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研 [Table_Title] Company Report: Everbright International (00257 HK) Gary Wong 黄家玮

究 (852) 2509 2616 EquityResearch 公司报告： 中国光大国际 (00257 HK) [email protected]

20 March 2020 Valuation[Table_Summary] Attractive Despite Slowdown in Growth, Upgrade to "Buy" 增长放慢但估值吸引，上调至“买入”评级

公  China Everbright International's (00257 HK, the "Company") revenue in [Table_Rank] 司 Rating: Buy 2019 increased by 37.9% YoY to HK$37.6 billion. Profit attributable to Upgraded 报 shareholders increased by 20.5% YoY to HK$5.2 billion. Results slightly exceeded expectation.Gross profit margin was 30.5%, a decrease of 4.1 告 评级： 买入(上调) ppt. YoY. Administrative expense ratio decreased by 0.7 ppts YoY to 6.3%.

CompanyReport Finance cost ratio decreased by 0.2 ppts YoY to 4.9%. 6[Table_Price]-18m TP 目标价 : HK$6.20 原目标价  We expect environmental energy revenue to increase at a CAGR of 1.8% Revised from : HK$8.50

and environmental water revenue to increase at a CAGR of 19.3% in Share price 股价: HK$3.770 2019-2022. In addition, due to shorter construction cycle of greentech projects compared with WTE and water projects, and new capacity to release even faster, we expect greentech business revenue to increase at a CAGR of Stock performance 31.3% in 2019-2022. 股价表现 [Table_QuotePic]  Our EPS estimates are HK$0.918, HK$1.027 and HK$1.153 for 2020/ 2021/ 10.0 % of 2022, respectively. We lower TP to HK$6.20, representing 7.3x 2020 return 证 0.0 EV/EBITDA. Upgrade to "Buy" with its current attractive valuation and

券 leading position in the solid waste treatment industry. (10.0) Report 研 (20.0)

 中国光大国际(00257 HK，“公司”)2019 年收入同比增 37.9%至 376 亿元(港元，下同)。

(30.0) 究 股东净利润同比增 20.5%至 52 亿元，业绩略高于预期。毛利率同比跌 4.1 个百分点至 30.5%。管理费用率同比降 0.7 个百分点至 6.3%，财务费用率同比降 0.2 个百分点至 4.9%。 (40.0) 报 (50.0) 告  我们预计 2019-2022 年环保能源收入将以 1.8%的年复合增长率增长，而环保水务收入将 以 19.3%的年复合增长率增长。此外，因绿色科技项目相对于垃圾发电与水务项目的建设 (60.0) EquityResearch Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 周期较短，新产能将会释放得更为迅速，我们预计 2019-2022 年绿色科技收入将以 31.3% HSI index CHINA EVERBR INT [Tab 的年复合增长率增长。

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 证券研究报告 我们对 2020、2021 和 2022 年每股盈利的预测分别为 0.918 港元、1.027 港元及 1.153 Change[Table_PriceChange] in Share Price 1 M 3 M 1 Y nfo1 港元。我们将目标价下调至 6.20 港元，对应 7.3 倍的 2020 年预期企业价值倍数。鉴于公 股价变动 1 个月 3 个月 1 年 环 司吸引的估值和固废处置行业龙头的地位，上调至“买入”评级。 ] Abs. % (32.7) (39.4) (52.3) 保 绝对变动 % Rel. % to HS Index (11.3) (17.3) (26.3) 行 相对恒指变动 %

业 Avg. Share price(HK$) 4.9 5.6 6.4

平均股价（港元）

Source: Bloomberg, Guotai Junan International. Environmental Protection Sector

[Tabl Year[Table_ End Turnover Net Profit EPS EPS PER BPS PBR DPS Yield ROE e_Inf 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 o2] 12/31 (HK$ m) (HK$ m) (HK$) (△%) (x) (HK$) (x) (HK$) (%) (%) 2018A 27,228 4,319 0.858 9.6 4.4 6.737 0.6 0.240 6.4 15.3 中 2019A 37,558 5,203 0.847 (1.3) 4.5 5.917 0.6 0.260 6.9 14.8 国 2020F 40,375 5,640 0.918 8.4 4.1 6.575 0.6 0.260 6.9 14.7 光中 2021F 45,529 6,308 1.027 11.9 3.7 7.342 0.5 0.260 6.9 14.8 大 2022F 51,066 7,080 1.153 12.3 3.3 8.234 0.5 0.260 6.9 14.8 外 国 Shares in issue (m) 总股数 (m) 6,143.0 Major shareholder 大股东 Ltd 42.0% 运 [Table_BaseData] 际 Market cap. (HK$ m) 市值 (HK$ m) 23,159.1 Free float (%) 自由流通比率(%) 58.0 输 3 month average vol. 3 个月平均成交股数(‘000) 18,017.7 FY20 Net gearing (%) FY20 净负债/股东资金 (%) 102.5 52 Weeks high/low (HK$) 52 周高/低 (HK$) 8.190 / 3.770 FY20 Est. NAV (HK$) FY20 每股估值（港元） 8.5

Source: the Company, Guotai Junan International. China Everbright International China(00257 HK) Everbright International Seethe lastpage fordisclaimer Page 1 of 8

[Table_PageHeader]China Everbright International (00257 HK)

2019 shareholders’ net profit increased 20.5% YoY to HK$5.2 billion. Results slightly exceeded expectation. China

Everbright International's (00257 HK) revenue in 2019 increased by 37.9% YoY to HK] $1 37.6r a billion.M t h Profitg i attributableR _ e l b to a T [

shareholders increased by 20.5% YoY to HK$5.2 billion, and earnings per share decreased by 1.2% YoY to HK$0.847 (due to

2019 fully reflecting the dilution effect of the rights offering which happened in September 2018). The results slightly exceeded expectations, mainly due to significantly higher-than-expected revenue growth rate in construction services. In particular, construction revenue increased 43.7% YoY to HK$23.8 billion, operation revenue increased 37.4% YoY to HK$9.4 billion, finance income increased 19.1% YoY to HK$3.1 billion, and revenue from equipment construction and others increased 1.7%

YoY to HK$1.2 billion. The Company’s overall gross profit margin was 30.5%, a decrease of 4.1 ppt. YoY, mainly because of 20 March2020 faster revenue growth of environmental energy construction projects which had lower gross profit margin compared with the other segments. Administrative expense ratio decreased by 0.7 ppts YoY to 6.3% due to improved economies of scale, while finance cost ratio decreased by 0.2 ppts YoY to 4.9% due to the increase in borrowings. Expenses were basically under control.

Figure 1: CEI Segment Revenue in 2019 Figure 2: CEI Segment EBIDTA in 2019 Others Others 11.4% 4.5%

Greentech 24.7% Greentech

] 2 r a M t h g i R _ e l b a T [ 24.2% Env ironmental Energy Env ironmental 51.8% Energy

56.8%

Env ironmental Env ironmental Water Water 14.1% 12.7% (00257 HK)

Source: the Company. Source: the Company.

中国光大国际 Table 1: CEI Segment Revenue Summary for 2019 Revenue (HKD ’000) Environmental Energy YoY Greentech YoY Environmental Water YoY Total YoY

Construction Services 15,720,547 61.9% 4,919,759 19.2% 3,206,597 16.1% 23,846,903 43.7%

Operation Services 3,723,750 28.3% 4,165,018 52.5% 1,547,984 25.2% 9,436,752 37.4%

Finance Income 2,093,907 21.1% 194,531 38.1% 796,192 10.5% 3,084,630 19.1%

Total 21,538,204 50.2% 9,279,308 32.6% 5,550,773 17.6% 36,368,285 39.6%

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

Table 2: CEI Investment Summary for Projects at Different Stages

HKD ’000 2015 2016 2017 2018 2019 17,700,000 25,681,000 36,476,077 43,787,000 62,532,000 Completed Projects

YoY 21.2% 45.1% 42.0% 20.0% 42.8%

Construction in Progress Projects 7,740,000 14,462,000 19,150,935 26,052,000 29,820,000

YoY 73.8% 86.8% 32.4% 36.0% 14.5%

Preparatory Stage Projects 11,685,000 13,069,000 17,265,834 24,646,000 31,449,000

YoY 4.3% 11.8% 32.1% 42.7% 27.6% Source: the Company, Guotai Junan International.

We expect environmental energy revenue to increase at a CAGR of 1.8% in 2019-2022. Environmental energy revenue was up 50.2%, of which revenue from construction services and operations services was up 61.9% and28.3%, respectively, to HK$15.7 billion and HK$3.7 billion. Making use of the funds from rights offering, the Company substantially increased its

construction services business and secured 34new WTE projects in 2019 (2018: 18 projects) and 2 supplementary agreements

for existing WTE projects in 2019 (2018: 2 projects). Although the pipeline is still abundant due to the WTE industry entering a Company Report mature stage, government subsidy decrease is likely to become a trend. We expect the Company to gradually relocate more

Seethe lastpage fordisclaimer Page 2 of 8 [Table_PageHeader]China Everbright International (00257 HK)

resources to other solid waste treatment segments or the greentech energy segment, and expect theCAGR of construction

services revenue to be -5.3% in 2019-2022. Operations services revenue growth decelerated] 1 fromr a 65.2%M t h ing 2018i R to_ 28.3%e l b in a T [

2019. With a likely decrease in new WTE projects, we expect growth of operation revenue to continue to decrease and expect a

CAGR of 23.1% in 2019-2022. Overall, we expect environmental energy revenue to increase at a CAGR of 1.8% in 2019-2022.

Table 3: CEI Environmental Energy Segment Revenue Breakdown HKD ’000 2015 2016 2017 2018 2019

Construction Services 3,715,228 5,779,429 8,178,207 9,709,674 15,720,547 20 March2020

YoY 32.2% 55.6% 41.5% 18.7% 61.9%

2,428,977 3,723,750 Operation Services 880,281 1,117,978 1,548,830 YoY 15.5% 27.0% 55.3% 87.4% 28.3% Finance Income 804,863 1,007,704 1,332,691 1,728,708 2,093,907 YoY 28.0% 25.0% 32.3% 29.7% 21.1% Source: the Company, Guotai Junan International.

Table 4: CEI Operations Statistics of Solid Waste Treatment HKD ’000 2015 2016 2017 2018 2019

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

Household Waste Treatment Number of Projects 46 60 75 93 125 Annual Treatment Capacity (tons) 31,791,500 41,738,000 13,797,000 18,596,750 24,108,250 Actual Annual Treatment Volume (tons) 6,928,000 8,933,000 11,743,000 18,079,000 21,515,000 Utilization Rate (%) 50.2% 48.0% 48.7% 57% 51.5% Electricity Capacity (MWh) 4,145,459 5,788,110 7,551,890 5,419,543 6,617,870 Electricity Generated (MWh) 9,571,626 13,696,451 (00257 HK) 1,883,199 2,473,110 3,432,697

Industrial Waste Treatment Number of Projects 13 22 29 33 51 Annual Treatment Capacity (tons) 998,090 2,229,370

293,000 439,000 674,150 中国光大国际 Actual Annual Treatment Volume (tons) 52,000 98,000 113,000 127,000 198,000

Sludge Treatment Number of Projects 1 1 3 3 5 Annual Treatment Capacity (tons) 18,000 18,250 73,000 73,000 157,000

Food Waste Treatment Number of Projects 2 2 6 12 18 Annual Treatment Capacity (tons) 73,000 73,000 237,250 658,825 865,000 Source: the Company, Guotai Junan International. China Everbright International Note: Industrial Waste Treatment is included in greentech segment.

We expect environmental water revenue to increase at a CAGR of 19.3% in 2019-2022. The Company operated environmental water business through its 73% listed subsidiary China Everbright Water ("CEW", 01857 HK). As at 31 December 2019, CEW operated 96 municipal waste water treatment projects (2018: 87 projects). During 2019, construction services revenue increased 16.1% to HK$3.2 billion, while operations services revenue increased 25.2% to HK$1.5 billion. As the Government is implementing a more market-driven approach to regulate the tariff on waste water treatment to encourage investment, we expect tariffs to gradually hike in the future. Being one of the largest waste water treatment companies in the field, we expect construction services revenue, which increases with increase in construction investment and therefore the operation services revenue, to continue to increase at a fast pace. We expect construction services revenue to increase at a CAGR of 19.9% in 2019-2022, and the revenue CAGR of operations services at 20.6% in 2019-2022 due to new capacity release. Overall, we expect environmental water revenue to increase at a CAGR of 19.3% in 2019-2022.

Company Report

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tOpPxOmOoOnNsM8O9R9PsQqQpNpPlOnNnOeRpNmM9PqRxOvPpOmNuOrMsM [Table_PageHeader]China Everbright International (00257 HK)

Table 5: CEI Environmental Water Segment Revenue Breakdown

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

HKD ’000 2015 2016 2017 2018 2019

Construction Services 591,890 1,133,784 2,111,292 2,761,642 3,206,597

YoY 428.10% 91.60% 86.20% 30.80% 16.1%

Operation Services 755,365 821,478 879,137 1,236,683 1,547,984

YoY 20.30% 8.80% 7.00% 40.67% 25.2% 20 March2020 Finance Income 467,895 538,775 601,204 720,714 796,192

YoY 50.60% 15.10% 11.60% 19.88% 10.5% Source: the Company, Guotai Junan International.

Table 6: CEI Operation Statistics of Environmental Water Segment HKD ’000 2015 2016 2017 2018 2019 Waste Water Treatment Number of Projects 60 70 79 87 96 Annual Treatment Capacity (’000 tons) 1,397,950 1,538,475 1,551,250 1,683,234 1,876,684 Actual Treatment Capacity (’000 tons) 899,163 1,148,279 1,187,615 1,271,248 1,433,805 Source: the Company, Guotai Junan International.

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

We expect greentech business revenue to increase at a CAGR of 31.3% in 2019-2022. The Company operated greentech

business through its 70% held subsidiary China Everbright Greentech ("CEG", 01257 HK). As at 31 December 2019, CEG had a total of 109greentech projects (2018: 93 projects), which included 48 integrated biomass utilization projects, 51hazardous waste treatment projects, 7 solar energy projects, 2 wind power projects and 1 environmental protection enterprise.

Construction services revenue increased 19.2% to HK$4.9 billion, while operations services revenue increased by 52.5% to (00257 HK)

HK$4.2 billion,and is CEI’s largest operating segment. Despite a decrease in number of integrated biomass utilization projects from 51 to 48 slightly hurting revenue, it was more than compensated by the substantial increase in number of hazardous waste treatment projects from 33 to 51. With a separately listed financing platform, greentech revenueshould maintain faster growth in

construction and operations services compared with environmental energy and environmental water due to a shorter 中国光大国际 construction cycle. We expect construction services revenue and operations services revenue to increase at a CAGR of 15.0% and 31.9% in 2019-2022. Overall, we expect greentech business revenue to increase at a CAGR of 31.3% in 2018-2021.

Table 7: CEI Greentech Segment Revenue Breakdown HKD ’000 2015 2016 2017 2018 2019 Construction Services 608,731 2,073,986 2,952,979 4,127,440 4,919,759 YoY (13.6%) 240.7% 42.4% 39.8% 19.2% Operation Services 549,260 914,988 1,547,358 2,730,775 4,165,018 YoY 46.7% 66.6% 69.1% 76.5% 52.5% China Everbright International Finance Income 18,690 36,966 79,755 140,848 194,531 YoY 32.1% 97.8% 115.8% 76.6% 38.1% Source: the Company, Guotai Junan International.

Table 8: CEI Operation Statistics of Greentech Segment 2015 2016 2017 2018 2019

Electricity Capacity (MWh) 3,117,686 4,677,806 6,535,629 7,120,003 6,623,903

Electricity Generated (MWh) 511,852 891,407 1,667,503 2,873,871 4,095,179

Annual Agricultural Waste Treatment (tons) 3,970,000 6,199,800 8,449,800 8,699,800 8,089,800

Annual Heat (tons) 1,371,000 1,613,700 1,752,000 2,112,000 3,179,000

Total Investment (RMB ’000) 9,640,000 13,956,000 19,758,163 24,305,000 29,130,000

Source: the Company, Guotai Junan International. Note: As the electricity generated by those projects were small and negligible. Hence, the electricity capacity and generated figures for the two years should be comparable with those of other years.

We expect overall gross margin to improve from 30.5% in 2019 to 32.1% in 2022.During 2019, the Company’s overall

gross profit margin was 30.5%, a decrease of 4.1 ppt YoY, mainly due to fast increase in revenue for lower gross margin Company Report environmental energy construction business. Going forward, with an expected slowdown in construction services revenue growth and new projects starting commencement of operations, we expect that revenue contribution from operations services Seethe lastpage fordisclaimer Page 4 of 8 [Table_PageHeader]China Everbright International (00257 HK)

will increase from 25.1% in 2019 to 37.6% in 2022. As operations services gross margins are higher than those of construction

services business, we expect overall gross margin to improve from 30.5% in 2019 to 32.1%] in1 2022.r a M t h g i R _ e l b a T [

We expect net gearing to increase from 92.6% as at end of 2019 to 116.9% as at end of 2022. We expect that the next three years will still be the Company’s heavy investment period and capital expenditures will not reduce, while the relatively loose financing environment now encourages borrowing. We think that the Company will continue to finance its capex through borrowings, which will drive up net gearing. We expect net gearing to increase from 92.6% as at end of 2019 to 116.9% as at end of 2022. 20 March2020

Lower the TP to HK$6.20, upgrade to "Buy". Our EPS estimates are HK$0.918, HK$1.027 and HK$1.153 for 2020/2021/ 2022, respectively, representing EPS CAGR of 10.8% during 2019-2022. We agree that due to substantial market correction and the slowdown in the Company’s profit growth, the Company deserves a valuation discount compared with its historical average, however current discount of nearly 50% to its historical average of 10.4x forward EV/EBITDA is simply too much. With the Company’s leading position in solid waste treatment industry, it is likely to emerge as one of the winners of market consolidation, and when the market picks up again, so will the Company’s valuation. We think a 30% discount to its 5-year historical valuation seems more sensible and we have arrived at a TP of HK$6.20, representing 7.3x 2020 EV/EBITDA. Upgrade to "Buy" with its current attractive valuation.

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

Figure 3: CEI Forward PE Ratio Figure 4: CEI Forward EV/EBITDA Ratio

30 20

18 25 16 20

14 (00257 HK)

15 12

10 10 8 5 6 中国光大国际

0 4

3/2015 7/2015 3/2016 7/2016 3/2017 7/2017 3/2018 7/2018 3/2019 7/2019 3/2020 3/2015 7/2015 3/2016 7/2016 3/2017 7/2017 3/2018 7/2018 3/2019 7/2019 3/2020

11/2016 11/2017 11/2018 11/2019 11/2015 11/2016 11/2017 11/2018 11/2019 11/2015 Source: Bloomberg. Source: Bloomberg.

China Everbright International

Company Report

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Table 9: Peers Comparison

PE ] 1 r a M t PBh g i R _ ROEe l b D/Y a T [ Company Stock Code Currency Last Price Market Cap(mn) 18A 19F 20F 21F 18A 19F 20F 21F 20F 20F Solid Waste Treatment

China Everbright Intl Ltd 257 HK HKD 3.770 23,159 4.4 4.5 3.8 3.3 0.7 0.6 0.6 0.5 15.5 7.9 Dongjiang Environmental-H 895 HK HKD 5.290 8,238 9.5 9.0 7.3 6.0 1.0 1.0 0.9 0.8 11.7 3.3 Dynagreen Environmental Pr-H 1330 HK HKD 2.610 9,056 8.8 7.0 5.4 4.3 0.9 0.9 0.8 0.7 14.1 5.6 Canvest Environmental Protec 1381 HK HKD 3.500 8,538 11.4 9.6 7.9 7.0 1.6 1.4 1.3 1.1 16.8 2.3

Capital Environment Holdings 3989 HK HKD 0.109 1,558 7.2 n.a. n.a. n.a. 0.4 n.a. n.a. n.a. n.a. n.a. 20 March2020 New Universe Environmental G 436 HK HKD 0.201 610 8.2 n.a. n.a. n.a. 0.7 n.a. n.a. n.a. n.a. n.a. Beijing Enterprises Environm 154 HK HKD 0.425 638 2.4 n.a. n.a. n.a. 0.2 n.a. n.a. n.a. n.a. n.a. Simple Average 7.4 7.5 6.1 5.2 0.8 1.0 0.9 0.8 14.5 4.8

Weighted Average 7.2 6.6 5.4 4.6 0.9 0.9 0.8 0.7 14.8 5.7

Waste Water Treatment

China Everbright Intl Ltd 257 HK HKD 3.770 23,159 4.4 4.5 3.8 3.3 0.7 0.6 0.6 0.5 15.5 7.9 Beijing Enterprises Water Gr 371 HK HKD 2.720 27,258 5.7 5.1 4.5 4.0 1.0 0.9 0.8 0.7 18.1 8.4 China Water Affairs Group 855 HK HKD 5.290 8,485 7.3 6.2 5.3 4.7 1.2 1.1 0.9 0.8 17.7 6.1 Guangdong Investment Ltd 270 HK HKD 12.220 79,892 15.9 15.7 14.2 13.1 2.0 1.9 1.8 1.8 12.9 5.2 Tianjin Capital Environ-H 1065 HK HKD 2.220 9,066 5.3 n.a. n.a. n.a. 0.5 n.a. n.a. n.a. n.a. n.a.

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

Ct Environmental Group Ltd 1363 HK HKD 0.340 2,148 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Siic Environment Holdings Lt 807 HK HKD 1.250 3,254 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 7.8 n.a. Yunnan Water Investment -H 6839 HK HKD 1.090 1,301 2.8 n.a. n.a. n.a. 0.3 n.a. n.a. n.a. n.a. n.a.

Kunming Dianchi Water Trea-H 3768 HK HKD 1.860 1,914 4.6 4.5 4.0 3.8 0.4 0.4 0.4 0.4 n.a. 12.3 China Water Industry Group L 1129 HK HKD 0.315 503 75.0 n.a. n.a. n.a. 0.4 n.a. n.a. n.a. n.a. n.a. Kangda International Environ 6136 HK HKD 0.710 1,443 4.0 n.a. n.a. n.a. 0.3 n.a. n.a. n.a. n.a. n.a.

Luzhou Xinglu Water Group -H 2281 HK HKD 1.220 1,049 5.7 n.a. n.a. n.a. 0.5 n.a. n.a. n.a. n.a. n.a. (00257 HK)

Simple Average 13.1 7.2 6.4 5.8 0.7 1.0 0.9 0.8 14.4 8.0

Weighted Average 11.0 11.1 9.9 9.1 1.4 1.4 1.3 1.3 14.5 6.4 Source: Bloomberg.

中国光大国际

China Everbright International

Company Report

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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 (HKD m) 2018A 2019A 2020F 2021F 2022F Year end 31 Dec (HKD m) 2018A 2019A 2020F 2021F 2022F

Total Revenue 27,228 37,558 40,375 45,529 51,066 Property, Plant and Equipment 4,782 5,395 6,103 6,877 7,723

Direct Costs and Operating Expenses (17,797) (26,100) (27,458) (30,916) (34,687) Interest in Associates 335 381 393 404 417

Gross Profit 9,431 11,458 12,916 14,612 16,379 Intangible Assets 12,643 18,402 19,259 22,774 26,709

Long-term Receivables 1,572 2,301 2,202 2,377 2,559 20 March2020 Other Income/Expenses, Net 682 735 841 922 1,052 Amounts Due from Customers 43,540 58,900 76,918 95,794 115,726

Administrative Expenses (1,899) (2,366) (2,544) (2,777) (3,064) Other Non-current Assets 2,585 3,763 4,323 4,988 5,774

Operating Profit 8,213 9,827 11,214 12,758 14,367 Total Non-current Assets 65,457 89,142 109,198 133,214 158,908

Finance Costs (1,376) (1,831) (2,161) (2,426) (2,583) Inventories 659 824 992 1,200 1,444

Share of Profits from Associates/JVs 162 268 302 375 467 Debtors 5,492 8,278 7,994 8,567 9,156

Profit Before Tax 6,998 8,264 9,355 10,707 12,251 Amounts Due from Customers 7,537 8,804 8,502 9,111 9,738

Income Tax (1,729) (1,896) (2,245) (2,570) (2,940) Other Current Assets 3,840 561 617 679 746

Profit After Tax 5,270 6,368 7,110 8,138 9,311 Cash & Cash Equivalents 12,136 11,743 11,243 10,202 12,295

Total Current Assets 29,664 30,210 29,349 29,759 33,380

Non-controlling Interest (951) (1,165) (1,471) (1,830) (2,231) Total Assets 95,122 119,352 138,547 162,973 192,288

Shareholders' Profit / Loss 4,319 5,203 5,640 6,308 7,080

] 2 r a M t h g i R _ e l b a T [ Short-term Debts 4,935 10,468 11,515 12,666 13,933

Basic EPS 0.858 0.847 0.918 1.027 1.153 Creditors 10,168 14,012 16,953 21,950 28,322

DPS 0.240 0.260 0.260 0.260 0.260 Other Current Liabilities 132 192 211 232 255

Total Current Liabilities 15,234 24,672 28,678 34,849 42,510

[Table_CashFlowStatement] Cash Flow Statement Long-term Loans 33,591 42,712 51,254 61,505 73,806

Other Non-current Liabilities 5,601 7,242 8,375 9,840 11,478 (00257 HK)

Year end 31 Dec (HKD m) 2018A 2019A 2020F 2021F 2022F Total Non-current Liabilities 39,192 49,953 59,629 71,345 85,284

Profit Before Tax 6,998 8,264 9,355 10,707 12,251 Total Liabilities 54,426 74,625 88,307 106,193 127,794

Depreciation and Amortisation 620 809 924 1,065 1,220 Share Capital 17,330 17,330 17,330 17,330 17,330

Change in Working Capital (12,386) (17,520) (15,542) (16,183) (16,168) Reserves 16,597 19,017 23,060 27,771 33,254 中国光大国际 Other Operating Activities 401 645 839 937 896 Total Shareholders' Equity 33,926 36,347 40,389 45,100 50,583

Cash from Operating Activities (4,366) (7,802) (4,423) (3,473) (1,802) Minority Interest 6,769 8,380 9,850 11,680 13,911

Total Equity 40,695 44,727 50,240 56,780 64,494

Capital Expenditure (5,179) (6,371) (1,566) (4,289) (4,781) Total Equity and Liabilities 95,122 119,352 138,547 162,973 192,288

Other Investing Activities (2,319) 1,928 87 (187) (194)

Cash from Investing Activities (7,498) (4,443) (1,479) (4,476) (4,975) BVPS 6.737 5.917 6.575 7.342 8.234

Issuance of Shares 9,962 0 0 0 0 [Table_FinancialRatio]

Issuance / (Repayment) of Debts 7,046 14,654 9,589 11,402 13,568 Financial Ratios China Everbright International Dividends (1,076) (1,209) (1,597) (1,597) (1,597) 2018A 2019A 2020F 2021F 2022F Other Financing Activities (279) (1,253) (2,215) (2,485) (2,648) Operations

Cash from Financing Activities 15,652 12,192 5,777 7,320 9,323

Gross Margin 34.6 30.5 32.0 32.1 32.1

Cash at Beg of Year 8,657 12,136 11,743 11,243 10,202 EBITDA Margin 35.8 31.2 32.7 32.8 32.8

Net Changes in Cash 3,789 (53) (125) (629) 2,546 Operating Margin 30.2 26.2 27.8 28.0 28.1

Forex (309) (340) (374) (412) (453) Net Margin 15.9 13.9 14.0 13.9 13.9

Cash at End of Year 12,136 11,743 11,243 10,202 12,295 ROA (%) 5.1 4.9 4.4 4.2 4.0

ROE (%) 15.3 14.8 14.7 14.8 14.8

Net Gearing Ratio (%) 58.2 92.6 102.5 112.6 116.9

Interest Coverage (x) 6.0 5.4 5.2 5.3 5.6

Source: the Company, Guotai Junan International.

Company Report

[Table_CompanyRatingDefinition] Seethe lastpage fordisclaimer Page 7 of 8 [Table_PageHeader]China Everbright International (00257 HK)

Company 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%; 20 March2020 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_IndustryRatingDefinition] Rating Definition The Benchmark: Hong Kong Hang Seng Index Time Horizon: 6 to 18 months Rating Definition Outperform 跑赢大市 Relative Performance>5%;

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

or the fundamental outlook of the sector is favorable. Neutral 中性 Relative Performance is -5% to 5%; or the fundamental outlook of the sector is neutral.

Underperform 跑输大市 Relative Performance<-5%; Or the fundamental outlook of the sector is unfavorable.

DISCLOSURE OF INTERESTS (00257 HK)

[Table_DISCLOSUREOFINTERESTS] (1) The Analysts and their associates do not serve as an officer of the issuer mentioned in this Research Report. (2) The Analysts and their associates do not have any financial interests in relation to the issuer mentioned in this Research Report. (3) Except for KAISA GROUP (01638 HK),GUOTAI JUNAN I (01788 HK), OF GANSU (02139 HK),JINSHANG BANK (02558 HK),ZHONGLIANG HLDG (02772 HK),BINHAI INVESTMENT (02886 HK),HAITIAN ANTENNA (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. 中国光大国际 (4) Guotai Junan and its group companies have not had relationships with the issuer mentioned in this Research Report within the preceding 12 months. (5) Guotai Junan and its group companies are not making a market in the securities in respect of the issuer mentioned in this Research Report. (6) Guotai Junan and its group companies have not employed an individual serving as an officer of the issuer mentioned in this Research Report. There is no officer of the issuer mentioned in this Research Report associated with Guotai Junan and its group companies.

DISCLAIMER China Everbright International This Research Report does not constitute an invitation or offer to acquire, purchase or subscribe for securities by (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.

© 2020 Guotai Junan Securities (Hong Kong) Limited. All Rights Reserved. 27/F., Low Block, Grand Millennium Plaza, 181 Queen’s Road Central, Hong Kong. Tel.: (852) 2509-9118 Fax: (852) 2509-7793 Website: www.gtja.com.hk

Company Report

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