assets 30,297 32,640 35,130 39,486 Current liabilities 13,002 12,890 13,568 14,665 Total liabilities 14,575 14,468 14,047 15,153 Shareholders' equity 14,788 17,237 20,041 23,168 Minority interests 879 935 1,043 1,165 Total liabilities & equity 30,297 32,640 35,130 39,486 Cash Flow (Rmb mn) 12/15A 12/16E 12/17E 12/18E EBIT 3,140 3,247 3,762 4,217 Net interest 0 0 0 0 Tax paid (582) (766) (887) (991) Working capital (295) (291) (328) (204) Our Blue Sky Scenario (HK$) (from 16.00) 20.00 Other cash & non-cash items 267 560 582 633 TP upside – HKD20 – Our upside scenario assumes 2017 EPS to Operating cash flow 2,530 2,750 3,128 3,655 be 5% higher than our base case driven by stronger ICS Capex (1,306) (1,191) (1,307) (1,408) performance and margin expansion. Our TP is based on +1 Free cash flow to the firm 1,224 1,559 1,821 2,248 standard deviation above industry average multiple Investing cash flow (2,373) (1,186) (1,302) (1,403) Equity raised 1 1 0 0 Our Grey Sky Scenario (HK$) (from 11.00) 12.00 Dividends paid (253) (281) (327) (376) TP downside – HKD12 – Our downside scenario assumes 2017 Financing cash flow (402) (399) (1,439) (380) EPS to be 5% lower than our base case on worse than expected Total cash flow (245) 1,165 387 1,873 ICS performance and weaker white good manufacturing sales. Our Adjustments 26 0 0 0 TP is based on -1 standard deviation below industry average Net change in cash (219) 1,165 387 1,873 Per share 12/15A 12/16E 12/17E 12/18E Share price performance Shares (wtd avg.) (mn) 2,841 2,852 2,780 2,780 EPS (Credit Suisse) (Rmb) 0.97 0.97 1.13 1.26 DPS (Rmb) 0.10 0.12 0.14 0.16 Operating CFPS (Rmb) 0.89 0.96 1.13 1.31 Earnings 12/15A 12/16E 12/17E 12/18E Growth (%) Sales revenue (6.4) 0.2 10.3 8.1 EBIT 4.4 3.4 15.9 12.1 EPS 8.2 (0.2) 16.2 11.9 Margins (%) EBITDA 5.4 5.5 5.8 6.0 EBIT 5.0 5.2 5.4 5.6 Valuation (x) 12/15A 12/16E 12/17E 12/18E P/E 13.5 13.5 11.6 10.4 P/B 2.43 2.11 1.81 1.57 The price relative chart measures performance against the MSCI CHINA F IDX Dividend yield (%) 0.8 0.9 1.0 1.2 which closed at 6,635.57 on 02-Mar-2017 EV/sales 0.4 0.4 0.4 0.3 On 02-Mar-2017 the spot exchange rate was HK$7.76/US$1 EV/EBITDA 8.1 7.5 6.1 5.1 EV/EBIT 8.7 8.1 6.6 5.4 ROE analysis (%) 12/15A 12/16E 12/17E 12/18E ROE 20.7 17.0 16.8 16.2 ROIC 53.0 35.4 34.7 33.5 Credit ratios 12/15A 12/16E 12/17E 12/18E Net debt/equity (%) (57.4) (56.2) (55.5) (55.8) Net debt/EBITDA (x) (2.66) (2.92) (2.90) (3.01)

Source: Company data, Thomson Reuters, Credit Suisse estimates

Haier Electronics Group Co., Ltd. (1169.HK / 1169 HK) 3 6 March 2017

Upgrade on improving earnings outlook and cheap valuation We upgrade Haier Electronics to OUTPERFORM from Neutral with a new target price of HK$18.2 using the SOTP valuation method. We expect earnings to accelerate to 15%/12% in 2017/18, driven by an improving outlook on both manufacturing side and ICS (Integrated Channel Services).

■ Strong manufacturing sales (60% operating profits) driven by mix upgrade and home appliance industry recovery. Based on industry data, QD Haier increased washing machines' ASP by 3% in 2016 but gained 1% market share at the same time. Water heaters are also experiencing a major upgrade from electric ones to gas water heaters. As a mid- to high-end brand, we believe Haier will benefit from stronger industry demand, and the trade-up trend, which should boost revenue as well as gross margin.

■ We also see an improving ICS earnings outlook (40% operating profit) after completed channel restructuring in 2H16 and operating leverage. Alibaba's shares conversion should strengthen the relationship with the company and bring up orders from Tmall, which should lead to stronger logistics segment growth going forward.

■ Strong home appliance demand in 2017, slower property is under control. We expect home appliance sales to accelerate to 8%/4% growth in 2017E/18E from 3% in 2016. The pick-up in 2017 is expected to be attributed to: (1) the recent industry price hike, (2) the delayed positive impact from the strong property cycle, and (3) rising replacement demand. Looking into 2018, we believe the potential slowdown in property transactions may affect sales; we expect it to be offset by the rising replacement cycle and ASP increase from product mix enhancement. In our view, the replacement cycle will start in 2017 for the products that were bought between the 2008 and 2013 government subsidy programmes. As replacement demand accounts for 70% of industry sales versus 30% demand from new home sales, rising replacement demand should be enough to offset the negative impact from the slower property demand in late 2017 (after adjusting for 9 months’ delay impact). On the valuation front, Haier Electronics is trading at 11x FY17E/18E P/E, 15% below its historical average. We believe the accelerating earnings in 2017 will drive a multiple rerating and act as a share price catalyst.

Haier Electronics Group Co., Ltd. (1169.HK / 1169 HK) 4 6 March 2017

Figure 7: Trading at 11x P/E, below its historical Figure 8: We expect its earnings and revenue to average, earnings growth should drive re-rating pick up in 2017/18E from 2016

(Rmbmn) (%) PE x % 120,000 25 50 25 44.5 20 90,000 40 20 15

10 30 20.2 15 60,000 20.4 20.1 5 20 10 15.1 0 12.2 30,000 10.5 10 5 -5 1.0 0 -10 0 0 2012 2013 2014 2015E 2016E 2017E 2018E 2011 2012 2013 2014 2015 2016 2017 2018 Net revenue Net revenue YoY chg - RHS Net profit YoY chg - RHS earnings growth(LHS) PE (RHS)

Source: Bloomberg, Credit Suisse estimates Source: Company data, Credit Suisse estimates Solid product sales on strong industry growth We expect product sales growth to accelerate to 14%/7% in 2017E/18E from 4% in 2016, driven by stronger market demand from replacement needs, better channel execution and product mix enhancement coupled with inflation. Even excluding the positive company-specific factors, we already expect the overall home appliance retail market to accelerate to ~8%/4% growth in 2017/18E—faster than the 3% in 2016. We believe that 2017 will be a strong year due to CPI inflation, the delayed positive impact from the strong 2016 property cycle and rising replacement needs. While the negative impact from the potential property slowdown (our property team forecasts -5%/-3% sales volume in 2017/18) may start to impose some negative impact starting 4Q17, we still believe ASP improvement from mix enhancement and stronger replacement needs can outpace the negative impact in 2018. Overall, replacement demand accounts for 70% of industry sales vs 30% demand from new property.

Figure 9: We expect market growth to pick up in 2017, driven by ASP increase, rising replacement needs and positive property growth in 2016 Volume Market Replacement New ASP change + = growth needs demand 2014 1.1% 0.4% 0.5% 2% 2015 1.8% -0.2% -1.0% 1% 2016 2.2% 0.7% 0.5% 3% 2017E 2.7% 1.3% 4.0% 8% 2018E 2.3% -0.8% 2.5% 4%

Source: Company data, Credit Suisse estimates

■ We expect stronger ASP growth in 2017/18 We expect industry ASP to increase at least 4%/2.5% in 2017/18E, faster than the 0.5%/- 1% in 2015/16 due to reduced promotion on healthier channel inventory, product upgrades and direct price hikes. Based on our checks with channel distributors and brands, we understand that, from 4Q17, ex-factory prices have already increased by 5%+ for the leading white good and kitchenware brands to reflect the rising raw material prices. We believe a 4%/2.5% ASP increase for the industry in 2017E/18E is highly possible, even taking into consideration smaller price increases for small brands and small appliances.

Haier Electronics Group Co., Ltd. (1169.HK / 1169 HK) 5 6 March 2017

■ Entering into replacement cycle Starting from 2016 year end, sales during 2008-13 driven by government subsidies program have entered into the replacement cycle (normal replacement at 8 years for large appliances and 3 years for small appliances). Between 2009 and 2011, the government subsidy programme stimulated over Rmb410 bn sales. During the government subsidies period between 2008 and 2013, the total home appliance industry sales accumulated to Rmb3,415 bn, which is 3.8x 2016 industry sales. We believe in the next few years, consumers will start to replace those products. This should have a positive impact in both 2017 and onwards, and offset the negative impact from the property slowdown. Based on our industry checks, replacement demand contributes around 70% of industry sales.

Figure 10: Positive property sales in 2016 expected Figure 11: We expect replacement needs to increase to drive solid market growth in 2017 but be negative from 2017 as sales during government subsidies in 2018 programmes should enter into replacement cycle

9,000 20.0% Rmb 100 mn Government 25.0% 22.5% 8,000 subsidies 15.0% 20.0% 17.3% 7,000

15.0% 6,000 10.0% 10.1% 5,000 10.0% 6.5% 5.0% 5.4% 4,000 5.0% 1.2% 3,000 0.0% 0.0% 2,000 -5.0% -5.0% -3.0% 1,000 -5.0% -10.0% -7.6% 0 -10.0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017E 2018E

Market size (LHS) Growth YoY(RHS)

Source: CEIC, Credit Suisse estimates Source: CMM, IOL, Credit Suisse estimates

Figure 12: Chinese government subsidy programs

Time Subsidy Rrogram Applicable products Size

Dec 2007 - Jan 2013 Home appliance to rural (家电下乡） TV, white goods, mobile phone, PC Cumulative sales over Rmb 720bn and sales volume of ~300mn units

Jun 2009 - Dec 2011 Old for new program (以旧换新） TV, white goods, PC stimulated over Rmb340bn home appliances consumption

June 2009 - May 2011 Energy saving subsidy (节能惠民） AC, auto, light, motor, etc stimulated over Rmb70bn home appliances consumption

June 2012 - May 2013 New energy saving subsidy (新节能惠民） TV, white goods, water heater stimulated over Rmb250bn home appaliances consumption White goods that meet the most stringent 领跑者） Nov 2015 - current Top runner ( energy saving standards NA

Source: Company data, Credit Suisse estimates

Haier Electronics Group Co., Ltd. (1169.HK / 1169 HK) 6 6 March 2017

■ Positive impact from property in 2017 but negative in 2018 China’s property sales volume increased by 22.5% in 2016, but is expected to slow down to -5%/-3% in 2017/18E based on our property team's forecasts, given government tightening. Home appliance sales normally lag the property cycle by 9 months, and therefore the strong property market in 2016 should be positive for the home appliance industry in 2017, but negative in 2018. However, as we highlighted before, sales from new property demand are only 30% of industry sales, while replacement needs contribute the majority. We agree that 2018 home appliance industry sales may slow down compared to 2017, but rising replacement needs coupled with mix improvement should be more than enough to offset the negative property impact. We still expect 2018 to achieve 4% growth vs 3% in 2016.

■ Market share gainer in an uptrend market We see a trading up trend in both the water heaters/washing machines markets, which have seen ASP increases of 5.2%/3% YoY. The water heater ASP increase has been driven by growing interest in gas water heaters, which are 65% more expensive than traditional electric water heaters. Gas water heaters gained 2.1% market share in terms of volume in 2016. We see the top 3 brands (including Haier) gaining market share in gas water heaters, while brands with a weaker brand image are losing market share. The Haier brand gained 0.8% market share in gas water heaters in 2016, and we believe this trend will continue in 2017, given Haier's strong leading position in water heaters. We also see Haier aggressively gaining market share in washing machines with newly launched mid-end products, as well as high-end brand Carsarte products. The brand has changed store layouts to actively promote high-end products, which resulted in a 1.01% market share gain in washing machines with a 3.4% ASP increase in 2016.

Figure 13: Haier brand washing machines are gaining market share, thanks to comprehensive Figure 14: Haier brand water heaters are gaining product offering market share, driven by product upgrades

28% 21% 27.6% 18.4% 17.6% 18% 15.3% 27% 26.8% 15.0% 26.5% 15%

12% 26% 25.8% 9%

6% 25% 3%

24% 0% 2015 2016 2015 2016 volume share value share volume share value share

Source: C Source: CMM

Haier Electronics Group Co., Ltd. (1169.HK / 1169 HK) 7 6 March 2017

Improving ICS outlook on channel reform and logistics segment We expect ICS sales growth to accelerate to 10% in 2017 from flat, driven by: (1) a better distribution segment on channel reform and loss-making 3rd party business exit, and (2) an improving logistics outlook on strengthened relationship with Alibaba. We expect the distribution business to grow to 4% in 2017 from -7% in 2016, driven by better home appliance retail sentiment, channel restructuring and a better earnings outlook from logistics. We are seeing offline growth of major home appliance distributors improving in 2H16, and expect to see this uptrend to continue in 2017. Haier Electronics also restructured the sales department in 2H16 and combined the sales departments of parentco QD Haier and Haier Electronics. In this way, distributors only have to report to one department and thus operational efficiency is improved. Loss-marking third party business still makes up ~10% of the total distribution business, but we expect the number to gradually drop to zero, which should improve the distribution segment's profitability. In 2H16, distribution sales already increased by 2%, partly helped by the channel reform versus -16% in 1H16, and we expect 2017 to see the full benefit. Strengthened relationship with Alibaba in logistics: we expect overall logistics business to grow 20% in 2017 vs 10% in 2016, driven by strong orders volumes from Tmall. In early 2017, Alibaba converted CEBs into a 24% shareholding in Goodaymart—the logistics segment of Haier Electronics. In addition to its existing 10% holding, Alibaba now holds 34% of Goodaymart. We expect the strong bond between these companies to bring more Tmall logistics orders, which we expect to grow at least 80% YoY. As the leading large-item delivery company, we also see future upside from business expansion to furniture, gym equipment, etc.

Figure 15: Home appliance distribution is improving industry wide Figure 16: Shareholding structure of Goodaymart

5.0% 4.0% 2.3%

0.0%

-5.0%

-10.0%

-15.0% -15.9% -20.0% 1H16 2H16 2017E

Haier Electronics distribution GOME offline SSSG Suning offline SSSG

Source: Company data Source: Company data

Haier Electronics Group Co., Ltd. (1169.HK / 1169 HK) 8 6 March 2017

Non-demanding valuation on better earnings outlook Cheap valuation on better earnings outlook: Despite a positive earnings outlook, we believe the stock is cheap—trading at 11x P/E, below its historical average of 13x. We expect the stronger earnings outlook in 2017 to act as a key share price catalyst. We raise our earnings by 4.2%/6.2% in 2017/18E and lift our target price to HK$18.2 (from HK$13.5) based on the SOTP valuation method. We assign 15x for its manufacturing business, and 10x P/E for its ICS (exclude logistics) business, in line with our multiples for other white goods companies. We use 20x for its logistics business, which is around a 30%+ discount to the US and A-share-listed logistics companies, given its relatively slow growth.

Figure 18: We expect stronger earnings outlook in Figure 17: We use SOTP to value the company 2017 to act as key share price catalyst

PE x % 50 25 44.5

Category PE multiple Valuation (HKD) 40 20 Water heater 15x 8.6 Washing machine 15x 3.8 30 20.2 15 20.4 20.1 ICS (exclude logistics) 10x 4.6 20 10 15.1 12.2 Logistics 20x 1.2 10.5 10 5 18.2 1.0 0 0 2011 2012 2013 2014 2015 2016 2017 2018 earnings growth(LHS) PE (RHS)

Source: Credit Suisse estimates Source: Bloomberg, Credit Suisse estimates

Figure 19: Valuation comp for Chinese home appliance companies

Company Name CS Ticker Price Market Cap Rating TP GPM GPM OPM OPM NPM NPM ROE ROE CAGR PE PE PEG 2016E 2017E 2016E 2017E 2016E 2017E 2016E 2017E 16-18E 2017E 2018E 2017E White goods Qingdao Haier-A 600690.SS 10.85 9,571 O 12.0 28.7% 29.2% 5.7% 5.6% 4.3% 4.0% 19.8% 19.8% 15% 11.8 10.1 0.7 Kelon-A 000921.SZ 12.17 2,156 NC na 24.0% 24.6% 4.7% 6.6% 4.2% 5.9% 24.3% 33.5% 24% 10.3 11.4 0.4 Co-A 000333.SZ 31.49 29,424 O 34.5 26.4% 25.7% 9.9% 9.4% 9.7% 8.6% 26.9% 25.7% 16% 11.9 10.1 0.7 Homa-A 002668.SZ 72.3 2,398 NC na 26.3% 28.8% 6.6% 8.6% 6.0% 7.7% 14.5% 18.1% 51% 36.7 23.9 0.7 -A 000521.SZ 7.04 996 NC na 20.8% 21.2% 2.3% 2.7% 1.9% 2.2% 6.4% 7.5% 23% 23.2 19.9 1.0 Haier Electronic 1169.HK 14.7 5,244 O 18.2 16.3% 16.7% 5.2% 5.4% 4.3% 4.5% 17.0% 16.8% 13% 11.6 10.4 0.9 Whirlpool Chin-A 600983.SS 10.81 1,204 NC na 31.1% 31.5% 5.3% 5.6% 5.3% 6.2% 9.0% 9.8% 26% 18.7 16.1 0.7 Wuxi Little Sw-A 000418.SZ 35.88 2,982 NC na 27.1% 27.7% 9.7% 10.0% 7.4% 7.6% 19.9% 20.7% 24% 14.9 12.2 0.6 -A 000651.SZ 27.31 23,810 O 29.0 35.5% 35.2% 12.7% 14.5% 14.2% 14.0% 28.8% 28.7% 12% 10.3 9.1 0.9 Average 26.3% 26.7% 6.9% 7.6% 6.4% 6.8% 18.5% 20.0% 16% 12.4 13.7 0.7

Kitchenware Robam-A 002508.SZ 42.05 4,535 O 50.4 58.6% 58.5% 22.6% 23.3% 20.4% 21.0% 33.1% 33.1% 27% 20.0 15.8 0.7 -A 002032.SZ 36.6 3,349 NC na 29.8% 29.9% 11.2% 11.6% 9.1% 9.7% 20.9% 21.1% 17% 17.9 15.3 1.0 Co -A 002242.SZ 18.28 2,032 N 20.0 31.6% 31.3% 11.7% 11.5% 9.2% 9.2% 19.9% 20.6% 11% 19.0 17.1 1.7 Guangdong Xinb-A 002705.SZ 17.7 1,475 NC na 20.7% 21.6% 7.8% 8.9% 6.1% 7.0% 16.1% 18.5% 25% 18.9 15.4 0.7 Zhejiang Meida-A 002677.SZ 13.05 1,225 NC na 54.1% 55.5% 35.4% 36.6% 31.0% 31.8% 18.0% 21.0% 31% 30.3 23.7 1.0 Vatti Corp Ltd-A 002035.SZ 29.32 1,590 NC na 42.2% 42.2% 8.1% 9.2% 7.1% 7.8% 18.5% 20.2% 31% 25.4 19.6 0.8 Guangdong Vanw-A 002543.SZ 19.55 1,226 NC na 33.5% 33.8% 8.9% 9.2% 7.8% 8.0% 12.3% 12.9% 17% 19.9 17.1 1.2 Average 38.6% 39.0% 15.1% 15.8% 13.0% 13.5% 19.8% 21.1% 23% 21.7 17.7 1.0

22% 14.7 15.4 0.8

31.7% 32.1% 10.5% 11.2% 9.3% 9.7% 19.1% 20.5% 23% 18.8 15.5 0.9 Source: Company data, Bloomberg (prices as of March 02, 2017 market close)

Haier Electronics Group Co., Ltd. (1169.HK / 1169 HK) 9 6 March 2017

Companies Mentioned (Price as of 02-Mar-2017) Gree Electric Appliances Inc of Zhuhai (000651.SZ, Rmb27.31) Haier Electronics Group Co., Ltd. (1169.HK, HK$14.7, OUTPERFORM, TP HK$18.2) Hangzhou Robam Appliances Co Ltd (002508.SZ, Rmb42.05) Electrical Holdings (000921.SZ, Rmb12.17) Homa (002668.SZ, Rmb72.3) Joyoung Co Ltd (002242.SZ, Rmb18.28) Little Swan (000418.SZ, Rmb35.88) Midea Group Co Ltd (000333.SZ, Rmb31.49) Qingdao Haier Co., Ltd. (600690.SS, Rmb10.85) Supor (002032.SZ, Rmb36.6) Vanward (002543.SZ, Rmb19.55) Vatti (002035.SZ, Rmb29.32) Whirlpool China (600983.SS, Rmb10.81) Xinbao Elctrcl (002705.SZ, Rmb17.7) Zhejiang Meida (002677.SZ, Rmb13.05)

Disclosure Appendix Analyst Certification Raymond Ching and Carey Shi each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.

3-Year Price and Rating History for Haier Electronics Group Co., Ltd. (1169.HK)

1169.HK Closing Price Target Price Date (HK$) (HK$) Rating 14-Jul-14 21.85 27.60 O 27-Aug-14 21.50 26.80 28-Aug-14 21.95 25.50 26-Aug-15 15.14 20.00 12-Jan-16 12.88 19.00 23-Mar-16 12.70 18.50 30-Aug-16 13.14 NC 26-Oct-16 12.66 13.40 N * 31-Oct-16 12.52 13.50 * Asterisk signifies initiation or assumption of coverage. OUTPERFORM NOT COVERED Effective July 3, 2016, NC denotes termination of coverage. NEUTRAL

The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities As of December 10, 2012 Analysts’ stock rating are defined as follows: Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark* over the next 12 months. Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months. Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months. *Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ra tings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin American and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, the expected total return (ETR) calculation includes 12-month rolling dividend yield. An Outperform rating is assigned where an ETR is greater than or equal to 7.5%; Underperform where an ETR less than or equal to 5%. A Neutral may be assigned where the ETR is between -5% and 15%. The overlapping rating range allows analysts to assign a rating that puts ETR in the context of associated risks. Prior to 18 May 2015, ETR ranges for Outperform and Underperform ratings did not overlap with Neutral thresholds between 15% and 7.5%, which was in operation from 7 July 2011. Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances. Not Rated (NR) : Credit Suisse Equity Research does not have an investment rating or view on the stock or any other securities related to the company at this time. Not Covered (NC) : Credit Suisse Equity Research does not provide ongoing coverage of the company or offer an investment rating or investment view on the equity security of the company or related products.

Haier Electronics Group Co., Ltd. (1169.HK / 1169 HK) 10 6 March 2017

Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward. Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation: Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months. Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months. Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months. *An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors. Credit Suisse's distribution of stock ratings (and banking clients) is:

Global Ratings Distribution Rating Versus universe (%) Of which banking clients (%) Outperform/Buy* 45% (64% banking clients) Neutral/Hold* 39% (59% banking clients) Underperform/Sell* 14% (53% banking clients) Restricted 2% *For purposes of the NYSE and FINRA ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors. Important Global Disclosures Credit Suisse’s research reports are made available to clients through our proprietary research portal on CS PLUS. Credit Suisse research products may also be made available through third-party vendors or alternate electronic means as a convenience. Certain research products are only made available through CS PLUS. The services provided by Credit Suisse’s analysts to clients may depend on a specific client’s preferences regarding the frequency and manner of receiving communications, the client’s risk profile and investment, the size and scope of the overall client relationship with the Firm, as well as legal and regulatory constraints. To access all of Credit Suisse’s research that you are entitled to receive in the most timely manner, please contact your sales representative or go to https://plus.credit-suisse.com . Credit Suisse’s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the market that may have a material impact on the research views or opinions stated herein. Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: https://www.credit- suisse.com/sites/disclaimers-ib/en/managing-conflicts.html . Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties.

Target Price and Rating Valuation Methodology and Risks: (12 months) for Haier Electronics Group Co., Ltd. (1169.HK) Method: We give a OUTPERFORM rating to Haier Electronics. Our TP of HK$18.2 is based on SOTP. We assign 15x for its manufacturing business, 10x for non-logistics ICS, and 20x for its logistic business. We believe the comapny's outlook is positive based on 1)strong manufacturing sales driven by mix upgrade and home appliance industry recovery, 2) improving ICS earnings outlook on channel restructuring and operating leverage, 3) accelerating logistic outlook on strengthened relationship with Alibaba and 4) attractive valuation with stronger earnings outlook. Risk: Upside risks to our HK$18.2 target price and OUTPERFORM rating for Haier Electronics Group Co., Ltd. include worse-than-expected retail sales, raw material price hike, and slower-than -expected logistics growth.

Please refer to the firm's disclosure website at https://rave.credit-suisse.com/disclosures for the definitions of abbreviations typically used in the target price method and risk sections. See the Companies Mentioned section for full company names The subject company (000333.SZ) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse. Credit Suisse provided non-investment banking services to the subject company (000333.SZ) within the past 12 months Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (1169.HK, 600690.SS, 000333.SZ) within the next 3 months. Credit Suisse has received compensation for products and services other than investment banking services from the subject company (000333.SZ) within the past 12 months For other important disclosures concerning companies featured in this report, including price charts, please visit the website at https://rave.credit- suisse.com/disclosures or call +1 (877) 291-2683. For date and time of production, dissemination and history of recommendation for the subject company(ies) featured in this report, disseminated within the past 12 months, please refer to the link: https://rave.credit-suisse.com/disclosures/view/report?i=287831&v=6g2dqxzrh9etd7gegg5q1nli9 . Important Regional Disclosures Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report.

Haier Electronics Group Co., Ltd. (1169.HK / 1169 HK) 11 6 March 2017

The analyst(s) involved in the preparation of this report may participate in events hosted by the subject company, including site visits. Credit Suisse does not accept or permit analysts to accept payment or reimbursement for travel expenses associated with these events. Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares. Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report. For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit https://www.credit- suisse.com/sites/disclaimers-ib/en/canada-research-policy.html. Principal is not guaranteed in the case of equities because equity prices are variable. Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that. This research report is authored by: Credit Suisse (Hong Kong) Limited ...... Raymond Ching ; Carey Shi To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important disclosures regarding any non-U.S. analyst contributors: The non-U.S. research analysts listed below (if any) are not registered/qualified as research analysts with FINRA. The non-U.S. research analysts listed below may not be associated persons of CSSU and therefore may not be subject to the FINRA 2241 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. Credit Suisse (Hong Kong) Limited ...... Raymond Ching ; Carey Shi For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at https://rave.credit- suisse.com/disclosures or call +1 (877) 291-2683.

Haier Electronics Group Co., Ltd. (1169.HK / 1169 HK) 12 6 March 2017

This report is produced by subsidiaries and affiliates of Credit Suisse operating under its Global Markets Division. For more information on our structure, please use the following link: https://www.credit-suisse.com/who-we-are This report may contain material that is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject Credit Suisse or its affiliates ("CS") to any registration or licensing requirement within such jurisdiction. All material presented in this report, unless specifically indicated otherwise, is under copyright to CS. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of CS. All trademarks, service marks and logos used in this report are trademarks or service marks or registered trademarks or service marks of CS or its affiliates.The information, tools and material presented in this report are provided to you for information purposes only and are not to be used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for securities or other financial instruments. CS may not have taken any steps to ensure that the securities referred to in this report are suitable for any particular investor. CS will not treat recipients of this report as its customers by virtue of their receiving this report. The investments and services contained or referred to in this report may not be suitable for you and it is recommended that you consult an independent investment advisor if you are in doubt about such investments or investment services. Nothing in this report constitutes investment, legal, accounting or tax advice, or a representation that any investment or strategy is suitable or appropriate to your individual circumstances, or otherwise constitutes a personal recommendation to you. CS does not advise on the tax consequences of investments and you are advised to contact an independent tax adviser. Please note in particular that the bases and levels of taxation may change. Information and opinions presented in this report have been obtained or derived from sources believed by CS to be reliable, but CS makes no representation as to their accuracy or completeness. CS accepts no liability for loss arising from the use of the material presented in this report, except that this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations applicable to CS. This report is not to be relied upon in substitution for the exercise of independent judgment. CS may have issued, and may in the future issue, other communications that are inconsistent with, and reach different conclusions from, the information presented in this report. Those communications reflect the different assumptions, views and analytical methods of the analysts who prepared them and CS is under no obligation to ensure that such other communications are brought to the attention of any recipient of this report. Some investments referred to in this report will be offered solely by a single entity and in the case of some investments solely by CS, or an associate of CS or CS may be the only market maker in such investments. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Information, opinions and estimates contained in this report reflect a judgment at its original date of publication by CS and are subject to change without notice. The price, value of and income from any of the securities or financial instruments mentioned in this report can fall as well as rise. The value of securities and financial instruments is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities or financial instruments. Investors in securities such as ADR's, the values of which are influenced by currency volatility, effectively assume this risk. Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility, and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct their own investigation and analysis of the product and consult with their own professional advisers as to the risks involved in making such a purchase. Some investments discussed in this report may have a high level of volatility. High volatility investments may experience sudden and large falls in their value causing losses when that investment is realised. Those losses may equal your original investment. Indeed, in the case of some investments the potential losses may exceed the amount of initial investment and, in such circumstances, you may be required to pay more money to support those losses. Income yields from investments may fluctuate and, in consequence, initial capital paid to make the investment may be used as part of that income yield. Some investments may not be readily realisable and it may be difficult to sell or realise those investments, similarly it may prove difficult for you to obtain reliable information about the value, or risks, to which such an investment is exposed. This report may provide the addresses of, or contain hyperlinks to, websites. Except to the extent to which the report refers to website material of CS, CS has not reviewed any such site and takes no responsibility for the content contained therein. Such address or hyperlink (including addresses or hyperlinks to CS's own website material) is provided solely for your convenience and information and the content of any such website does not in any way form part of this document. Accessing such website or following such link through this report or CS's website shall be at your own risk. This report is issued and distributed in European Union (except Switzerland): by Credit Suisse Securities (Europe) Limited, One Cabot Square, London E14 4QJ, England, which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Germany: Credit Suisse Securities (Europe) Limited Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuer Finanzdienstleistungsaufsicht ("BaFin"). United States and Canada: Credit Suisse Securities (USA) LLC; Switzerland: Credit Suisse AG; Brazil: Banco de Investimentos Credit Suisse (Brasil) S.A or its affiliates; Mexico: Banco Credit Suisse (México), S.A. (transactions related to the securities mentioned in this report will only be effected in compliance with applicable regulation); Japan: by Credit Suisse Securities (Japan) Limited, Financial Instruments Firm, Director-General of Kanto Local Finance Bureau ( Kinsho) No. 66, a member of Japan Securities Dealers Association, The Financial Futures Association of Japan, Japan Investment Advisers Association, Type II Financial Instruments Firms Association; Hong Kong: Credit Suisse (Hong Kong) Limited; Australia: Credit Suisse Equities (Australia) Limited; Thailand: Credit Suisse Securities (Thailand) Limited, regulated by the Office of the Securities and Exchange Commission, Thailand, having registered address at 990 Abdulrahim Place, 27th Floor, Unit 2701, Rama IV Road, Silom, Bangrak, Bangkok10500, Thailand, Tel. +66 2614 6000; Malaysia: Credit Suisse Securities (Malaysia) Sdn Bhd; Singapore: Credit Suisse AG, Singapore Branch; India: Credit Suisse Securities (India) Private Limited (CIN no.U67120MH1996PTC104392) regulated by the Securities and Exchange Board of India as Research Analyst (registration no. INH 000001030) and as Stock Broker (registration no. INB230970637; INF230970637; INB010970631; INF010970631), having registered address at 9th Floor, Ceejay House, Dr.A.B. Road, Worli, Mumbai - 18, India, T- +91-22 6777 3777; South Korea: Credit Suisse Securities (Europe) Limited, Seoul Branch; Taiwan: Credit Suisse AG Taipei Securities Branch; Indonesia: PT Credit Suisse Securities Indonesia; Philippines:Credit Suisse Securities (Philippines ) Inc., and elsewhere in the world by the relevant authorised affiliate of the above. Additional Regional Disclaimers Hong Kong: Credit Suisse (Hong Kong) Limited ("CSHK") is licensed and regulated by the Securities and Futures Commission of Hong Kong under the laws of Hong Kong, which differ from Australian laws. CSHKL does not hold an Australian financial services licence (AFSL) and is exempt from the requirement to hold an AFSL under the Corporations Act 2001 (the Act) under Class Order 03/1103 published by the ASIC in respect of financial services provided to Australian wholesale clients (within the meaning of section 761G of the Act). Research on Taiwanese securities produced by Credit Suisse AG, Taipei Securities Branch has been prepared by a registered Senior Business Person. Australia (to the extent services are offered in Australia): Credit Suisse Securities (Europe) Limited (“CSSEL”) and Credit Suisse International (“CSI”) are authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority (“FCA”) and the Prudential Regulation Authority under UK laws, which differ from Australian Laws. CSSEL and CSI do not hold an Australian Financial Services Licence (“AFSL”) and are exempt from the requirement to hold an AFSL under the Corporations Act (Cth) 2001 (“Corporations Act”) under Class Order 03/1099 published by the Australian Securities and Investments Commission (“ASIC”), in respect of the financial services provided to Australian wholesale clients (within the meaning of section 761G of the Corporations Act). This material is not for distribution to retail clients and is directed exclusively at Credit Suisse's professional clients and eligible counterparties as defined by the FCA, and wholesale clients as defined under section 761G of the Corporations Act. Credit Suisse (Hong Kong) Limited (“CSHK”) is licensed and regulated by the Securities and Futures Commission of Hong Kong under the laws of Hong Kong, which differ from Australian laws. CSHKL does not hold an AFSL and is exempt from the requirement to hold an AFSL under the Corporations Act under Class Order 03/1103 published by the ASIC in respect of financial services provided to Australian wholesale clients (within the meaning of section 761G of the Corporations Act). Credit Suisse Securities (USA) LLC (CSSU) and Credit Suisse Asset Management LLC (CSAM LLC) are licensed and regulated by the Securities Exchange Commission of the United States under the laws of the United States, which differ from Australian laws. CSSU and CSAM LLC do not hold an AFSL and is exempt from the requirement to hold an AFSL under the Corporations Act under Class Order 03/1100 published by the ASIC in respect of financial services provided to Australian wholesale clients (within the meaning of section 761G of the Corporations Act). Malaysia: Research provided to residents of Malaysia is authorised by the Head of Research for Credit Suisse Securities (Malaysia) Sdn Bhd, to whom they should direct any queries on +603 2723 2020. Singapore: This report has been prepared and issued for distribution in Singapore to institutional investors, accredited investors and expert investors (each as defined under the Financial Advisers Regulations) only, and is also distributed by Credit Suisse AG, Singapore Branch to overseas investors (as defined under the Financial Advisers Regulations). Credit Suisse AG, Singapore Branch may distribute reports produced by its foreign entities or affiliates pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Singapore recipients should contact Credit Suisse AG, Singapore Branch at +65-6212-2000 for matters arising from, or in connection with, this report. By virtue of your status as an institutional investor, accredited investor, expert investor or overseas investor, Credit Suisse AG, Singapore Branch is exempted from complying with certain compliance requirements under the Financial Advisers Act, Chapter 110 of Singapore (the “FAA”), the Financial Advisers Regulations and the relevant Notices and Guidelines issued thereunder, in respect of any financial advisory service which Credit Suisse AG, Singapore Branch may provide to you. UAE: This information is being distributed by Credit Suisse AG (DIFC Branch), duly licensed and regulated by the Dubai Financial Services Authority (“DFSA”). Related financial services or products are only made available to Professional Clients or Market Counterparties, as defined by the DFSA, and are not intended for any other persons. Credit Suisse AG (DIFC Branch) is located on Level 9 East, The Gate Building, DIFC, Dubai, United Arab Emirates. EU: This report has been produced by subsidiaries and affiliates of Credit Suisse operating under its Global Markets Division In jurisdictions where CS is not already registered or licensed to trade in securities, transactions will only be effected in accordance with applicable securities legislation, which will vary from jurisdiction to jurisdiction and may require that the trade be made in accordance with applicable exemptions from registration or licensing requirements. Non-US customers wishing to effect a transaction should contact a CS entity in their local jurisdiction unless governing law permits otherwise. US customers wishing to effect a transaction should do so only by contacting a representative at Credit Suisse Securities (USA) LLC in the US. Please note that this research was originally prepared and issued by CS for distribution to their market professional and institutional investor customers. Recipients who are not market professional or institutional investor customers of CS should seek the advice of their independent financial advisor prior to taking any investment decision based on this report or for any necessary explanation of its contents. This research may relate to investments or services of a person outside of the UK or to other matters which are not authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority or in respect of which the protections of the Prudential Regulation Authority and Financial Conduct Authority for private customers and/or the UK compensation scheme may not be available, and further details as to where this may be the case are available upon request in respect of this report. CS may provide various services to US municipal entities or obligated persons ("municipalities"), including suggesting individual transactions or trades and entering into such transactions. Any services CS provides to municipalities are not viewed as "advice" within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. CS is providing any such services and related information solely on an arm's length basis and not as an advisor or fiduciary to the municipality. In connection with the provision of the any such services, there is no agreement, direct or indirect, between any municipality (including the officials,management, employees or agents thereof) and CS for CS to provide advice to the municipality. Municipalities should consult with their financial, accounting and legal advisors regarding any such services provided by CS. In addition, CS is not acting for direct or indirect compensation to solicit the municipality on behalf of an unaffiliated broker, dealer, municipal securities dealer, municipal advisor, or investment adviser for the purpose of obtaining or retaining an engagement by the municipality for or in connection with Municipal Financial Products, the issuance of municipal securities, or of an investment adviser to provide investment advisory services to or on behalf of the municipality. If this report is being distributed by a financial institution other than Credit Suisse AG, or its affiliates, that financial institution is solely responsible for distribution. Clients of that institution should contact that institution to effect a transaction in the securities mentioned in this report or require further information. This report does not constitute investment advice by Credit Suisse to the clients of the distributing financial institution, and neither Credit Suisse AG, its affiliates, and their respective officers, directors and employees accept any liability whatsoever for any direct or consequential loss arising from their use of this report or its content. Principal is not guaranteed. Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that. Copyright © 2017 CREDIT SUISSE AG and/or its affiliates. All rights reserved. Investment principal on bonds can be eroded depending on sale price or market price. In addition, there are bonds on which investment principal can be eroded due to changes in redemption amounts. Care is required when investing in such instruments. When you purchase non-listed Japanese fixed income securities (Japanese government bonds, Japanese municipal bonds, Japanese government guaranteed bonds, Japanese corporate bonds) from CS as a seller, you will be requested to pay the purchase price only.

Haier Electronics Group Co., Ltd. (1169.HK / 1169 HK) 13