September 2, 2016

ACTION Removed from Asia Pacific Conviction Buy List Holdings (3339.HK)

Equity Research Off CL on faster - substitution; maintain Buy

What happened Investment Profile We remove Lonking from the Conviction List as we see faster-than-expected Low High loader-to-excavator substitution driving a slower recovery of loaders (53% of Growth Growth Returns * Returns * 2015 revenue) vs. (11% 2015 revenue). However, we stay Buy- Multiple Multiple rated as we still expect robust infrastructure construction activities and cost Volatility Volatility control to drive top/bottom line growth and effective cash flow management Percentile 20th 40th 60th 80th 100th /sufficient provisions to provide strong earnings protection against further Lonking Holdings (3339.HK) impairment. Since adding Lonking to the CL on Apr 7, 2016, the stock is -7%, Asia Pacific Industrials Peer Group Average * Returns = Return on Capital For a complete description of the investment vs. the HSCEI Index up 11%; we attribute the underperformance to limited profile measures please refer to the liquidity / concern over the sustainability of construction machinery demand. disclosure section of this document.

Key data Current Current view Price (HK$) 1.25 1) We remain positive on construction machinery thanks to improving 12 month price target (HK$) 1.50 Market cap (HK$ mn / US$ mn) 5,350.1 / 689.7 activity and faster replacement. However, we believe accelerating loader-to- Foreign ownership (%) -- excavator substitution is hampering the loader recovery (Jan-Jul 2016 sales 12/15 12/16E 12/17E 12/18E -16%) as buyers switch from cheaper loaders to pricier but more efficient EPS (Rmb) New 0.03 0.05 0.07 0.08 excavators (Jan-Jul sales +6%) given the improving business outlook. While EPS revision (%) 0.0 (22.2) (20.5) (12.4) EPS growth (%) (72.0) 72.4 39.6 16.4 we maintain our excavator forecasts, we expect a slower recovery for EPS (dil) (Rmb) New 0.03 0.05 0.07 0.08 P/E (X) 42.2 22.9 16.4 14.1 loaders and cut 2016/17/18E loader yoy sales growth to -11%/ +5%/+8%. P/B (X) 0.7 0.7 0.7 0.7 Thus we trim Lonking’s loader 2015-18E sales CAGR from +7% to +4%. EV/EBITDA (X) 17.2 12.9 9.2 7.8 Dividend yield (%) 1.2 2.3 3.2 3.7 ROE (%) 1.7 3.0 4.1 4.7 2) In our Construction Machinery coverage, we continue to favor Lonking for CROCI (%) 4.6 7.3 8.3 8.8 its strong cost and cash flow control, giving it the best operating leverage to revenue growth and a clean balance sheet with limited credit risk exposure Price performance chart 1.5 13,500 (effective provision rate of 21% vs. Liugong/ of 6.9%/ 5.2%). Buy. 1.4 12,500 Valuation: After factoring in updated loader sales forecasts, we cut Lonking 1.3 11,500 2016-18E EPS by 22%/21%/12.4%. We cut our 2017E EV/GCI vs. CROCI/WACC 1.2 10,500 based 12m target price to 1.50HKD from 1.80HKD (cash return multiple/EV/ 1.1 9,500 GCI premium applied unchanged at 0.90x/10%). 1.0 8,500

0.9 7,500 Risks: 1) Lower-than-expected infrastructure/property FAI growth; 2) Sep-15 Dec-15 Mar-16 Jun-16 worse-than-expected loader sales; and 3) weaker-than-expected cost control. Lonking Holdings (L) Hang Seng China Ent. Index (R)

INVESTMENT LIST MEMBERSHIP Share price performance (%) 3 month 6 month 12 month Absolute 8.7 17.9 22.5 Asia Pacific Buy List Rel. to Hang Seng China Ent. Index (1.7) 1.9 17.7

Source: Company data, Goldman Sachs Research estimates, FactSet. Price as of 9/02/2016 close.

Coverage View: Neutral Tian Lu, CFA +852-2978-0748 [email protected] Goldman Sachs (Asia) L.L.C. Goldman Sachs does and seeks to do business with companies Jacqueline Du covered in its research reports. As a result, investors should be +86(10)6627-3147 [email protected] Beijing Gao Hua Securities Company Limited aware that the firm may have a conflict of interest that could Frank Shi affect the objectivity of this report. Investors should consider +852-2978-0108 [email protected] Goldman Sachs (Asia) L.L.C. this report as only a single factor in making their investment Diana Zhao +65-6654-5191 [email protected] Goldman Sachs (Singapore) Pte decision. For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html. Analysts employed by non- US affiliates are not registered/qualified as research analysts with FINRA in the U.S.

The Goldman Sachs Group, Inc. Global Investment Research September 2, 2016 Lonking Holdings (3339.HK)

Lonking Holdings: Summary Financials

Profit model (Rmb mn) 12/15 12/16E 12/17E 12/18E Balance sheet (Rmb mn) 12/15 12/16E 12/17E 12/18E

Total revenue 4,829.3 4,573.5 5,166.1 5,698.8 Cash & equivalents 1,146.3 1,988.1 2,451.9 2,744.8 Cost of goods sold (3,730.5) (3,548.8) (3,944.6) (4,327.8) Accounts receivable 2,693.7 2,443.4 2,618.5 2,888.4 SG&A (477.8) (413.7) (480.4) (560.8) Inventory 1,280.9 1,118.1 1,188.8 1,304.3 R&D (300.0) (300.0) (300.0) (300.0) Other current assets 1,529.8 1,529.8 1,529.8 1,529.8 Other operating profit/(expense) (250.6) (184.8) (154.3) (141.7) Total current assets 6,650.7 7,079.4 7,788.9 8,467.3 EBITDA 474.1 541.8 711.9 801.2 Net PP&E 2,829.3 2,503.7 2,158.7 1,795.9 Depreciation & amortization (403.6) (415.6) (425.1) (432.8) Net intangibles 0.0 0.0 0.0 0.0 EBIT 70.5 126.1 286.9 368.4 Total investments 210.5 210.5 210.5 210.5 Interest income 140.0 135.1 175.4 159.4 Other long-term assets 2,825.0 2,825.0 2,825.0 2,825.0 Interest expense (116.1) (109.1) (113.5) (117.9) Total assets 12,515.6 12,618.7 12,983.2 13,298.8 Income/(loss) from uncons. subs. (0.7) 0.0 0.0 0.0 Others 118.8 95.0 25.1 25.1 Accounts payable 1,252.1 1,215.3 1,404.9 1,541.4 Pretax profits 212.5 247.1 373.9 435.0 Short-term debt 292.2 292.2 292.2 292.2 Income tax (95.9) (46.1) (93.5) (108.8) Other current liabilities 152.8 197.0 238.8 262.9 Minorities (0.1) (0.1) 0.0 0.0 Total current liabilities 1,697.1 1,704.6 1,935.9 2,096.5 Long-term debt 4,073.1 4,073.1 4,073.1 4,073.1 Net income pre-preferred dividends 116.5 200.9 280.4 326.3 Other long-term liabilities 121.3 121.3 121.3 121.3 Preferred dividends 0.0 0.0 0.0 0.0 Total long-term liabilities 4,194.4 4,194.4 4,194.4 4,194.4 Net income (pre-exceptionals) 116.5 200.9 280.4 326.3 Total liabilities 5,891.5 5,899.0 6,130.3 6,290.9 Post-tax exceptionals 0.0 0.0 0.0 0.0 Net income 116.5 200.9 280.4 326.3 Preferred shares 0.0 0.0 0.0 0.0 Total common equity 6,621.3 6,716.8 6,850.0 7,005.0 EPS (basic, pre-except) (Rmb) 0.03 0.05 0.07 0.08 Minority interest 2.8 2.9 2.9 2.9 EPS (basic, post-except) (Rmb) 0.03 0.05 0.07 0.08 EPS (diluted, post-except) (Rmb) 0.03 0.05 0.07 0.08 Total liabilities & equity 12,515.6 12,618.7 12,983.2 13,298.8 DPS (Rmb) 0.010.020.030.04 Dividend payout ratio (%) 52.5 52.5 52.5 52.5 BVPS (Rmb) 1.55 1.57 1.60 1.64 Free cash flow yield (%) 32.9 19.6 12.3 9.5

Growth & margins (%) 12/15 12/16E 12/17E 12/18E Ratios 12/15 12/16E 12/17E 12/18E Sales growth (35.0) (5.3) 13.0 10.3 CROCI (%) 4.6 7.3 8.3 8.8 EBITDA growth (55.1) 14.3 31.4 12.5 ROE (%) 1.7 3.0 4.1 4.7 EBIT growth (89.4) 78.9 127.4 28.4 ROA (%) 0.9 1.6 2.2 2.5 Net income growth (72.0) 72.4 39.6 16.4 ROACE (%) 1.0 1.9 2.6 3.4 EPS growth (72.0) 72.4 39.6 16.4 Inventory days 150.5 123.4 106.7 105.1 Gross margin 22.8 22.4 23.6 24.1 Receivables days 242.1 205.0 178.8 176.4 EBITDA margin 9.8 11.8 13.8 14.1 Payable days 133.1 126.9 121.2 124.2 EBIT margin 1.5 2.8 5.6 6.5 Net debt/equity (%) 48.6 35.4 27.9 23.1 Interest cover - EBIT (X) NM NM NM NM

Cash flow statement (Rmb mn) 12/15 12/16E 12/17E 12/18E Valuation 12/15 12/16E 12/17E 12/18E Net income pre-preferred dividends 116.5 200.9 280.4 326.3 D&A add-back 403.6 415.6 425.1 432.8 P/E (analyst) (X) 42.2 22.9 16.4 14.1 Minorities interests add-back 0.1 0.1 0.0 0.0 P/B (X) 0.7 0.7 0.7 0.7 Net (inc)/dec working capital 1,319.0 376.3 (56.2) (249.0) EV/EBITDA (X) 17.2 12.9 9.2 7.8 Other operating cash flow (117.2) 0.0 0.0 0.0 EV/GCI (X) 0.9 0.8 0.7 0.7 Cash flow from operations 1,722.0 992.9 649.3 510.1 Dividend yield (%) 1.2 2.3 3.2 3.7

Capital expenditures (100.0) (90.0) (80.0) (70.0) Acquisitions 0.0 0.0 0.0 0.0 Divestitures 0.0 0.0 0.0 0.0 Others (1,057.0) 0.0 0.0 0.0 Cash flow from investments (1,157.0) (90.0) (80.0) (70.0)

Dividends paid (common & pref) (220.3) (61.2) (105.5) (147.2) Inc/(dec) in debt 0.0 0.0 0.0 0.0 Common stock issuance (repurchase) 0.0 0.0 0.0 0.0 Other financing cash flows (286.8) 0.0 0.0 0.0 Cash flow from financing (507.1) (61.2) (105.5) (147.2) Total cash flow 57.9 841.7 463.8 292.9 Note: Last actual year may include reported and estimated data. Source: Company data, Goldman Sachs Research estimates.

Analyst Contributors

Tian Lu, CFA Diana Zhao [email protected] [email protected]

Jacqueline Du [email protected]

Frank Shi [email protected]

Goldman Sachs Global Investment Research 2 September 2, 2016 Lonking Holdings (3339.HK)

Faster loader to excavator substitution slowing loader recovery

Exhibit 1: Excavator has been on a steady recovery path Exhibit 2: We attribute this mainly to excavator being since 2016 but loader sales growth is still in negative more efficient, even though it is pricier than loader… territory Lonking vs industry annual sales volume & yoy growth Excavator-to-loader replacement percentage

Loader ytd sales yoy Excavator ytd sales yoy Lonking loader ASP ('000 Rmb) 600 300.0% Lonking excavator ASP ('000 Rmb) 250.0% 500 200.0% 400 150.0% 100.0% 300 50.0% 0.0% 200 -50.0% 100 -100.0% - Jul-10 Oct-08 Oct-15 Jan-07 Jan-14 Feb-11 Apr-12 Dec-09 Jun-13 Sep-11 Mar-08 Mar-15 Aug-07 Aug-14 Nov-12 May-09 May-16

Source: Shangshi Consulting. Source: Shangshi Consulting, company data.

Exhibit 3: …Customers buy the cheaper loader in a weak Exhibit 4: We therefore lower our loader industry growth market but tend to switch to excavator when assumption to -11%/+5%/+8% on faster loader-to- construction activity improves excavator substitution

Ytd loader-to-excavator sales volume ratio (LHS) Unit Loader sales volume (LHS) Komatsu China excavator utilization hour yoy (RHS) Yoy growth - new (RHS) 3.00 0.4 300,000 20% Yoy growth - old (RHS) 0.3 8% 8% 2.50 246,832 10% 0.2 250,000 3% 8% 2.00 173,699 5% 0% 0.1 200,000 180,775 -10% 1.50 0 150,614 -11% -0.1 150,000 -20% 1.00 -0.2 73,961 -30% 100,000 73,581 68,801 0.50 65,810 -0.3 -40% 50,000 - -0.4 -50% 0 -60% Jul-10 Oct-08 Oct-15 Jan-07 Feb-11 Apr-12 Jan-14 Dec-09 Jun-13 Sep-11 Mar-08 Mar-15 Aug-07 Nov-12 Aug-14 May-09 May-16 2011 2012 2013 2014 2015 2016E 2017E 2018E

Source: Company data, Shangshi Consulting. Source: Shangshi Consulting, Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research 3 September 2, 2016 Lonking Holdings (3339.HK)

Exhibit 5: While Lonking also has exposure to the more Exhibit 6: We therefore lower our Lonking earnings favorable excavator and forklift business, loader still estimates, but still expect it to outperform the industry accounts for 53% of its total 2015A sales

Components Finance Industry loader sales volume (LHS) & Others leasing Lonking loader sales volume (LHS) Industry loader volume yoy growth (%) (RHS) 13% 0% 300,000 20% Lonking loader volume yoy growth (%) (RHS) Road Roller 10% 2% 250,000 0% 200,000 -10%

150,000 -20%

Forklift -30% 100,000 Loaders 21% -40% 53% 50,000 -50%

0 -60% Excavator 11%

Source: Company data. Source: Shangshi Consulting, company data, Goldman Sachs Global Investment Research.

We continue to favor Lonking for its strong cost control, healthy cash flow, and strong downside protection from credit risk

Exhibit 7: Lonking has one of the strongest cost controls Exhibit 8: …and has kept strong control over its cash among its peers, with its SG&A expense ratio only flow, generating steadily improving operating cash flow inching up by 6pp during the 2011-15 downcycle vs. yield, at 36% in 2015 Zoomlion/ Liugong up by 10pp/13pp…

Operating cash 2008 2009 2010 2011 2008 2009 2010 2011 2012 2013 2014 2015 flow yield 2012 2013 2014 2015 25% +13pp 40% SG&A as % of sales +10pp over over 30% 20% 2011-15 +6pp 2011-15 20% over 10% 15% 2011-15 0%

10% -10% -20% 5% -30% -40% 0% Lonking Zoomlion Liugong Sany Lonking Zoomlion Liugong Shantui

Source: Company data. Source: Company data.

Goldman Sachs Global Investment Research 4 September 2, 2016 Lonking Holdings (3339.HK)

Exhibit 9: Lonking now has a 21% on/off balance sheet financing provision rate and provides strong downside protection again further asset impairment risks Sany/Zoomlion/Liugong/Lonking on/off balance sheet financing analysis

Sany Zoomlion Liugong Lonking Rmb mn 2012 2013 2014 2015 2012 2013 2014 2015 2012 2013 2014 2015 2012 2013 2014 2015 On-balance sheet financing Total Accounts Receivables before provision 15,575 19,658 21,249 22,803 19,772 29,257 32,219 32,124 2,343 3,079 3,830 3,550 2,494 2,083 2,112 2,103 Total allowances 600 930 1,398 1,842 871 1,451 1,780 2,380 183 293 361 399 97 145 188 286 Effective allowance rate 3.9% 4.7% 6.6% 8.1% 4.4% 5.0% 5.5% 7.4% 7.8% 9.5% 9.4% 11.2% 3.9% 6.9% 8.9% 13.6% Total Other Receivables before provision 1,384 1,802 2,563 2,451 1,183 640 1,022 1,526 184 244 290 333 856 1,346 1,255 920 Total allowances 44 69 157 191 58 66 95 116 10 18 21 13 69 205 311 397 Effective allowance rate 3.2% 3.8% 6.1% 7.8% 4.9% 10.4% 9.3% 7.6% 5.2% 7.3% 7.2% 3.9% 8.1% 15.3% 24.7% 43.1% Finance lease receivables - short-term 0 0 0 0 10,218 11,394 13,075 13,429 3,493 2,669 2,043 2,199 235 26 36 74 Finance lease receivables - long-term 0 150 379 264 11,281 8,121 4,663 2,650 3,119 2,675 2,055 2,479 79 6 3 7 Total allowances 0 0 4 2 300 731 654 645 101 198 174 186 5 2 2 2 Effective allowance rate - - 1.0% 0.9% 1.4% 3.7% 3.7% 4.0% 1.5% 3.7% 4.2% 4.0% 1.7% 5.9% 5.0% 2.3% Total on-balance sheet financing 16,958 21,610 24,190 25,519 42,453 49,412 50,978 49,730 9,139 8,667 8,219 8,561 3,663 3,461 3,406 3,104 Total allowances 644 998 1,559 2,035 1,229 2,249 2,529 3,141 293 508 555 599 172 352 500 684 Off-balance sheet financing Outstanding Mortgage guarantees 24,486 18,971 12,839 7,622 12,385 15,044 14,525 8,186 448 423 254 103 0 0 0 0 Total allowances 122000000000000000 Effective allowance rate 0.5% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Guarantee exposure to third-party leasing 12,230 9,266 11,955 8,842 892 2,669 2,741 2,089 0 0 0 0 1,074 1,108 469 150 Total off-balance sheet financing 36,716 28,237 24,794 16,464 13,278 17,712 17,266 10,275 448 423 254 103 1,074 1,108 469 150 Total allowances 122000000000000000 Total on & off balance sheet items Total on & off-balance sheet financing balance 53,674 49,847 48,984 41,983 55,731 67,124 68,245 60,005 9,587 9,089 8,473 8,664 4,737 4,569 3,875 3,254 Effective allowance rate 1.4% 2.0% 3.2% 4.8% 2.2% 3.4% 3.7% 5.2% 3.1% 5.6% 6.6% 6.9% 3.6% 7.7% 12.9% 21.0%

Source: Company data.

Exhibit 10: Our new 12-m TP for Lonking is HKD1.50 Exhibit 11: It currently trades at -1STD P/B…

12-m rolling forward P/B (x) Lonking Holdings 4.0 P/B Avg -1 SD +1 SD

2017E 3339.HK 3.5 Sector EV/GCI vs. CROCI/WACC 0.90x Historical EV/GCI premium/ (discount) -13% 3.0 Current EV/GCI premium/ (discount) -4% Premium/ (discount) applied 10% CROCI/WACC 0.8x 2.5 Implied EV/GCI 0.8x +1 SD, 2.1 Gross capital invested (RMB mn) 9,049 2.0 Implied EV (RMB mn) 7,539 Net debt and minority interest (RMB mn) 1,916 1.5 Avg, 1.4 Implied market cap (RMB mn) 5,623 Number of shares (mn) 4,280 1.0 Pricing currency HK$ Target price 1.5 0.5 -1 SD, 0.7 Current price 1.26 Upside/downside to target price 21% 0.0 Rating Buy Implied 2016 P/E 27.5x Implied 2017 P/E 20.1x Jul-16 Jul-11 Oct-12 Jan-14 Apr-15 Feb-16 Jan-09 Apr-10 Feb-11 Jun-14 Dec-11 Jun-09 Sep-15 Sep-10 Mar-13 Aug-13 Nov-14 Nov-09 Implied 2018 P/E 17.2x May-12

Source: Datastream, Goldman Sachs Global Investment Research. Source: Datastream, Goldman Sachs Global Investment Research.

Exhibit 12: …and offers an attractive growth profile among its construction machinery peers Global construction machinery comps table

China Construction Machinery Comps Market cap P/E P/B EV/EBITDA EPS Growth ROE CROCI Net debt/equity Company Ticker Price Rating (US$ mn) 2016E 2017E 2016E 2017E 2016E 2017E 2016E 2017E 2016E 2017E 2016E 2017E 2016E Sany Heavy 600031.SS Rmb5.3 Buy 6,009 103.9X 38.8X 1.7X 1.7X 19.9X 14.1X 179% 168% 2% 4% 7% 9% 67% Shantui 000680.SZ Rmb5.1 Neutral 944 2.4X 2.9X 34% 21% -20% -19% -3% 0% 91% Heli 600761.SS Rmb11.1 Neutral 1,027 17.8X 15.8X 1.6X 1.5X 10.1X 8.8X -3% 12% 9% 10% 11% 11% -18% Guangxi Liugong 000528.SZ Rmb6.9 Neutral 1,156 79.6X 60.9X 0.9X 1.0X 22.9X 19.7X 355% 31% 1% 2% 10% 10% 24% Lonking Holdings 3339.HK HK$1.3 Buy 690 22.9X 16.4X 0.7X 0.7X 12.9X 9.2X 72% 40% 3% 4% 7% 8% 35% Median 51.3X 27.6X 1.6X 1.5X 16.4X 11.7X 72% 31% 2% 4% 7% 9% 35% Global Machinery Comps Market cap P/E P/B EV/EBITDA EPS Growth ROE CROCI Net debt/equity Company Ticker Price Rating (US$ mn) 2016E 2017E 2016E 2017E 2016E 2017E 2016E 2017E 2016E 2017E 2016E 2017E 2016E Komatsu 6301.T ¥2214.5 Not Rated 20,221 20.4X 23.0X 1.4X 1.4X 8.4X 9.0X -27% -11% 7% 6% 10% 9% 9% Hitachi Construction Machinery 6305.T ¥1894 Neutral 3,901 76.6X 26.7X 1.0X 1.0X 8.7X 7.6X -57% 187% 1% 4% 4% 7% 12% Manitowoc Co. MTW $4.9 Neutral 665 1.0X 1.0X 14.3X 10.2X -127% 80% -4% -1% -7% 3% 31% Terex Corp. TEX $24 Buy 2,638 27.3X 19.7X 1.4X 1.3X 9.9X 8.8X -53% 39% 5% 7% 4% 8% 49% Caterpillar Inc. CAT $81.5 Neutral 47,575 22.4X 20.7X 3.0X 2.9X 9.0X 8.3X -18% 8% 14% 14% 10% 10% 22% Volvo VOLVb.ST Skr92.8 Neutral 23,764 16.0X 14.0X 2.1X 1.9X 5.8X 5.2X -22% 14% 14% 14% 11% 11% -3% Joy Global Inc. JOY $27.3 Not Rated 2,658 117.3X 68.7X 1.9X 1.9X 14.0X 12.5X -85% 71% 2% 3% 6% 7% 46% Median 24.8X 21.9X 1.4X 1.4X 9.0X 8.8X -53% 39% 5% 6% 6% 8% 22% Price as of 2-Sep-2016 close All financials are calendar-year based.

Source: Datastream, Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research 5 September 2, 2016 Lonking Holdings (3339.HK)

Disclosure Appendix Reg AC We, Tian Lu, CFA, Jacqueline Du, Frank Shi and Diana Zhao, hereby certify that all of the views expressed in this report accurately reflect our personal views about the subject company or companies and its or their securities. We also certify that no part of our compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.

Unless otherwise stated, the individuals listed on the cover page of this report are analysts in Goldman Sachs' Global Investment Research division. Investment Profile The Goldman Sachs Investment Profile provides investment context for a security by comparing key attributes of that security to its peer group and market. The four key attributes depicted are: growth, returns, multiple and volatility. Growth, returns and multiple are indexed based on composites of several methodologies to determine the stocks percentile ranking within the region's coverage universe. The precise calculation of each metric may vary depending on the fiscal year, industry and region but the standard approach is as follows: Growth is a composite of next year's estimate over current year's estimate, e.g. EPS, EBITDA, Revenue. Return is a year one prospective aggregate of various return on capital measures, e.g. CROCI, ROACE, and ROE. Multiple is a composite of one-year forward valuation ratios, e.g. P/E, dividend yield, EV/FCF, EV/EBITDA, EV/DACF, Price/Book. Volatility is measured as trailing twelve-month volatility adjusted for dividends. Quantum Quantum is Goldman Sachs' proprietary database providing access to detailed financial statement histories, forecasts and ratios. It can be used for in-depth analysis of a single company, or to make comparisons between companies in different sectors and markets. GS SUSTAIN GS SUSTAIN is a global investment strategy aimed at long-term, long-only performance with a low turnover of ideas. The GS SUSTAIN focus list includes leaders our analysis shows to be well positioned to deliver long term outperformance through sustained competitive advantage and superior returns on capital relative to their global industry peers. Leaders are identified based on quantifiable analysis of three aspects of corporate performance: cash return on cash invested, industry positioning and management quality (the effectiveness of companies' management of the environmental, social and governance issues facing their industry). Disclosures Coverage group(s) of stocks by primary analyst(s) Tian Lu, CFA: Asia Pacific Infrastructure, China Capital Goods. Jacqueline Du: Asia Pacific Infrastructure, China Capital Goods. Asia Pacific Infrastructure: China Communications Construction (A), China Communications Construction (H), China Machinery Engineering Corp., China Railway Construction (A), China Railway Construction (H), China Railway Group (A), China Railway Group (H), China State Construction Intl, Sinopec Engineering Group. China Capital Goods: China Railway Signal & Communication, CRRC Corp. (A), CRRC Corp. (H), Dongfang Electric Corp. (A), Dongfang Electric Corp. (H), Estun Automation Co., Guangxi Liugong, Haitian International Holdings, Han's Laser Technology Industry Group, Hangzhou Zhongheng Electric Co., Heli, Henan Pinggao Electric Co, Hollysys Automation Technologies Ltd., Huagong Tech Co., Lonking Holdings, Sany Heavy, Sany International, Shanghai Electric Group (A), Shanghai Electric Group (H), Shanghai STEP Electric Corp., Shantui, Shenzhen Inovance Techology Co., Siasun Robot&Automation Co., Tian Di Science & Technology, Yangtze Optical Fibre and Cable, Zhengzhou Coal Machinery, Zhuzhou CRRC Times Electric Co., Zoomlion (A), Zoomlion (H). Company-specific regulatory disclosures The following disclosures relate to relationships between The Goldman Sachs Group, Inc. (with its affiliates, "Goldman Sachs") and companies covered by the Global Investment Research Division of Goldman Sachs and referred to in this research. Goldman Sachs had a non-securities services client relationship during the past 12 months with: Lonking Holdings (HK$1.25) Distribution of ratings/investment banking relationships Goldman Sachs Investment Research global Equity coverage universe

Rating Distribution Investment Banking Relationships Buy Hold Sell Buy Hold Sell Global 31% 54% 15% 66% 60% 50% As of July 1, 2016, Goldman Sachs Global Investment Research had investment ratings on 2,963 equity securities. Goldman Sachs assigns stocks as Buys and Sells on various regional Investment Lists; stocks not so assigned are deemed Neutral. Such assignments equate to Buy, Hold and Sell for the purposes of the above disclosure required by the FINRA Rules. See 'Ratings, Coverage groups and views and related definitions' below. The Investment Banking Relationships chart reflects the percentage of subject companies within each rating category for whom Goldman Sachs has provided investment banking services within the previous twelve months.

Goldman Sachs Global Investment Research 6 September 2, 2016 Lonking Holdings (3339.HK)

Price target and rating history chart(s)

Lonking Holdings (3339.HK) Stock Price Currency : Hong Kong Dollar Goldman Sachs rating and stock price target history 3.00 16,000 2.3 15,000 2.50 2.2 2 1.8 14,000 1.8 1.1 1.2 13,000 2.00 1.5 1.4 1.4 1.1 12,000 1.50 11,000 1.7 10,000 1.00 9,000 1.6 0.50 8,000 7,000 0.00 6,000 May 20 Apr 6 B N B A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J 2013 2014 2015 2016 Index Price Stock Price Source: Goldman Sachs Investment Research for ratings and price targets; FactSet closing prices as of 6/30/2016. Rating Covered by Tian Lu, CFA Pric e tar get Price target at removal Not covered by current analyst Hang Seng China Ent. Index

The price targets show n should be considered in the context of all prior published Goldman Sachs research, which may or may not have included price targets, as w ell as developments relating to the company, its industry and financial markets.

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Analyst compensation: Analysts are paid in part based on the profitability of Goldman Sachs, which includes investment banking revenues. Analyst as officer or director: Goldman Sachs policy prohibits its analysts, persons reporting to analysts or members of their households from serving as an officer, director, advisory board member or employee of any company in the analyst's area of coverage. Non-U.S. Analysts: Non-U.S. analysts may not be associated persons of Goldman, Sachs & Co. and therefore may not be subject to FINRA Rule 2241 or FINRA Rule 2242 restrictions on communications with subject company, public appearances and trading securities held by the analysts. Distribution of ratings: See the distribution of ratings disclosure above. 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Association. Sales and purchase of equities are subject to commission pre-determined with clients plus consumption tax. See company-specific disclosures as to any applicable disclosures required by Japanese stock exchanges, the Japanese Securities Dealers Association or the Japanese Securities Finance Company. Ratings, coverage groups and views and related definitions Buy (B), Neutral (N), Sell (S) -Analysts recommend stocks as Buys or Sells for inclusion on various regional Investment Lists. Being assigned a Buy or Sell on an Investment List is determined by a stock's return potential relative to its coverage group as described below. Any stock not assigned as a Buy or a Sell on an Investment List is deemed Neutral. 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The investment rating and target price have been removed pursuant to Goldman Sachs policy when Goldman Sachs is acting in an advisory capacity in a merger or strategic transaction involving this company and in certain other circumstances. Rating Suspended (RS). Goldman Sachs Research has suspended the investment rating and price target for this stock, because there is not a sufficient fundamental basis for determining, or there are legal, regulatory or policy constraints around publishing, an investment rating or target. The previous investment rating and price target, if any, are no longer in effect for this stock and should not be relied upon. Coverage Suspended (CS). Goldman Sachs has suspended coverage of this company. Not Covered (NC). Goldman Sachs does not cover this company. Not Available or Not Applicable (NA). The information is not available for display or is not applicable. Not Meaningful (NM). The information is not meaningful and is therefore excluded. 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may fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments. Certain transactions, including those involving futures, options, and other derivatives, give rise to substantial risk and are not suitable for all investors. Investors should review current options disclosure documents which are available from Goldman Sachs sales representatives or at http://www.theocc.com/about/publications/character-risks.jsp. Transaction costs may be significant in option strategies calling for multiple purchase and sales of options such as spreads. Supporting documentation will be supplied upon request. All research reports are disseminated and available to all clients simultaneously through electronic publication to our internal client websites. Not all research content is redistributed to our clients or available to third-party aggregators, nor is Goldman Sachs responsible for the redistribution of our research by third party aggregators. For research, models or other data available on a particular security, please contact your sales representative or go to http://360.gs.com. Disclosure information is also available at http://www.gs.com/research/hedge.html or from Research Compliance, 200 West Street, New York, NY 10282. © 2016 Goldman Sachs. No part of this material may be (i) copied, photocopied or duplicated in any form by any means or (ii) redistributed without the prior written consent of The Goldman Sachs Group, Inc.

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