9 March 2017 

EQUITIES Sunny Optical (2382 HK) ELECTRICAL EQUIPMENT 

Hold: Strong February shipments mostly priced-in Hong Kong

 Jan-Feb handset camera module and vehicle lens shipments HOLD tracking slightly ahead  But growth momentum has started to slow down TARGET PRICE (HKD) PREVIOUS TARGET (HKD) 55.00  Maintain Hold with TP of HKD55 SHARE PRICE (HKD) UPSIDE/DOWNSIDE Strong February handset camera module and vehicle lens shipments. Sunny 51.60 +6.6% Optical reported February shipment data for its three major product lines (handset (as of 09 Mar 2017) camera modules (HCM), handset camera lens (HCL), and vehicle lens) today after MARKET DATA market close. February HCM shipments were 29.4m (down 8% MoM but up 144% Market cap (HKDm) 56,605 Free float 55% YoY) on fewer working days in February. January and February total shipments were Market cap (USDm) 7,286 BBG 2382 HK 3m ADTV (USDm) 38 RIC 2382.HK 61.2mn (up 121% YoY). This accounted for17%/19% of our (up 34% YoY) and consensus (up 20% YoY) 2017 shipment estimates, tracking ahead, thanks to FINANCIALS AND RATIOS (CNY) Year to 12/2015a 12/2016e 12/2017e 12/2018e continuous market share gains from its peers. February handset camera lens (HCL) HSBC EPS 0.70 1.16 1.67 2.11 shipments came in at 41.4m (down 4% MoM, up 98% YoY). January to February HSBC EPS (prev) - - - - Change (%) - - - - accumulated HCL shipments were 84.3mn (up 93% YoY), in-line with what we are Consensus EPS 0.69 1.12 1.62 2.14 expecting in terms of the full year, or 17%/17% of our 2017 shipment forecasts (up PE (x) 65.3 39.7 27.6 21.7 Dividend yield (%) 0.3 0.5 0.7 0.9 31% YoY) and consensus (up 28% YoY), respectively. February vehicle lens EV/EBITDA (x) 43.5 27.2 19.1 15.3 shipments were 2.4m units (down 10% MoM but up 59% YoY). This is 18%/17% of ROE (%) 21.5 28.9 32.3 31.7

our (up 30% YoY)/ consensus (up 33% YoY) forecasts; tracking slightly ahead. 52-WEEK PRICE (HKD)

Muted China smartphone shipment outlook with limited contribution of 3D 60.00 sensing cameras. We expect Sunny Optical’s shipment growth momentum to slow 36.00 down in 2Q17 due to model transition of major China smartphone OEMs (e.g. 12.00 Huawei, OPPO, Vivo, etc) and slowing down smartphone replacement demand in tier 03/16 09/16 03/17 3-5 cities. According to Bloomberg news on February 22th, Apple is likely to adopt 3D Target price: 55.00 High: 54.15 Low: 17.64 Current: 51.60

sensing cameras in its upcoming flagship model in 2H17. However, due to the Source: Thomson Reuters IBES, HSBC estimates complexity both in software and hardware, we don’t expect the Android camp to widely equip this feature in their phone until 2018, at the earliest. Joyce Chen* Analyst Valuation and risks. Our HKD55 TP is based on 26x 2017-2018 average EPS, HSBC Securities (Taiwan) Corporation Limited joycechchen@hsbc.com.tw which is the blended average PE derived from our peer group analysis. We continue +8862 6631 2862

to like Sunny Optical for its extensive optical product line and market share gain Bruce Lu* story. However, after outperforming HSI by over 40% YTD, we believe the company Analyst HSBC Securities (Taiwan) Corporation Limited is trading near its fair value. Its handset camera lens business trades at 25-30x 2017- [email protected] 18e PE versus Largan (3008 TT, CP TWD4,485, Buy), at 15-20x. +8862 6631 2861

* Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is not registered/ qualified pursuant to FINRA regulations

Disclosures & Disclaimer Issuer of report: HSBC Securities (Taiwan) Corporation Limited This report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it. View HSBC Global Research at: https://www.research.hsbc.com

EQUITIES ● ELECTRICAL EQUIPMENT 9 March 2017 

Financials & valuation: Sunny Optical Hold

Financial statements Valuation data Year to 12/2015a 12/2016e 12/2017e 12/2018e Year to 12/2015a 12/2016e 12/2017e 12/2018e Profit & loss summary (CNYm) EV/sales 4.6 3.2 2.0 1.5 Revenue 10,696 15,435 23,893 30,814 EV/EBITDA 43.5 27.2 19.1 15.3 EBITDA 1,126 1,816 2,549 3,089 EV/IC 24.4 13.6 11.2 9.4 Depreciation & amortisation -246 -337 -479 -462 PE* 65.3 39.7 27.6 21.7 Operating profit/EBIT 880 1,479 2,070 2,626 PB 13.0 10.3 7.9 6.1 Net interest -16 -17 -20 -24 FCF yield (%) 2.6 -0.2 1.7 2.6 PBT 862 1,451 2,050 2,602 Dividend yield (%) 0.3 0.5 0.7 0.9 Taxation -99 -195 -240 -304 * Based on HSBC EPS (diluted) Net profit 762 1,256 1,810 2,298 HSBC net profit 762 1,256 1,810 2,298 Cash flow summary (CNYm) Issuer information Cash flow from operations 1,701 986 1,523 2,010 Share price (HKD) 51.60 Free float 55% Capex -283 -850 -400 -400 Target price (HKD) 55.00 Sector Electrical Equipment Cash flow from investment -1,932 -748 -400 -400 Reuters (Equity) 2382.HK Country Hong Kong Dividends -171 -228 -345 -450 Bloomberg (Equity) 2382 HK Analyst Joyce Chen Change in net debt -865 385 -781 -1,162 Market cap (USDm) 7,286 Contact +8862 6631 2862 FCF equity 1,304 -77 864 1,281

Balance sheet summary (CNYm) Intangible fixed assets 113 142 142 142 Price relative Tangible fixed assets 892 1,755 1,676 1,614 Current assets 6,017 9,497 13,875 18,448 Cash & others 1,911 1,591 2,601 3,874 54.40 54.40 Total assets 7,636 11,793 16,092 20,603 Operating liabilities 3,108 6,161 8,764 11,314 44.40 44.40 Gross debt 683 748 977 1,088 34.40 34.40 Net debt -1,228 -843 -1,624 -2,786 Shareholders' funds 3,831 4,867 6,334 8,184 24.40 24.40 Invested capital 2,003 3,641 4,328 5,016 14.40 14.40

4.40 4.40 Ratio, growth and per share analysis 2015 2016 2017 Sunny Optical Rel to HANG SENG INDEX Year to 12/2015a 12/2016e 12/2017e 12/2018e Y-o-y % change Source: HSBC Revenue 26.9 44.3 54.8 29.0 Note: Priced at close of 09 Mar 2017 EBITDA 30.7 61.3 40.3 21.2 Operating profit 36.0 68.0 40.0 26.9 PBT 36.0 68.3 41.2 26.9 HSBC EPS 34.1 64.5 44.1 26.9 Ratios (%) Revenue/IC (x) 4.8 5.5 6.0 6.6 ROIC 35.1 45.3 45.9 49.6 ROE 21.5 28.9 32.3 31.7 ROA 11.5 12.9 13.0 12.5 EBITDA margin 10.5 11.8 10.7 10.0 Operating profit margin 8.2 9.6 8.7 8.5 EBITDA/net interest (x) 70.4 105.5 130.4 128.6 Net debt/equity -32.1 -17.3 -25.6 -34.0 Net debt/EBITDA (x) -1.1 -0.5 -0.6 -0.9 Per share data (CNY) EPS Rep (diluted) 0.70 1.16 1.67 2.11 HSBC EPS (diluted) 0.70 1.16 1.67 2.11 DPS 0.16 0.21 0.32 0.41 Book value 3.54 4.48 5.83 7.53

2 EQUITIES ● ELECTRICAL EQUIPMENT 9 March 2017 

Valuation and risks. Our TP of HKD55 is based on 26x of 2017-2018 average, which is the blended average PE derived from our peer group analysis (see table below). Our target multiple of 26x assumes that Sunny Optical’s handset camera module segment trades at 20x (a premium to peers’ 10-15x due to technology leadership), the vehicle camera lens segment trades at 30x (a premium to global ADAS plays’ average PE on market share leadership), and the handset camera lens business trades at 25x, versus 15-20x for Largan due to the impact of SZ-HK Connect and the scarcity of listed handset lens stocks in SZ and HK stock markets. Our target price implies 7% upside; we thus maintain our Hold rating on the stock based on the muted near-term outlook.

We continue to like Sunny Optical for its extensive optical product line and market share gain story. However, after outperforming HSI by over 40% YTD, we believe the company is trading near its fair value. Its handset camera lens business trades at 25-30x 2017-18e PE versus Largan (3008 TT, CP TWD4,485, Buy), at 15-20x. We believe Sunny Optical is fairly valued even considering the valuation premium resulting from the SZ-HK Connect.

Sunny Optical: February shipment data HSBC Achieved Cons. Achieved (mn units) Feb-17 MoM YoY Jan-Feb 17 YoY 2017e YoY % 2017e YoY %

HCM 29.4 -8% 144% 61.2 121% 360.6 34% 17% 323.8 20% 19% HCL 41.4 -4% 98% 84.3 93% 496.3 31% 17% 500.6 32% 17% Vehicle lens 2.4 -10% 59% 5.2 34% 29.3 30% 18% 30.0 33% 17% Source: Company data, HSBC estimates, Bloomberg consensus

Sunny Optical: HCL shipment trend Sunny Optical: HCM shipment trend

(mn units) (mn units) 600% 60.0 200% 35.0

Shipment YoY Shipment YoY 500% 30.0 50.0 150%

400% 25.0 40.0 100%

300% 20.0 30.0 50% 200% 15.0

0%

Jun-12 Feb-10 Sep-10 Apr-11 Nov-11 Jan-13 Aug-13 Mar-14 Oct-14 May-15 Dec-15 Jul-16 Feb-17 20.0 Jul-09 100% 10.0

-50% 10.0 5.0

0%

Jan-00 Jan-00 Jan-00 Jan-00 Jan-00 Feb-00 Feb-00 Feb-00 Feb-00 Mar-00 Mar-00 Mar-00 Mar-00 Apr-00

-100% - -100% - Source: Company data Source: Company data

3 EQUITIES ● ELECTRICAL EQUIPMENT 9 March 2017 

Sunny Optical: Vehicle lens shipment trend (mn units) 140% 3 Shipment YoY 120% 2.5

100%

2 80%

60% 1.5

40% 1

20%

0.5

0%

Apr-14 Oct-14 Apr-15 Jan-14 Jul-14 Jan-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17

-20% 0

Source: Company data

Sunny Optical: Sum of parts valuation table Average 2017-18 net profit (CNY) PE(x) Mkt cap (HKDm) Handset camera module 924 20 20,582 Handset camera lens 639 25 17,799 Vehicle lens 306 30 10,210 Others 185 20 4,128 Total 2,054 26 52,719 Source: HSBC estimates

Sunny Optical: 12M forward PE band Sunny Optical: 12M forward PB trend

70 80 60 Share price (TWD) 70 Share price (TWD) 25x 8x 50 60 20x 6x 40 50 40 30 15x 4x 30 20 10x 20 2x 10 10

0 0

Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18

Jun-07 Jun-14 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-15 Jun-16 Jun-17 Jun-18 Jun-08 Source: Company data, HSBC estimates Source: Company data, HSBC estimates

4 EQUITIES ● ELECTRICAL EQUIPMENT 9 March 2017 

Sunny Optical: Semi-annual earnings forecasts (CNYm) ___ Fiscal 2015 ______Fiscal 2016 ______Fiscal 2017 ____ Fiscal Fiscal Fiscal 1H 2H 1H 2HE 1H 2HE 2015 2016E 2017E

Sales 4,651 6,045 5,910 9,526 10,307 13,585 10,696 15,435 23,893 QoQ 30% -2% 61% 8% 32% YoY 27% 58% 74% 43% 27% 44% 55%

Gross profit 722 1,041 988 1,654 1,664 2,261 1,763 2,642 3,925 GM 15.5% 17.2% 16.7% 17.4% 16.1% 16.6% 16.5% 17.1% 16.4%

Opex -364 -520 -417 -746 -802 -1,053 -884 -1,163 -1,855 Opex/sales -7.8% -8.6% -7.1% -7.8% -7.8% -7.8% -8.3% -7.5% -7.8%

Operating 358 522 571 908 862 1,208 880 1,479 2,070 Income OPM 7.7% 8.6% 9.7% 9.5% 8.4% 8.9% 8.2% 9.6% 8.7%

PBT 349 513 552 899 853 1,197 862 1,451 2,050 PBT margin 8% 8% 9% 9% 8% 9% 8% 9% 9%

Net Profit 308 454 465 791 754 1,057 762 1,256 1,810 NM 7% 8% 8% 8% 7% 8% 7% 8% 8% QoQ 51% 74% 62% 34% YoY 20% 47% 51% 74% 62% 34% 35% 65% 44%

EPS (CNY) 0.28 0.42 0.43 0.73 0.69 0.97 0.70 1.16 1.67 QoQ 48% 2% 70% -5% 40% YoY 51% 74% 62% 34% 34% 64% 44%

BVPS 3.5 4.5 5.8 (CNY) QoQ YoY 17.5% 26.7% 30.2%

DPS (CNY) 0.2 0.2 0.3 QoQ YoY 27.6% 33.8% 51.1% Source: Company data, HSBC estimates

5 EQUITIES ● ELECTRICAL EQUIPMENT 9 March 2017 

Disclosure appendix

Analyst Certification The following analyst(s), economist(s), and/or strategist(s) who is(are) primarily responsible for this report, certifies(y) that the opinion(s) on the subject security(ies) or issuer(s) and/or any other views or forecasts expressed herein accurately reflect their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report: Joyce Chen and Bruce Lu

Important disclosures Equities: Stock ratings and basis for financial analysis HSBC believes an investor's decision to buy or sell a stock should depend on individual circumstances such as the investor's existing holdings, risk tolerance and other considerations and that investors utilise various disciplines and investment horizons when making investment decisions. Ratings should not be used or relied on in isolation as investment advice. Different securities firms use a variety of ratings terms as well as different rating systems to describe their recommendations and therefore investors should carefully read the definitions of the ratings used in each research report. Further, investors should carefully read the entire research report and not infer its contents from the rating because research reports contain more complete information concerning the analysts' views and the basis for the rating.

From 23rd March 2015 HSBC has assigned ratings on the following basis: The target price is based on the analyst’s assessment of the stock’s actual current value, although we expect it to take six to 12 months for the market price to reflect this. When the target price is more than 20% above the current share price, the stock will be classified as a Buy; when it is between 5% and 20% above the current share price, the stock may be classified as a Buy or a Hold; when it is between 5% below and 5% above the current share price, the stock will be classified as a Hold; when it is between 5% and 20% below the current share price, the stock may be classified as a Hold or a Reduce; and when it is more than 20% below the current share price, the stock will be classified as a Reduce.

Our ratings are re-calibrated against these bands at the time of any 'material change' (initiation or resumption of coverage, change in target price or estimates).

Upside/Downside is the percentage difference between the target price and the share price.

Prior to this date, HSBC’s rating structure was applied on the following basis: For each stock we set a required rate of return calculated from the cost of equity for that stock’s domestic or, as appropriate, regional market established by our strategy team. The target price for a stock represented the value the analyst expected the stock to reach over our performance horizon. The performance horizon was 12 months. For a stock to be classified as Overweight, the potential return, which equals the percentage difference between the current share price and the target price, including the forecast dividend yield when indicated, had to exceed the required return by at least 5 percentage points over the succeeding 12 months (or 10 percentage points for a stock classified as Volatile*). For a stock to be classified as Underweight, the stock was expected to underperform its required return by at least 5 percentage points over the succeeding 12 months (or 10 percentage points for a stock classified as Volatile*). Stocks between these bands were classified as Neutral.

*A stock was classified as volatile if its historical volatility had exceeded 40%, if the stock had been listed for less than 12 months (unless it was in an industry or sector where volatility is low) or if the analyst expected significant volatility. However, stocks which we did not consider volatile may in fact also have behaved in such a way. Historical volatility was defined as the past month's average of the daily 365-day moving average volatilities. In order to avoid misleadingly frequent changes in rating, however, volatility had to move 2.5 percentage points past the 40% benchmark in either direction for a stock's status to change.

Rating distribution for long-term investment opportunities As of 09 March 2017, the distribution of all independent ratings published by HSBC is as follows: Buy 45% ( 25% of these provided with Investment Banking Services ) Hold 40% ( 26% of these provided with Investment Banking Services ) Sell 15% ( 18% of these provided with Investment Banking Services )

6 EQUITIES ● ELECTRICAL EQUIPMENT 9 March 2017 

For the purposes of the distribution above the following mapping structure is used during the transition from the previous to current rating models: under our previous model, Overweight = Buy, Neutral = Hold and Underweight = Sell; under our current model Buy = Buy, Hold = Hold and Reduce = Sell. For rating definitions under both models, please see “Stock ratings and basis for financial analysis” above.

For the distribution of non-independent ratings published by HSBC, please see the disclosure page available at http://www.hsbcnet.com/gbm/financial-regulation/investment-recommendations-disclosures.

Share price and rating changes for long-term investment opportunities Sunny Optical (2382.HK) share price performance HKD Rating & target price history Vs HSBC rating history From To Date Analyst Neutral (V) Overweight (V) 21 May 2014 Joyce Chen Overweight (V) Neutral (V) 21 Jul 2014 Joyce Chen 52 Neutral (V) Overweight (V) 18 Aug 2014 Joyce Chen Overweight (V) Neutral (V) 17 Nov 2014 Joyce Chen 42 Neutral (V) Hold 06 Apr 2015 Joyce Chen Hold Buy 25 Aug 2015 Joyce Chen 32 Buy Hold 07 Nov 2016 Joyce Chen Target price Value Date Analyst 22 Price 1 7.90 12 Mar 2014 Joyce Chen 12 Price 2 12.00 21 May 2014 Joyce Chen Price 3 13.00 20 Jun 2014 Joyce Chen Price 4 12.60 21 Jul 2014 Joyce Chen 2 Price 5 15.00 17 Nov 2014 Joyce Chen

Price 6 13.30 20 Jan 2015 Joyce Chen

Mar-17 Mar-13 Mar-14 Mar-15 Mar-16 Mar-12 Price 7 14.10 10 Mar 2015 Joyce Chen Source: HSBC Price 8 16.00 25 Aug 2015 Joyce Chen Price 9 18.60 12 Oct 2015 Joyce Chen Price 10 19.50 09 Nov 2015 Joyce Chen Price 11 22.00 15 Mar 2016 Joyce Chen Price 12 30.00 08 Apr 2016 Joyce Chen Price 13 40.00 15 Aug 2016 Joyce Chen Price 14 43.00 16 Aug 2016 Joyce Chen Price 15 40.00 07 Nov 2016 Joyce Chen Price 16 55.00 15 Feb 2017 Joyce Chen Source: HSBC To view a list of all the independent fundamental ratings disseminated by HSBC during the preceding 12-month period, please use the following links to access the disclosure page:

Clients of Global Research and Global Banking and Markets: www.research.hsbc.com/A/Disclosures

Clients of HSBC Private Banking: www.research.privatebank.hsbc.com/Disclosures

HSBC & Analyst disclosures Disclosure checklist

Company Ticker Recent price Price date Disclosure SUNNY OPTICAL 2382.HK 52.50 08 Mar 2017 4, 6, 7, 11 Source: HSBC

1 HSBC has managed or co-managed a public offering of securities for this company within the past 12 months. 2 HSBC expects to receive or intends to seek compensation for investment banking services from this company in the next 3 months. 3 At the time of publication of this report, HSBC Securities (USA) Inc. is a Market Maker in securities issued by this company. 4 As of 31 January 2017 HSBC beneficially owned 1% or more of a class of common equity securities of this company. 5 As of 31 January 2017, this company was a client of HSBC or had during the preceding 12 month period been a client of and/or paid compensation to HSBC in respect of investment banking services. 6 As of 31 January 2017, this company was a client of HSBC or had during the preceding 12 month period been a client of and/or paid compensation to HSBC in respect of non-investment banking securities-related services.

7 EQUITIES ● ELECTRICAL EQUIPMENT 9 March 2017 

7 As of 31 January 2017, this company was a client of HSBC or had during the preceding 12 month period been a client of and/or paid compensation to HSBC in respect of non-securities services. 8 A covering analyst/s has received compensation from this company in the past 12 months. 9 A covering analyst/s or a member of his/her household has a financial interest in the securities of this company, as detailed below. 10 A covering analyst/s or a member of his/her household is an officer, director or supervisory board member of this company, as detailed below. 11 At the time of publication of this report, HSBC is a non-US Market Maker in securities issued by this company and/or in securities in respect of this company 12 As of 06 March 2017, HSBC beneficially held a net long position of more than 0.5% of this company’s total issued share capital, calculated according to the SSR methodology. 13 As of 06 March 2017, HSBC beneficially held a net short position of more than 0.5% of this company’s total issued share capital, calculated according to the SSR methodology. HSBC and its affiliates will from time to time sell to and buy from customers the securities/instruments, both equity and debt (including derivatives) of companies covered in HSBC Research on a principal or agency basis.

Analysts, economists, and strategists are paid in part by reference to the profitability of HSBC which includes investment banking, sales & trading, and principal trading revenues.

Whether, or in what time frame, an update of this analysis will be published is not determined in advance.

Economic sanctions imposed by the EU and OFAC prohibit transacting or dealing in new debt or equity of Russian SSI entities. This report does not constitute advice in relation to any securities issued by Russian SSI entities on or after July 16 2014 and as such, this report should not be construed as an inducement to transact in any sanctioned securities.

For disclosures in respect of any company mentioned in this report, please see the most recently published report on that company available at www.hsbcnet.com/research. HSBC Private Banking clients should contact their Relationship Manager for queries regarding other research reports. In order to find out more about the proprietary models used to produce this report, please contact the authoring analyst.

Additional disclosures 1. This report is dated as at 09 March 2017.

2. All market data included in this report are dated as at close 08 March 2017, unless a different date and/or a specific time of day is indicated in the report.

3. HSBC has procedures in place to identify and manage any potential conflicts of interest that arise in connection with its Research business. HSBC's analysts and its other staff who are involved in the preparation and dissemination of Research operate and have a management reporting line independent of HSBC's Investment Banking business. Information Barrier procedures are in place between the Investment Banking, Principal Trading, and Research businesses to ensure that any confidential and/or price sensitive information is handled in an appropriate manner.

4. You are not permitted to use, for reference, any data in this document for the purpose of (i) determining the interest payable, or other sums due, under loan agreements or under other financial contracts or instruments, (ii) determining the price at which a financial instrument may be bought or sold or traded or redeemed, or the value of a financial instrument, and/or (iii) measuring the performance of a financial instrument.

Production & distribution disclosures 1. This report was produced and signed off by the author on 09 Mar 2017 13:54 GMT.

2. In order to see when this report was first disseminated please see the disclosure page available at https://www.research.hsbc.com/R/34/g6slchs

8 EQUITIES ● ELECTRICAL EQUIPMENT 9 March 2017 

Disclaimer Legal entities as at 1 July 2016 Issuer of report ‘UAE’ HSBC Bank Middle East Limited, Dubai; ‘HK’ The Hongkong and Shanghai Banking Corporation Limited, Hong HSBC Securities (Taiwan) Corporation Limited Kong; ‘TW’ HSBC Securities (Taiwan) Corporation Limited; 'CA' HSBC Securities (Canada) Inc.; HSBC Bank, Paris 13th Floor, 333 Keelung Road, Sec. 1, Branch; HSBC France; ‘DE’ HSBC Trinkaus & Burkhardt AG, Düsseldorf; 000 HSBC Bank (RR), Moscow; ‘IN’ HSBC Taipei, Taiwan Securities and Capital Markets (India) Private Limited, Mumbai; ‘JP’ HSBC Securities (Japan) Limited, Tokyo; ‘EG’ HSBC Telephone: + 886 2 2722 8458 Securities Egypt SAE, Cairo; ‘CN’ HSBC Investment Bank Asia Limited, Beijing Representative Office; The Hongkong and Fax: + 886 2 2722 2056 Shanghai Banking Corporation Limited, Singapore Branch; The Hongkong and Shanghai Banking Corporation Limited, Website: www.research.hsbc.com Seoul Securities Branch; The Hongkong and Shanghai Banking Corporation Limited, Seoul Branch; HSBC Securities (South Africa) (Pty) Ltd, Johannesburg; HSBC Bank plc, London, Madrid, Milan, Stockholm, Tel Aviv; ‘US’ HSBC Securities (USA) Inc, New York; HSBC Yatirim Menkul Degerler AS, Istanbul; HSBC México, SA, Institución de Banca Múltiple, Grupo Financiero HSBC; HSBC Bank Australia Limited; HSBC Bank Argentina SA; HSBC Saudi Arabia Limited; The Hongkong and Shanghai Banking Corporation Limited, New Zealand Branch incorporated in Hong Kong SAR; The Hongkong and Shanghai Banking Corporation Limited, Bangkok Branch This document has been issued by HSBC Securities (Taiwan) Corporation Limited in the conduct of its Taiwan regulated business for the information of its institutional and professional customers. It is not intended for and should not be distributed to retail customers in Taiwan. This recommendation material is for reference only. Investors should carefully consider their own investment risk. Investment results are the responsibility of the individual investor. HSBC Securities (Taiwan) Corporation Limited is regulated by the Securities and Futures Bureau. All enquires by recipients in Taiwan must be directed to your HSBC contact in Taiwan. If this report is received by a customer of an affiliate of HSBC, it's provision to the recipient is subject to the terms of business in place between the recipient and such affiliate. This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. HSBC has based this document on information obtained from sources it believes to be reliable but which it has not independently verified; HSBC makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of the Research Division of HSBC only and are subject to change without notice. From time to time research analysts conduct site visits of covered issuers. HSBC policies prohibit research analysts from accepting payment or reimbursement for travel expenses from the issuer for such visits. HSBC and its affiliates and/or their officers, directors and employees may have positions in any securities mentioned in this document (or in any related investment) and may from time to time add to or dispose of any such securities (or investment). HSBC and its affiliates may act as market maker or have assumed an underwriting commitment in the securities of companies discussed in this document (or in related investments), may sell them to or buy them from customers on a principal basis and may also perform or seek to perform investment banking or underwriting services for or relating to those companies. HSBC Research may not be distributed to the public media or quoted or used by the public media without the express written consent of HSBC Securities (Taiwan) Corporation Limited. Reports written by Taiwan-based analysts on non-Taiwan listed companies are not considered recommendations to buy or sell securities under Taiwan Stock Exchange Operational Regulations governing securities firms recommending trades in securities to customers and as such HSBC Securities (Taiwan) Corporation Limited may not execute transactions for clients in these securities/instruments. In the UK this report may only be distributed to persons of a kind described in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005. The protections afforded by the UK regulatory regime are available only to those dealing with a representative of HSBC Bank plc in the UK. HSBC Securities (USA) Inc. accepts responsibility for this research report prepared by its foreign affiliate. All U.S. persons receiving this report and wishing to effect transactions in any security discussed herein should do so with HSBC Securities (USA) Inc. in the United States and not with the foreign affiliate, the issuer of this report. Note, however, that HSBC Securities (USA) Inc. is not distributing this report and has not contributed to or participated in its preparation. In Korea, this publication is distributed by either The Hongkong and Shanghai Banking Corporation Limited, Seoul Securities Branch ("HBAP SLS") or The Hongkong and Shanghai Banking Corporation Limited, Seoul Branch ("HBAP SEL") for the general information of professional investors specified in Article 9 of the Financial Investment Services and Capital Markets Act (“FSCMA”). This publication is not a prospectus as defined in the FSCMA. It may not be further distributed in whole or in part for any purpose. Both HBAP SLS and HBAP SEL are regulated by the Financial Services Commission and the Financial Supervisory Service of Korea. In Singapore, this publication is distributed by The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch for the general information of institutional investors or other persons specified in Sections 274 and 304 of the Securities and Futures Act (Chapter 289) (“SFA”) and accredited investors and other persons in accordance with the conditions specified in Sections 275 and 305 of the SFA. This publication is not a prospectus as defined in the SFA. It may not be further distributed in whole or in part for any purpose. The Hongkong and Shanghai Banking Corporation Limited Singapore Branch is regulated by the Monetary Authority of Singapore. Recipients in Singapore should contact a "Hongkong and Shanghai Banking Corporation Limited, Singapore Branch" representative in respect of any matters arising from, or in connection with this report. In Australia, this publication has been distributed by The Hongkong and Shanghai Banking Corporation Limited (ABN 65 117 925 970, AFSL 301737) for the general information of its “wholesale” customers (as defined in the Corporations Act 2001). Where distributed to retail customers, this research is distributed by HSBC Bank Australia Limited (AFSL No. 232595). These respective entities make no representations that the products or services mentioned in this document are available to persons in Australia or are necessarily suitable for any particular person or appropriate in accordance with local law. No consideration has been given to the particular investment objectives, financial situation or particular needs of any recipient. This publication is distributed in New Zealand by The Hongkong and Shanghai Banking Corporation Limited, New Zealand Branch incorporated in Hong Kong SAR. In Japan, this publication has been distributed by HSBC Securities (Japan) Limited. It may not be further distributed in whole or in part for any purpose. In Canada, this document has been distributed by HSBC Securities (Canada) Inc. (member IIROC), and/or its affiliates. The information contained herein is under no circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient. No securities commission or similar regulatory authority in Canada has reviewed or in any way passed judgment upon these materials, the information contained herein or the merits of the securities described herein, and any representation to the contrary is an offense. If you are an HSBC Private Banking (“PB”) customer with approval for receipt of relevant research publications by an applicable HSBC legal entity, you are eligible to receive this publication. To be eligible to receive such publications, you must have agreed to the applicable HSBC entity’s terms and conditions (“KRC Terms”) for access to the KRC, and the terms and conditions of any other internet banking service offered by that HSBC entity through which you will access research publications using the KRC. Distribution of this publication is the sole responsibility of the HSBC entity with whom you have agreed the KRC Terms. If you do not meet the aforementioned eligibility requirements please disregard this publication and, if you are a customer of PB, please notify your Relationship Manager. Receipt of research publications is strictly subject to the KRC Terms, which can be found at https://research.privatebank.hsbc.com/ – we draw your attention also to the provisions contained in the Important Notes section therein. © Copyright 2017, HSBC Securities (Taiwan) Corporation Limited, ALL RIGHTS RESERVED. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of HSBC Securities (Taiwan) Corporation Limited. MCI (P) 094/06/2016, MCI (P) 085/06/2016, MCI (P) 126/02/2017

[574062]

9 

Global Telecoms, Media & Technology Research Team

Global Asia

Analyst, Global Sector Head Analyst Analyst Stephen Howard +44 20 7991 6820 Yogesh Aggarwal +91 22 2268 1246 John Liu +852 2822 4392 [email protected] [email protected] [email protected]

Analyst Europe Associate Vivek Gedda +91 22 6164 0693 Aric Hui +852 2822 3165 Analyst [email protected] [email protected] Nicolas Cote-Colisson +44 20 7991 6826 [email protected] Analyst Associate Vikas Ahuja +91 22 3396 0690 Qin Wang +852 2822 4393 Analyst [email protected] [email protected] Antonin Baudry +33 1 56 52 43 25 [email protected] Analyst Associate Neale Anderson +852 2996 6716 Wayne Wang +852 2914 9935 Analyst [email protected] [email protected] Christopher Johnen +49 211 910 2852 [email protected] Analyst Associate Angela Tay +65 6658 0612 Kenneth Shim +822 3706 8779 Analyst [email protected] [email protected] Dominik Klarmann, CFA +49 211 910 2769 [email protected] Analyst Associate Joyce Chen +8862 6631 2862 David Huang +886 2 66312865 Analyst [email protected] [email protected] Luigi Minerva +44 20 7991 6928 [email protected] Analyst

Jenny Lai +8862 6631 2860 Analyst [email protected] Specialist Sales Olivier Moral +33 1 5652 4322 [email protected] Analyst Kubilay Yalcin +49 211 9104880 Carrie Liu +8862 6631 2864 [email protected] Analyst [email protected] Adam Fox-Rumley +44 20 7991 6819 Myles McMahon +852 2822 4676 [email protected] Analyst [email protected] Bruce Lu +8862 6631 2861 Americas [email protected]

Analyst Analyst Christopher A Recouso +1 212 525 2279 Steven C Pelayo +852 2822 4391 [email protected] [email protected]

Analyst Analyst Ronny Berger, CFA 44 20 7991 2750 Ricky Seo +822 37068777 [email protected] [email protected]

Analyst Analyst Sunil Rajgopal +1 212 525 0267 Rajiv Sharma +91 22 2268 1239 [email protected] [email protected]

Global Emerging Markets (GEMs) Analyst Darpan Thakkar +91 22 6164 0695 Analyst [email protected] Hervé Drouet +44 20 7991 6827 [email protected] Analyst Piyush Choudhary +65 6658 0607 Emerging Europe, Middle East & Africa (EMEA) [email protected]

Analyst Analyst Ziyad Joosub +27 11 676 4223 Jerry Tsai +8862 6631 2863 [email protected] [email protected]

Analyst Analyst Eric Chang +971 4 423 6554 Chi Tsang +852 2822 2590 [email protected] [email protected]

Analyst Terry Chen +852 2996 6635 [email protected]

Analyst Jena Han +822 3706 8772 [email protected]

Analyst Will Cho +822 3706 8765 [email protected]