Steady Operation and Clear Blueprint, Maintain “Buy”

股

票

研 [Table_Title] Company Report: China Merchants Port (00144 HK) Spencer Fan 范明

究 (86755) 2397 6686 EquityResearch 公司报告：招商局港口 (00144 HK) [email protected]

13 October 2017 Steady[Table_Summary Operation] and Clear Blueprint, Maintain “Buy” 主业稳健，蓝图清晰，维持“买入”

 1H17 results stable. Revenue rose 5.4% YoY to HK$4,055 mn, in line with [Table_Rank] expectations, mainly due to increased contribution from CIMC. Shareholders’ Rating: Buy Maintained profit surged 86.3% YoY to HK$3,148 mn, exceeding expectations, mainly 公 due to the HK$813 mn disposal gain from CIMC. Port operations remained 评级：买入 (维持)

司 stable.

报  CMP’s horizontal competition case was expected to be solved within 3 6[Table_Price]-18m TP 目标价 : HK$27.20 告 years. In late August 2017, CMP entrusted SCW to handle Mega SCT in Revised from 原目标价: HK$27.20 Shekou, Shenzhen. We expect CMP to gradually consolidate its western

CompanyReport Shenzhen homebase assets amid China’s upcoming wave of port Share price 股价： HK$23.600 consolidation. CMP’s Shenzhen division will also benefit from economic growth of the Guangdong-Hong Kong-Macau Greater Bay Area.  CMP continued its expansion both domestically and internationally. In Stock performance Brazil, CMP acquired a 90% share in its second largest port, TCP, for R$2.89 股价表现 bn (HK$7,228 mn). TCP’s operations cover 45% of Brazil’s population and [Table_QuotePic] 35.0 % of return 48% GDP. Domestically, CMP plans to acquire 51% of Zhongshan Port 30.0 Group for RMB484.5 mn, implying a 12.5x 2016 PER and 2.0 x 2016 PBR. 25.0 20.0

 Reiterate “Buy” rating and maintain TP at HK$27.20. By August 2017, the 15.0

fundamentals of CMP’s operations in key ports were stable, benefitting from 10.0 证 China’s trade recovery. We believe in CMP’s and the parent company CMG’s 5.0 券告 0.0 corporate governance and execution capability in the consolidation process. (5.0)

研报 As the leader in the Chinese port industry, CMP’s current valuation remains (10.0)

attractive. Our TP represents 16.4x, 16.2x and 15.4x 2017-2019 PER. (15.0)

究究 Oct/16 Jan/17 Apr/17 Jul/17 Oct/17  2017 年上半年经营稳定。收入同比升 5.4%至 40.55 亿港元，符合预期，受益于中集集团报

研的贡献。股东净利同比涨 86.3%至 31.48 亿港元，好于预期，受益于处置中集集团股权的 HSI CHINA MERCHANTS PORT HDLGS

告 8.13 亿港元收益。港口业务经营稳定。

券

EquityResearch Report  招商局港口预计在 3 年内解决深圳西部母港的同业竞争。2017 年 8 月末，公司已与深赤 Change[Table_PriceChange] in Share Price 1 M 3 M 1 Y 证湾 A 签署并授权深赤湾管辖公司于深圳蛇口的妈湾港。我们预计在国内港口整合浪潮启动股价变动 1 个月 3 个月 1 年的大背景下，公司将逐步地整合其深圳西部母港片区资源。公司于深圳片区的主业也将受 [Tab Abs. % (2.9) 13.7 14.8

益于粤港澳大湾区的经济增长。绝对变动 %

le_I Rel. % to HS Index (4.7) 4.5 (6.8)  公司在国内及海外继续扩张。在巴西，公司以 28.9 亿雷亚尔(约合 72.28 亿港元)收购了该相对恒指变动 % nfo1 国第二大港口 TCP90%的权益，TCP 覆盖的腹地涵盖巴西 45%的人口以及 48%的 GDP。 Avg. share price(HK$)

24.2 23.3 20.4 港在国内，招商局港口计划以人民币 4.85 亿元收购中山港 51%的股权，分别对应 12.5 倍的平均股价（港元） ] Source: Bloomberg, Guotai Junan International. 口 2016 年市盈率和 2.0 倍 2016 年市净率。行  重申“买入”评级并维持 27.20 港元目标价。截至 2017 年 8 月，受益于国内进出口贸易的业复苏，公司核心港区的经营基本面均保持稳健。同时，我们相信招商局港口及母公司招商

PortsSector 局集团在资源整合中的公司治理和执行力。作为国内港口行业龙头，公司目前估值水平仍旧吸引。我们的目标价对应 16.4 倍、16.2 倍及 15.4 倍的 2017-2019 年市盈率。

Y[Table_ear End Turnover Net Profit EPS EPS PER BPS PBR DPS Yield ROE 年结Profit] 收入股东净利每股净利每股净利变动市盈率每股净资产市净率每股股息股息率净资产收益率 [Tab

12/31 (HK$ m) (HK$ m) (HK$) (△ %) (x) (HK$) (x) (HK$) (%) (%) le_I 2015A 8,233 4,808 1.551 (4.5) 15.2 22.203 1.1 0.644 2.7 7.1 nfo2 2016A 7,976 5,494 1.756 13.2 13.4 21.063 1.1 0.729 3.1 8.2 中] 2017F 8,458 5,266 1.660 (5.5) 14.2 21.891 1.1 2.039 8.6 7.8 招外 2018F 8,818 5,316 1.676 1.0 14.1 23.111 1.0 0.708 3.0 7.5 商 2019F 9,020 5,589 1.762 5.1 13.4 24.393 1.0 0.735 3.1 7.4 运局 [Table_BaseData]Shares in issue (m) 总股数 (m) 3,172.1 Major shareholder 大股东 China Merchants Group 62.0% 输港 Market cap. (HK$ m) 市值 (HK$ m) 74,861.6 Free float (%) 自由流通比率 (%) 38.0 口 3 month average vol. 3 个月平均成交股数 (‘000) 5,749.1 FY17 Net gearing (%) FY17 净负债/股东资金 (%) 32.3

52 Weeks high/low (HK$) 52 周高/低 27.400 / 18.800 FY17 Est. NAV (HK$) FY17 每股估值（港元） 36.0

Source: the Company, Guotai Junan International.

China Merchants Port (00144 HK) ChinaPort (00144 Merchants See the last page for disclaimer Page 1 of 7

[Table_PageHeader]China Merchants Port (00144 HK)

China Merchants Port’s (“CMP” or “the Company”) 1H17 results were overall stable. Revenue rose 5.4% to HK$4,055 mn,

in line with the market consensus and our projection. The increase in revenue was mainly] due1 r to thea M increasedt h g i contributionR _ e l fromb a T [

China International Marine Containers (“CIMC”, 000039 SZ/02039 HK), which indirectly benefited from recoveries in global trade.

1H17 shareholders’ profit surged 86.3% to HK$3,148 mn, exceeding market consensus and our expectation. The 86.3% YoY improvement was better than CMP’s 50% YoY profit growth guidance in July 2017. The profit increase was mainly attributable to the HK$813 mn disposal gain from CMIC. Excluding CIMC's impact, CMP's 1H17 profit from core port operations amounted to HK$2,453 mn, up 18.7% YoY. To celebrate its 25th listing anniversary on the HKEx, CMP announced a special interim dividend of

HK$135 cents. Not including the special dividend, CMP’s interim dividend (HK$22 cents) represented a payout ratio of 22.2%, in 13 October 2017 line with our expectation. During 1H17, CMP handled total container throughput of 50.16 mn TEU, up 8.9% YoY. Among which, mainland ports contributed 37.88 mn TEU, up 9.9% YoY. Container throughput handled by CMP’s overseas ports was 8.54 mn TEU, remaining at the same level recorded in 1H16. Bulk cargo volume increased 14.6% YoY to 249 mn tons, in line with our expectation.

Figure-1: Western Shenzhen Throughput and YoY Figure-2: CMP’s Greater China Division Throughput and Change YoY Change (SIPG not included) Western Shenzhen's rest throughput 000' CKRTT Hong Kong % Ningbo-Daxie CKRTT YoY/% % 000' SCW TEU TEU CMPS & Haixing HK YoY/% Ningbo-Daxie YoY/% Western Shenzhen rest's YoY/% 3,500 30% SCW YoY/% 7,500 30% ] 2 r a M t h g i R _ e 20%l b a T [ CMPS & Haixing YoY/% 3,000 6,500 10% 20% 2,500 5,500 0% 10% 2,000 4,500 -10% 3,500 0% 1,500 -20% 2,500 1,000 -10% -30% 1,500 -20% 500 -40% 500 0 -50% -500 -30% 1H14 2H14 1H15 2H15 1H16 2H16 1H17 Aug 17 1H14 2H14 1H15 2H15 1H16 2H16 1H17 Aug 17 YTD YTD

Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International. (00144 HK)

Figure-4: CMP’s Company-wide Total Throughput and YoY Figure-3: CMP’s Overseas Throughput and YoY Change

Change 招商局港口 000' Taiwan Kaohsiung Kaoming Columbo - CICT 000' % Total Throughput Throughput's YoY % TEU Nigeria - Lagos Djibouti - Djibouti City TEU Taiwan YoY/% CICT YoY/% 70,000 68,091 25% Nigeria YoY/% Djibouti YoY/% 1,500 40% 60,000 50,155 20% 30% 49,607 50,000 45,884 41,891 39,251 41,589 41,133 1,000 20% 40,000 15%

30,000 China Merchants Port 10% 10% 500 0% 20,000 5% 10,000 -10% 0 0% 0 -20% 1H14 2H14 1H15 2H15 1H16 2H16 1H17 Aug 17 1H14 2H14 1H15 2H15 1H16 2H16 1H17 Aug 17 YTD YTD Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International.

While the market is concerned about CMP’s horizontal competition with Shenzhen Chiwan Wharf (“SCW”, 000022 SZ), we expect the Company to finish consolidation within 3 years. Currently, CMP holds 67% equity in SCW, and the case constitutes horizontal competition regarding natural port operations in Qianhai-Shekou Free Trade Zone, Shenzhen. On August 23, 2017, CMP and SCW entered into an entrustment agreement. Regarding CMP's home base resources, CMP entrusted SCW to exercise certain shareholder rights over CMP’s 80% interest in Mega SCT. Accordingly, the entrustment agreement would stay valid for 3 years. Mega SCT majors in container loading/unloading operations in berths 1 to 9 in the Mawan port zone of Shekou

district. During the analyst conference on August 31, 2017, CMP’s management promised to solve this case within 3 years. In our Report opinion, we expect CMP to gradually consolidate its assets in its western Shenzhen home base amid an upcoming wave of state-owned enterprise (“SOE”) consolidation. Actually, China’s port industry had been undergoing a new wave of

consolidation/reshuffling starting 2017 (refer to Table-1). CMP’s parent company, China Merchants Group (“CMG”), had been Company designated to handle port consolidations in Liaoning Province (Dalian, Yingkou and Jinzhou) in June 2017. Normally, the port industry in Shenzhen is divided into eastern and western areas. The eastern port zone belongs to Yantian Port Group (000088 See the last page for disclaimer Page 2 of 7 [Table_PageHeader]China Merchants Port (00144 HK)

SZ), and the western port zone belongs to CMP and its subsidiary SCW. The eastern port zone occupies around 50% of

Shenzhen’s total container throughput, while SCW takes 21% share. On September 12, 2012,] 1 r CMPa M promisedt h g i to R solve_ e thel caseb a T [

within 3-5 years through capital restructuring. Regarding its previous commitment, CMP requested an extension to its timeline by another 3 years to September 16, 2020, amid the existence of multiple interest groups (minorities) in SCW. CMP believed that the case should be better solved through gradual negotiations, while we believe in the parent company CMG’s execution capability and effective corporate governance. With the consolidation process going on, CMP will benefit from economic growth in Guangdong-Hong Kong-Macau Greater Bay Area. We do not rule out the possibility that CMG might steer Shenzhen’s port

industry integration (east and west) in the future. In this scenario, CMP’s comprehensive competence will be further enhanced in 13 October 2017 the Pearl River Delta region.

Table-1: China’s Regional Port Groups Are Entering A New Era of Consolidation in 2017 Time Events

Jiangsu Port Holdings Group debut. Jiangsu's provincial government will consolidate Lianyungang port, Nanjing Port, Suzhou 2017.05 Port, and Nantong Port.

Liaoning Provincial Government signed "Port cooperation framework" with China Merchants Group ("CMG") to build up a single

2017.06 port operation framework. CMG will become the holding company to control Liaoning Port Holdings Group and consolidate

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

Dalian, Yingkou and Jinzhou Ports.

Fujian Province's SASAC announced to transfer its holding stake in Fujian Ganghang Construction Co., Ltd to Fujian Provincial

2017.06 Communication Transportation Group. Related company Xiamen Port Development (000905 SZ) halted trading during

Mid-August 2017.

China Merchants Port (00144 HK) announced to solve the horizontal competition case with Shenzhen Chiwan Wharf Holdings 2017.08 （000022 SZ） within 3 years. Source: Guotai Junan International.

(00144 HK)

CMP has recently made steps into Latin America’s “Belt and Road” related countries. On September 4, 2017, CMP announced to acquire 90% of TCP Participacoes S.A. (“TCP”) for R$2.89 bn (HK$7,228 mn). Accordingly, the deal will be funded

by internal resources and debts. As Brazil’s second largest container terminal, TCP’s concession period will end in 2048, and 招商局港口 TCP’s current designed capacity includes 3 berths, with 1.5 mn TEU handling capacity per annum, while this capacity will expand to 2.4 mn TEU/year in 2H19. Current water depth of TCP is 12.3 meters, as capable of serving the largest container vessels in the Latin America trade lines. Therefore, the acquisition will allow CMP to expand its business to the Latin America region. According to CMP, TCP’s operations cover 45% of Brazil’s total population and 48% total GDP. TCP reported a net loss after tax of R$7,954 thousand in 2016 (equivalent to HK$19.9 mn) due to high interest expense (issuance of debt for berth expansion in

4Q16). In 2016, TCP handled throughput of 0.76 mn TEU, which could categorize TCP as a major overseas port of CMP in terms China Merchants Port of volume size. In our view, TCP is not only the cornerstone of CMP’s entry into Brazil, but also the future hub of increasing commodity trade between China and Brazil. Although it might take 1-2 years to wait for TCP to make a profit, we believe that CMP will replicate its "Port-Zone-City" model for TCP and its operational development, as similar to Sri Lanka’s CICT development path. It is estimated that CMP will coordinate its cargo resources and increase trans-pacific shipping routes to call at TCP to increase its handling volume and enhance the business ties between China and Brazil.

CMP continued to consolidate potential port assets within the Pearl River Delta region. On September 11, 2017, CMP announced to acquire 51% equity interest of Zhongshan Port Group (“ZPG”) for a total consideration of RMB484.5 mn through subsidiary firm SCW. ZPG operates Zhongshan Port, Xiaolan Port, and Shenwan Port in Zhongshan. Based on our findings, ZPG's 2014-2016 cargo throughput was 6.32 mn tons /6.54 mn tons /6.59 mn tons, respectively. Meanwhile, ZPG's 2014-2016 container throughput amounted 0.906 mn TEU/0.923 mn TEU/0.920 mn TEU, representing around 67.9% of Zhongshan's total container throughput in 2016. The acquisition of Zhongshan Port Group will allow CMP to control core port assets of Zhongshan, and further strengthen the synergy of port resources within the region. In our view, CMP’s layout in the Guangdong-Hong

Kong-Macau Greater Bay Area will become more diversified after launching in the west coast of the Pearl River Delta region for

Report the first time. With CMP's western Shenzhen home base located on the east coast, Zhonghan Port in the west coast might

leverage on CMP’s platform to increase the number of its calling routes and draw additional cargo. Zhongshan Port’s 2016

after-tax profit was RMB75.8 mn, implying a 12.5x 2016 PER and a 2.0x 2016 PBR, while we believe that the valuation is slightly Company overpriced considering ZPG’s business scale and higher-than-average trading PER. The execution of ZPG's share purchase

See the last page for disclaimer Page 3 of 7 [Table_PageHeader]China Merchants Port (00144 HK)

agreement was originally expected to take place on September 13, 2017; the agreement has not been executed yet. CMP noted

that the Company would make a further announcement of details of execution later. ] 1 r a M t h g i R _ e l b a T [

Slightly adjust our earnings estimates for 2017-2019 while we expect CMP’s port operations to benefit from China's continued export/import boom and to be affected by recent asset acquisitions. Contributions from key port zones remained solid. By August, 2017, western Shenzhen, Hong Kong, Shanghai (“SIPG”, 600018 SH), and Ningbo-Daxie’s throughput YTD YoY growth rate was 8.5%, 21.1%, 8.3% and 19.7%, respectively. External conditions were also favorable. By August 2017,

China’s YTD exports/imports rose 7.6% YoY/16.9% YoY (in USD terms), respectively, indicating strong trade trends. Overall, we 13 October 2017 revise up CMP’s FY17-FY19 shareholders’ profit by 1.9%, -0.2% and 1.6%, respectively. Correspondingly, 2017-2019 EPS estimates are HK$1.660, HK$1.676 and HK$1.762, representing YoY change of -5.5%, 1.0% and 5.1%, respectively. Our projected CMP earnings per share declined in 2017 on a YoY basis, and it was mainly due to the incremental financing cost (issuance of debts to acquire overseas assets) and the estimated underperformance of CMP's JV (overseas terminals in Turkey and Nigeria) in 2017.

Table-2: Change in CMP’s Earnings Estimates HK$ mn 2017F 2018F 2019F

New Estimates

] 2 r a M t h g i R _ e l b a T [ Revenue 8,458 8,818 9,020 Shareholders' profit 5,266 5,316 5,589 EPS (HK$) 1.660 1.676 1.762 ROE (%) 7.8 7.5 7.4 Old Estimates

Revenue 8,436 8,814 8,978

Shareholders' profit 5,169 5,324 5,499 EPS (HK$) 1.630 1.678 1.734

ROE (%) 7.6 7.5 7.3 (00144 HK)

Changes of Estimates Revenue (%) 0.3% 0.0% 0.5% Shareholders' profit (%) 1.9% -0.2% 1.6%

EPS (%) 1.8% -0.1% 1.6% 招商局港口 ROE (ppt) 0.2 (0.0) 0.1 Source: Guotai Junan International.

Figure-5: YTD Trade Growth in China (US$) Figure-6: Monthly Trade Growth in China (US$) Monthly Export YoY % YTD Export YoY YTD Import YoY % Monthly Import YoY YTD Export & Import YoY 50

Monthly Export & Import YoY China Merchants Port 25 40

15 30 20 5 10

(5) 0

08 02 05 02 05 11 02 05 11 08 11 08 08

------

(15) (10)

2014 2015 2015 2016 2016 2016 2017 2017 2014 2015 2015 2016 2017 (20) (25) (30) Source: General Administration of Customs, Guotai Junan International. Source: General Administration of Customs, Guotai Junan International.

Maintain “Buy” rating as well as the HK$27.20 TP to reflect CMP’s valuation potential. With consolidation expected within

the Shenzhen west port zone, we favor CMP’s execution capability in solving the horizontal competition case with SCW. In terms

of industry outlook, CMP remained cautious on price cutting pressure on new shipping alliances for lower terminal handling fees Report and shipping calling charges. On the other hand, CMP could reasonably use its cash in hand to partially fund its overseas acquisitions among “Belt and Road” countries. By scanning CMP’s port portfolio, we believe this layout to be a balanced one,

while the newly-added terminals may pivot more cargo for CMP. Our TP represents 16.4x, 16.2x and 15.4x 2017-2019 PER, and Company 1.2x 2017 PBR.

See the last page for disclaimer Page 4 of 7 [Table_PageHeader]China Merchants Port (00144 HK)

Major risks: 1) weak marine trade in 3Q17 and beyond, and 2) upstream price bargaining pressure from new container shipping

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

Figure-7: CMP’s FY17-FY19 Revenue Estimates Figure-8: CMP’s FY17-FY19 Net Profit Estimates

HK$ mn Revenue YoYs % HK$ mn Shareholdrs' Profit YoY % 9,500 5,800 20% 10% 9,020 5,600 5,589 15% 13 October 2017 9,000 8,818 5,494 8,458 5,316 5,400 14% 5,266 10% 5% 8,500 5,200 5% 8,233 6% 4% 4% 5% 5,000 0% 8,000 7,976 0% 2% 4,808 1% 0% 4,800 -5% -4% 7,500 4,600 -10% -3% 4,400 -15% 7,000 -5% FY15A FY16F FY17F FY18F FY19F FY15A FY16F FY17F FY18F FY19F

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

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

Table-3: Peers Comparison PE PB ROE(%) D/Y(%) EV/EBITDA ROA(%)

Company Stock Code Currency Last price 16A 17F 18F 19F 16A 17F 18F 19F 17F 17F 17F 17F HK - Listed Companies

China Merchants Port Holding 144 HK HKD 23.60 13.4 14.2 14.1 13.4 1.1 1.1 1.0 1.0 7.8 8.6 22.0 4.9

Cosco Shipping Ports Ltd 1199 HK HKD 8.97 13.9 14.6 13.0 11.7 0.8 0.7 0.7 0.7 5.1 2.8 15.3 3.6

Dalian Port (Pda) Co Ltd-H 2880 HK HKD 1.36 29.1 n.a. n.a. n.a. 0.9 n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Tianjin Port Dvlp Hlds Ltd 3382 HK HKD 1.25 14.5 n.a. n.a. n.a. 0.7 n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Xiamen International Port-H 3378 HK HKD 1.50 11.0 9.4 7.7 6.9 0.7 0.7 0.6 0.6 7.8 4.7 n.a. 2.7

Simple Average 16.4 12.7 11.6 10.7 0.8 0.8 0.8 0.8 6.9 5.4 18.6 3.7

Weighted Average 17.0 14.1 13.6 12.7 1.0 1.0 0.9 0.9 7.1 7.0 20.2 4.5 (00144 HK)

China - Listed Companies

Dalian Port Pda Co Ltd-A 601880 CH CNY 2.94 73.5 73.5 58.8 58.8 2.1 n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Tianjin Port Co Ltd-A 600717 CH CNY 11.87 15.8 n.a. n.a. n.a. 1.3 1.2 1.2 1.1 7.4 1.8 n.a. 3.5

Anhui Wanjiang Logistics-A 600575 CH CNY 4.52 37.7 n.a. n.a. n.a. 2.2 n.a. n.a. n.a. n.a. n.a. n.a. n.a. 招商局港口

Rizhao Port Co Ltd -A 600017 CH CNY 4.30 71.7 47.8 43.0 41.0 1.3 1.3 1.2 1.2 3.0 n.a. n.a. n.a.

Tangshan Port Group Co Ltd-A 601000 CH CNY 5.10 15.5 14.2 13.4 n.a. 1.7 1.6 1.4 n.a. 11.4 2.4 n.a. 7.6

Shenzhen Chiwan Wharf Hldg-B 200022 CH HKD 13.51 14.0 13.4 12.5 n.a. 1.7 n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Xiamen Port Development Co-A 000905 CH CNY 14.27 36.6 n.a. n.a. n.a. 2.9 n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Shenzhen Airport Co-A 000089 CH CNY 8.65 31.5 24.0 20.1 17.6 1.7 1.6 1.5 1.4 6.7 1.2 10.7 5.7

Jinzhou Port Co Ltd-B 900952 CH USD 0.53 126.7 n.a. n.a. n.a. 1.2 n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Yingkou Port Liability Co-A 600317 CH CNY 3.45 45.5 38.3 34.5 34.5 2.1 2.1 2.0 1.9 5.2 0.6 n.a. 3.8

Ningbo Zhoushan Port Co Lt-A 601018 CH CNY 5.93 34.9 28.5 26.4 24.4 2.3 2.2 2.1 2.0 7.5 1.3 n.a. 4.9 China Merchants Port Jiangsu Lianyungang Port -A 601008 CH CNY 6.02 602.0 240.8 200.7 n.a. 1.9 n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Simple Average 92.1 60.1 51.2 35.2 1.9 1.6 1.5 1.5 6.9 1.5 10.7 5.1 Weighted Average 54.2 40.4 35.1 32.6 2.0 1.8 1.7 1.7 7.3 1.4 10.7 5.0

Other Area - Listed Companies

Piraeus Port Authority Sa PPA GA EUR 15.66 58.4 16.1 15.1 13.6 2.2 1.2 n.a. n.a. n.a. 2.8 11.5 n.a.

Dp World Ltd DPW DU USD 22.10 17.9 15.7 14.3 12.9 2.1 1.9 1.7 1.6 12.8 2.0 10.3 5.8

Eurokai Kgaa EUK2 GR EUR 44.80 14.7 16.2 14.9 14.4 1.8 n.a. n.a. n.a. n.a. n.a. 10.3 n.a.

Hamburger Hafen Und Logistik HHFA GR EUR 27.35 27.4 25.0 23.7 21.8 3.7 3.5 3.3 3.1 15.3 2.5 7.7 5.6

Simple Average 29.6 18.3 17.0 15.7 2.4 2.2 2.5 2.3 14.0 2.4 9.9 5.7 Weighted Average 19.7 16.7 15.3 13.9 2.3 2.0 1.9 1.7 13.1 2.0 10.0 5.8 Source: Bloomberg.

Report

Company

See the last page for disclaimer Page 5 of 7 [Table_PageHeader]China Merchants Port (00144 HK)

Financial Statements and Ratios [Table_IncomeStatement] Income Statement [Table_BalanceSheet] Balance Sheet

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

Year end 31 Dec (HK$ m) 2015A 2016A 2017F 2018F 2019F Year end 31 Dec (HK$ m) 2015A 2016A 2017F 2018F 2019F Total Revenue 8,233 7,976 8,458 8,818 9,020 Property, plant and -Ports operations 7,789 7,570 8,052 8,371 8,506 equipment 19,570 18,459 25,553 24,699 23,676 -Logistics 408 405 405 446 512 Intangible assets 8,633 8,198 8,197 8,196 8,195 -Other operations 36 1 1 1 2 Investment properties & Land 7,832 14,720 15,139 15,611 16,138 Investment in associates & Cost of services and expenses (5,591) (5,640) (5,642) (5,964) (6,024) JVs 46,994 51,929 51,450 58,653 66,173 Other gains 137 1,450 1,572 844 896 Other non-current assets 7,034 3,794 3,798 3,759 3,753 13 October 2017 Other income 202 111 234 240 246 Total Non-current Assets 90,063 97,100 104,138 110,918 117,936 Operating Profit 2,981 3,897 4,621 3,938 4,138 Finance cost - net (700) (900) (1,004) (927) (933) Cash & Cash Equivalents 10,293 3,637 4,854 4,259 3,000 Share of profit of JV and Debtors, deposits and 4,034 3,686 3,104 3,516 3,674 associates prepayments 1,916 2,296 2,573 2,503 2,690 Profit Before Tax 6,315 6,683 6,722 6,527 6,879 Other current assets 77 80 89 87 93 Total Current Assets 12,286 6,013 7,517 6,850 5,782 Income Tax (790) (477) (615) (512) (545) Total Assets 102,349 103,113 111,655 117,768 123,718 Profit After Tax 5,525 6,206 6,107 6,016 6,334 Non-controlling Interest (717) (712) (841) (700) (745) Creditors and accruals 2,582 3,497 3,040 3,268 3,154 Shareholders' Profit / Loss 4,808 5,494 5,266 5,316 5,589 Borrowings 1,800 5,362 4,000 4,000 5,200 Basic EPS 1.551 1.756 1.660 1.676 1.762 Other financial liabilities 406 285 180 119 189 YoY (%) (4.5) 13.2 (5.5) 1.0 5.1 Total Current Liabilities 4,788 9,144 7,220 7,387 8,542

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

Long-term borrowings 16,681 16,793 21,293 21,293 21,293 Loans from related parties 664 279 2,000 3,000 3,000 [Table_CashFlowStatement] Cash Flow Statement Deferred tax liabilities 2,333 1,973 1,913 2,347 2,381 Other non-current liabilities 1,234 1,186 1,151 1,116 1,081

Total Non-current Liabilities 20,912 20,231 26,357 27,756 27,755 Year end 31 Dec (HK$ m) 2015A 2016A 2017F 2018F 2019F Total Liabilities 25,700 29,375 33,577 35,143 36,297 Operating profit 2,981 3,897 4,621 3,938 4,138

Depreciation and amortization 1,392 1,438 1,394 1,711 1,735 Share capital 18,994 19,548 19,548 19,548 19,548 Others (478) (1,076) (36) (184) (198) Mandatory Convertible Change in working capital 324 (166) (792) 314 (339) Securities (MCSs) 15,224 15,219 15,219 15,219 15,219 Income tax paid (739) (683) (597) (153) (493) Reserves and proposed

Dividend received from (00144 HK) dividend 34,610 31,141 34,640 38,487 42,538 associates & JCEs 3,204 2,142 1,804 2,043 2,135 Total Shareholders' Equity 68,828 65,908 69,407 73,254 77,305 Cash from Operating Activities 6,684 5,552 6,395 7,668 6,977 Minority Interest 7,821 7,830 8,671 9,370 10,115

Total Equity 76,649 73,738 78,078 82,624 87,421 CapEx (1,696) (1,207) (500) (683) (543) 招商局港口 Proceeds from disposal of

Associates or JVs 140 2 8,500 0 0 [Table_FinancialRatio] Acquisition of Associates or Financial Ratios JVs (3,016) (6,472) (6,231) (5,240) (5,981) 2015A 2016A 2017F 2018F 2019F Acquisitions of assets through Profitability acquisitions of subsidiaries 0 (3,848) (7,810) 0 0 ROC (%) 4.6 4.8 4.6 4.1 4.0 Others 2,589 669 (801) (462) 22 ROA (%) 4.7 5.3 4.9 4.6 4.6 Cash from Investing Activities (1,983) (10,856) (6,842) (6,385) (6,501) ROE (%) 7.1 8.2 7.8 7.5 7.4 China Merchants Port Change in loans (242) 2,367 5,009 1,000 1,250 Liquidity Interest paid (858) (964) (1,004) (927) (933) Current ratio (x) 2.6 0.7 1.0 0.9 0.7 Others (1,519) (1,089) (587) (488) (520) Quick ratio (x) 2.3 0.6 0.8 0.8 0.5 Dividends paid (1,163) (1,457) (1,707) (1,400) (1,478) Cash from ops. / Avg curr. liability 88.2 79.7 78.2 105.0 87.6 Cash from Financing Activities (3,782) (1,143) 1,711 (1,815) (1,680) Solvency Cash at Beg of Year 9,501 10,293 3,637 4,854 4,259 Total debt / equity (%) 25.0 30.4 35.0 34.2 33.7 Net Changes in Cash 919 (6,447) 1,264 (531) (1,205) Net gearing ratio (%) 12.9 28.5 32.3 32.8 34.3 Cash at End of Year 10,293 3,637 4,854 4,259 3,000 Interest coverage ratio (x) 10.0 8.4 7.7 8.0 8.4

Source: the Company, Guotai Junan International.

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Company

See the last page for disclaimer Page 6 of 7 [Table_PageHeader]China Merchants Port (00144 HK)

Company[Table_CompanyRatingDefinition] Rating Definition

The Benchmark: Hong Kong Hang Seng Index ] 1 r a M t h g i R _ e l b a T [

Time Horizon: 6 to 18 months

Rating Definition Buy 买入 Relative Performance>15%; or the fundamental outlook of the company or sector is favorable. Accumulate 收集 Relative Performance is 5% to 15%; or the fundamental outlook of the company or sector is favorable.

Neutral 中性 Relative Performance is -5% to 5%; 13 October 2017 or the fundamental outlook of the company or sector is neutral. Reduce 减持 Relative Performance is -5% to -15%; or the fundamental outlook of the company or sector is unfavorable.

Sell 卖出 Relative Performance <-15%; or the fundamental outlook of the company or sector is unfavorable.

Sector[Table_ RatingIndustry DefinitionRatingDefinition] The Benchmark: Hong Kong Hang Seng Index Time Horizon: 6 to 18 months Rating Definition Outperform 跑赢大市 Relative Performance>5%;

] 2 r a M t h g i R _ e l b a T [ or the fundamental outlook of the sector is favorable. Neutral 中性 Relative Performance is -5% to 5%; or the fundamental outlook of the sector is neutral. Underperform 跑输大市 Relative Performance<-5%; Or the fundamental outlook of the sector is unfavorable.

[DISCLOSURETable_DISCLOSUREOFINTERESTS OF INTERESTS ] (1) The Analysts and their associates do not serve as an officer of the issuer mentioned in this Research Report. (2) The Analysts and their associates do not have any financial interests in relation to the issuer mentioned in this Research Report.

(3) Except for SMI HOLDINGS GROUP (00198 HK),GUOTAI JUNAN I (01788 HK),BINHAI INVESTMENT (02886 HK),MR CSI300 ETF (00144 HK)

(03127 HK),CAM SCSMALLCAP (03157 HK),LINK HOLDINGS (08237 HK),MR CSI300 ETF-R (CNY) (83127 HK),GFI MSCI A I-R (CNY) (83156 HK),Guotai Junan and its group companies do not hold equal to or more than 1% of the market capitalization of the issuer mentioned in this Research Report. (4) Guotai Junan and its group companies have not had investment banking relationships with the issuer mentioned in this Research Report within the preceding 12 months. 招商局港口 (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.

China Merchants Port DISCLAIMER

This Research Report does not constitute an invitation or offer to acquire, purchase or subscribe for securities by Guotai Junan Securities (Hong Kong) Limited ("Guotai Junan"). Guotai Junan and its group companies may do business that relates to companies covered in research reports, including investment banking, investment services, etc. (for example, the placing agent, lead manager, sponsor, underwriter or invest proprietarily).

Any opinions expressed in this report may differ or be contrary to opinions or investment strategies expressed orally or in written form by sales persons, dealers and other professional executives of Guotai Junan group of companies. Any opinions expressed in this report may differ or be contrary to opinions or investment decisions made by the asset management and investment banking groups of Guotai Junan.

Though best effort has been made to ensure the accuracy of the information and data contained in this Research Report, Guotai Junan does not guarantee the accuracy and completeness of the information and data herein. This Research Report may contain some forward-looking estimates and forecasts derived from the assumptions of the future political and economic conditions with inherently unpredictable and mutable situation, so uncertainty may contain. Investors should understand and comprehend the investment objectives and its related risks, and where necessary consult their own financial advisers prior to any investment decision.

This Research Report is not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in

any jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation or which would subject

Guotai Junan and its group companies to any registration or licensing requirement within such jurisdiction.

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Website: www.gtja.com.hk

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