Profitability Recovering Under Strong Contracted Sales, Maintain "Accumulate"

股

票

Research 研

究 Company Report: Evergrande (03333 HK) Van Liu 刘斐凡 Equity 公司报告：中国恒大 (03333 HK) +86 755 23976672 [email protected]

12 April 2017

Profitability Recovering under Strong Contracted Sales, Maintain "Accumulate" 强劲合约销售下的盈利能力恢复，维持“收集” 公司 Rating: Accumulate  2016 underlying net profit missed our expectation. Top line increased by Maintained

报 58.8% YoY to RMB211,444 mn in 2016. Underlying net profit decreased 评级：收集 (维持)

告 29.0% YoY to RMB5,061 mn. CompanyReport

 Contracted sales will extend strong growth. Sales target and saleable 6-18m TP 目标价: HK$9.66 resources in 2017 are RMB450.0 bn (indicating 20.5% YoY growth) and Revised from 原目标价: HK$5.17 RMB802.0 bn (indicating 56.1% target sale-through rate), respectively. Share price 股价： HK$8.500  We expect profitability to recover. The Company's gross margins are expected to remain at around 28.3% between 2017 and 2019. Debt replacement and perpetual instruments repayment will dramatically promote Stock performance the Company's profitability. 股价表现

 The real estate business spinoff can be a catalyst for Evergrande's valuation.

However, the leverage ratio is likely to remain at a high level, which should

证 still justify a high NAV discount. Overall, as we revise up underlying net profit, we revise up its target price from HK$5.17 to HK$9.66, which represents a 券告 58% discount to the Company’s revised 2017E NAV of HK$22.99 per share,

研报

7.0x underlying 2017 PER and 1.9x 2017 PBR. We maintain "Accumulate".

究究 Key risk factors include: lower-than-expected house sales, debt replacement

报 missing expectations, perpetual instruments repayment missing and potential 研

liquidity risk. 告券  2016 年核心净利低于我们预期。总收入同比增长 58.8%到人民币 2,114.44 亿元。核心净利 EquityResearch Report 同比下降 29.0%到人民币 50.61 亿元。证  合约销售将延续强劲增长。2017 年的销售目标和可售资源分别为人民币 4,500 亿元（预示 Change in Share Price 1 M 3 M 1 Y

同比 20.5%的增长）和人民币 8,020 亿元（预示 56.1%的去化率）。股价变动 1 个月 3 个月 1 年

Abs. % 35.1 62.8 48.3  我们预期盈利能力的恢复。公司毛利率将在 2017 到 2019 年维持在 28.3%左右。另外，债绝对变动 % 务置换和永续债工具的偿还将显著提高公司盈利能力。 Rel. % to HS index 相对恒指变动 % 32.9 57.8 30.5

房 Avg. share price(HK$)  地产业务的分拆是中国恒大估值的一个催化剂。然而，杠杆率很有可能保持在高水平，这平均股价（港元） 4.8 5.1 4.9 地仍应适用一个高每股净资产折让。总体而言，我们上调了核心净利，我们将目标价从 5.17 Source: Bloomberg, Guotai Junan International. 产港元上调至 9.66 港元，相当于较 22.99 港元的 2017 年每股净资产有 58%的折让，也分别

相当于 7.0 倍 2017 年核心市盈率和 1.9 倍 2017 年市净率。我们维持“收集”。风险：低

行于预期的房屋销售，未完成债务置换，未完成永续债工具的偿还以及潜在的流动性风险。

业 Sector Property

Year End Turnover Net Profit EPS EPS PER BPS PBR DPS Yield ROE 年结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 12/31 (RMB m) (RMB m) (RMB) (△%) (x) (RMB) (x) (RMB) (%) (%) 2015A 133,130 7,128 0.479 (22.8) 14.9 3.478 2.0 0.380 5.3 20.5 2016A 211,444 5,061 0.364 (23.9) 20.8 3.233 2.3 0.000 0.0 10.7

2017F 288,015 17,000 1.224 235.9 6.2 4.523 1.7 0.666 8.8 34.7 HK) HK) 中 2018F 351,712 23,085 1.662 35.8 4.6 5.698 1.3 0.917 12.1 36.0 国 2019F 379,098 24,572 1.769 6.4 4.3 6.768 1.1 0.991 13.1 31.9

3333

恒 Shares in issue (m) 总股数 (m) 13,731.7 Major shareholder 大股东 Hui Ka Yan 74.3% Market cap. (HK$ m) 市值 (HK$ m) 116,719.5 Free float (%) 自由流通比率 (%) 25.7 大 3 month average vol. 3 个月平均成交股数 (‘000) 43,089.3 FY17 Net gearing (%) FY17 净负债/股东资金 (%) 252.7 52 Weeks high/low (HK$) 52 周高/低 8.500 / 4.620 FY17 Est. NAV (HK$) FY17 每股估值（港元） 22.99

Source: the Company, Guotai Junan International. Evergrande See the last page for disclaimer Page 1 of 9 Se initiatives YoY was RMB5 paid tax appreciation land to due profit underlying net 2016 maintained tier in levels stock low ASPand high restrictions Mar. 2017 soaring level Corp InformationEstate Real China sector property the of development sound and steady promote to maintained be will Targeted policies Source: Figure Jan. downside momentum. in rebounded sold area land and investment in growth Jan. inventories, during that to compared decrease to continued sales house commodity in increase Hous Source: Source: 2011 Figure e 10,000 12,000 14,000 10 15 20 25 30 Months

0 5 2,000 4,000 6,000 8,000 th s are s also missed also to to - e e

Jan -10 ,

0 National Bureau of Statistics of China of Statistics of Bureau National Feb China Real Estate Information Corp Information Estate Real China 091

strong contracted sales growth sales contracted strong las 1 5.4 sales growth sales

Apr -10 3 ASP,in especially : : t

during during 2017 Jul -10

. Cumulative House AmountinCumulative House Sales China Stocks relative pag . 2017 %. %. . Policy tightening could curb investment demand investment curb could tightening Policy . . These related policies have mainly involved an increase in minimum down payment m

Oct -10 On the other hand,lower n

e Jan -11 Tier Net gearing Net , fo Apr -11 which Amount Sold YTD Amount YoY of Residential Houses (RHS) Sold YTD Amount YoY of Commodity Houses (RHS) Sold of Amount Residential Houses (LHS) (RMB bn) Sold of Amount Commodity Houses (LHS)(RMB bn) - 1 Cities r

our expectation. our Jul -11 ly - disclaimer to

Oct -11 low. As a result, the government's government's the result, a low. As Jan -12 - Sales Ratio by City Tier .

missed has has

Cash Apr -12

Tier Jul -12

- the continued to slow down, but investment growth investment but down, slow to continued 2 Cities ratio Oct -12

and was in line with line in was

balance Jan -13

our expectation. our

Apr -13 second

surged Jul -13 net profit attributed to to attributed profit net , The Company recorded flat gross margins gross flat recorded Company The Oct -13 Tier Guotai Junan Junan Guotai , , the , Guotai Junan Junan Guotai -

Jan -14 - 1, tier 1, - also dramatically increased 3 Cities tier cities with high tier cities s . Apr -14 - hand house hand

Gross profit amounted to to amounted profit Gross

by Jul -14 stocks

Oct -14 - 261.0 Jan -15 tier select and 2

our expectation. our

Tier

International Apr -15 Moreover Between - International to - Jul -15 4 Cities

ppts Oct -15 - sales ratio decreased to 8.7 months in Feb. 2017, which means which 2017, Feb. in months 8.7 to decreased ratio sales

Jan -16 triggered market,

Apr -16 - - - 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 0.0% YoY

30.0% 20.0% 10.0% level of of level

. Jul -16 ,

perpetual capital capital perpetual . Jan. u

Oct -16 tock will be levels a under policy environment.easing nderlying net profit net nderlying

riding on soaring debt scales for aggressive land replenishment land aggressive for scales debt soaring on riding

Jan -17 - 3 cities, policy tightening policy cities, 3

and delay rigid demand, thus cooling the property market. With With market. property the cooling thus demand, rigid delay and Source: Source: Figure tolerance tolerance Source: Source: Wind Cities Figure To

RMB59 85.5 p 100 150 200 250 300 1,400 1,600 1,800 1,000 1,200 50

200 400 600 800 0 line National Bureau of Statistics of China of Statistics of Bureau National 0 the 2 % % YoY to Between

Feb-11 : 4

Cumulative House GFACumulative House China Sales in increas : , May-11

towards 422 most otl adAqiiinAon n10 Monthly 100 Amountin Acquisition Land , Aug-11 - e. 07 I adto, s addition, In 2017. Feb. instruments Junan Guotai Nov-11

. mn, de Feb-12 Underlying n Underlying recent RMB304 ed

rebounded

May-12 Jan.2011 creased GFA Sold of GFA ResidentialSold Houses (RHS) of GFA CommoditySold Houses (RHS) of GFA Residential Sold Houses (LHS) (sq.m. mn) of GFA CommoditySold Houses (LHS)(sq.m. mn)

soaring

Land Acquisition Land Premium Rate(RHS) Land Acquisition Monthly GFA YoY(RHS) Land Acquisition Monthly GFA(LHS)(mn sq.m.)

up Aug-12 by Nov-12

58.8

58.8 measures International Feb-13 round of policy tightening policy of round n , May-13 , 329 29.0

et profit profit et

% YoY. % Aug-13 ASP % YoY % to - -

. et profit margin profit et Nov-13 e. 06 I odr o replenish to order In 2016. Dec. Mar

During Jan. During m

% YoY % to Feb-14 ,

n. HPR upgrading May-14 that think We decreased. has . . 201 .

in these related cities will be will cities related these in

Aug-14 Given , Guotai Junan Junan Guotai de Nov-14 RMB211 lal aes extended areas aleable Feb-15 7 creased May-15 RMB5

Evergrande more

Aug-15 - Feb. 2017, the YoYthe 2017, Feb. Nov-15 declined

, Feb-16 44

International , financial costs financial 061

51.3 May-16 .

and mortgage

Aug-16 to According measures

Page Page ( m

Nov-16 HK 03333

mn % that n Feb-17 3.0

- - - 10.0% 20.0% 30.0% 40.0% 50.0% 0.0% in - - - - 100.0% 120.0% 20.0% 40.0% 60.0% 80.0% 0.0% , which which , 30.0% 20.0% 10.0% o to YoY 80.0% 60.0% 40.0% 20.0% 2 .

stock stock of of 2016 ppts ppts 9 )

Company Report Evergrande 中国恒大 (03333 HK) 12 April 2017 Se injectionthe improve can C Capital the obtaine Group the 2017, Jan 24 On capital. share enlarged Estate’s Real Hengda of 13.16% for accounted amount investment The bn. RMB198 of which improve Evergrande's Source: Figure up sq.m, RMB resources sufficient by supported be to likely lower in sales housing support still policies and tiers (indicating targe Sales target. locations expect We Company, Source: the Net ROE Shareholders'equity Total Tradeand other payables Advancedproceeds received from customers Stocksof properties Total Cashand Land Underlying( EPS ( DPS NPM(Ex. after NPM(Inc.after N N GPM Gross Total RMB Table P P e

(Ex.after (Inc.after g Company th .

earing

mn 106.93 a d a r RMB e But the policy tightening was only targeted only was tightening policy the But evenue , p sset ppreciation ebt

the Company the 1 100.0% 120.0% Hengda Real Estate introduced strategic investors with a investmenttotal amountof RMB30 based on valuation bn its rofit las 20.0% 40.0% 60.0% 80.0% 5 : 0.0%

c of Sheet the Company’sComparison and Balance Statement Income in 50.6 its t

ash Evergrande's Evergrande's City Tier cent) pag r 56.1 I - atio

- n 201 n

tax valuefair gains on IP

tax valuefair gains onIP financial position. b c - - % % YoY. e tax valuefair gains onIP e n tax valuefair gains on IP sales ontracted will introduce will

real estate business estate real quivalents fo

RMB % target sale target % in contracted sales, up sales, contracted in t r . ax 42.8% 55.9%

Tier 6 1.3% 2013

Guotai Junan Junan Guotai disclaimer

, contracted sales contractedsales ,

ad aebe eore i 2017 in resources saleable and t

During 2013 During - cent) 1 Cities T he Company has achieved has Company he

d an inand

ContractedSales

Tier

International additional - 46.1% 44.5% 9.4% 2014 through rate), respectively.rate), through - 2 Cities - principle approval for the proposed spinoff from the Hong Kong Stock Exchange. StockKong Hong spinoffthe from proposed the for approval principle On 30 Dec to extend strong growth due to sufficient saleable resources resources saleable sufficient to due growth strong extend to - 2016

andexchange losses ompany andexchange losses

andexchange losses andexchange losses amounted to amounted spin .

Tier

strategic strategic

62.8

52.3% 40.6% - 7.1% 2015 3 Cities off off ’ . s financial position.s

Breakdownby 2016, the % YoY.% Accumulated for listing for in

- investors in the near future near the in investors wide geographic locations. geographic wide tier for

23.8 RMB

13.4% 54.0% 32.6% 2016 cities with high stocks. high with cities cities with overheating property market property overheating with cities )

)

Company % of% its

r RMB are ) 373.37 )

In addition, the Company's saleable resources fully covered all covered fully resources saleable Company's the addition, In on

the A the Source: Source: Figure

2017

b 450.0

n, n, reached agreements with a number of investors, pursuant to

c soaring 40.00 50.00 60.00 10.00 20.00 30.00 -

o 0.00 share marke share annual sales target the Company the ntracted sales in terms of GFA amounted to GFAamounted of terms in sales ntracted

6 b : ( n May-14 Evergrande

296,906 191,309 383,976 757,035 164,022 133,130 indicating by Contracted Sales(bn Contracted RMB) (LHS) Jul-14 260.5% 51,006 83,061 10,460 37,413 20.5% 28.1%

4,453 7,128 D Therefore, the Company's contracted sales are sales contracted Company's the Therefore, 5.4% 7.9% 20 with a total investment amount of RMB15 bn RMB15 of amount investment total a with 71.3 38.0 Sep-14 85.4 uring Jan. to Jan. uring . 15 Nov-14 t

% YoY, % achieving

can Jan-15 ’

05 YoY 20.5% Mar-15 Saless Records 20

be a catalyst for catalyst a be May-15 far so 15

Jul-15 and and Mar s

Sep-15 . , especially ,

Nov-15 2017 . 2016

rwh ad RMB and growth) Jan-16 1,350,868 535,070 299,905 194,961 658,627 304,329 211,444 521.6% 1 44,240 59,422 28.1% 11.5%

Mar-16 24.5 8,359 5,061 5,091 2.4% 2.4% 2016 , ASP (RMB/sqm.) (RHS) 37.2

in Evergrande May-16 Evergrande 0.0

in % of its 201 its of %

its Jul-16

ie geographic wide

higher

Sep-16 valuation and valuation Nov-16

In addition, addition, In Page Page

Jan-17 ( 03333 HK 03333 11.298 -

261.0ppts

tier cit tier

802.0 Mar-17 recorded - - - - 9.0 ppts9.0 ppts3.0 5.4ppts 0.0ppts Change 10,000 12,000 2,000 4,000 6,000 8,000 0 134.7% 100.0% 6 - - - - 3 13.3% 80.2% 56.8% 71.5% 78.4% 85.5% 87.7% 47.8% 29.0% 51.3% 58.8% 58.8%

sales of of

ies, cit mn 9 ) bn

. . y

Company Report Evergrande 中国恒大 (03333 HK) 12 April 2017 Se 28.3around YoY margins. Enormous scale of land bank further.increase Ther future. the in bn RMB370 to amount will Shenzhen in saleable resources Therefore, sq.m. per RMB50,020 be to ASP saleable the estimates Company The sq.m. 7,413,000 to amounted further.Company the improved addition, In per sq.m. acquired 213 parcels of land with help will which further, improved bank land Company's The Source: Figure CAGR of RMB from increase to income other estimate and growth fast maintain care and RMB5 approximately of gain tax before unaudited an recognize enable the Company to focus on property development and other related businesses. aggregate consideration for the 2016, Oct. 28 disposed Company The e

. th

Its unit land cost amounted to RMB1, to amounted cost land unit Its e the Company the las 7 : cultural t

38.1

and As at the end of Evergrande pag % in% 2016 e % in 201 59.6% 59.6% of the the fo

r , Guotai Junan International Junan Guotai , tourism disclaimer Company - ’ 2018. 6 s

all - billion. RMB33.9of volumetrading annualwithregistered million15over were thereand businessfinancial conductsHDFAX.COM Shengjing of shares 17.28% Company the 2016,AprilIn China in companies 30 rankingincome, premium in bn RMB14.99recorded Insurance LifeEvergrande

201 Diversification industries th Financial Financial Business

mn allinsurance among of 201

newly projects acquired

9 dispose Bank. unprofitable businesses and optimized distribution optimized and businesses unprofitable . 6

s , the, d

with with proper unit land costs support the Company's contracted sales with stable gross isposal a

. With the gradual development of these diversified business total total GFA of 102 mn sq.m, up Company d

. of all of its int its of all of

was

Strategy has 20 20 has 570 per sq.m, 18.8% of ASP in 2016 in ASP of 18.8% sq.m, per 570

RMB2

had

w projects 582 .7 .7 bn ere erest in grain and oil, d oil, and grain in erest

projects in Women’s Hospital’’Women’s andBrigham ofAffiliate HospitalInternational ‘‘ establish to School,Medical Harvard of hospital teachingmajor a Hospital,Women’s and Brigham with cooperated Group Health Evergrande aging. antiandcosmeticsmedical hospitals, international high newoperation, careelderly commences which group industry health comprehensive andalarge is Group Health Evergrande

in in tier .

Diversification Diversification The

Strategy in Shenzhen with Shenzhen in Boao - d 1 1 and tier Evergrande isposal is being carried out for strategic consideration and w .7 bn .7 - 192.7 end — 209 to - . stabilize its gross margins. gross its stabilize

% % YoY. The average land cost amounted to RMB efore, we expect the Company's quality land bank to to bank land quality Company's the expect we efore, cities. Total GFA amounted to Evergrande will continue to focus on financial, health financial, on focus to continue will Evergrande 4.959 - 2 2 cities. Therefore, the Company's bankland quality ai

a ry products and spring water businesses. The businesses. water spring and products ry bn in 201 in bn planned GFAplanned 11.8 of mn . We estimate gro estimate We

In within

addition, addition, 6

sq.m. mn 10.6was construction underarea The in 2016. bn RMB17.47 to amounted sales thecontracted children.for services providetostriving andland productmajor its on focusing composite tourism cultural is largea Group Tourism Evergrande to RMB to Cultural Cultural Tourism

its diversified businesses diversified its Business es, es, we expect other income to — the Company is expected to fairytale 13.059

ss margins to remain to margins ss 229 In 2016, The Company The 2016, In Evergrande

sq.m. Saleable GFA sq.m.

mn sq.m bn in 201 in bn

, up , 46.9% Page Page ( 03333 HK 03333 9 , or at a a at or , 4 1

, of of . 996

O 9 ) at ill

Company Report Evergrande 中国恒大 (03333 HK) 12 April 2017 Se revise 161.6 promote remain respectively. mn, locations that expect We Source: Figure ratios will stillgearing remain at and are levels high estimated to should scale debt Therefore, level. high a at GFA started newly its maintain will respectively. bn, RMB112.944 and bn RMB535.070 profitability Company's instruments A 2017, instruments perpetual and borrowing of costs Therefore, bn. RMB5.091 only same the During 7.8%. to ppts attributable to perpetual capital instruments were 0.64 RMB by decreased 2016 in cost funding with level average high a at remain to likely is ratio leverage the but profitability, D Source: Figure - eclining eclining e plan restructuring share

revise th Tier e to % the Company the the the w down las 39.0% 10 8 at a stable level stable a at - ith sufficient cash on hand on cash sufficient ith 3 3 Cities, : . the Company's profitability Company's the Company t

: Therefore, Evergrande the end 201 end of the pag

f up RMB17 Evergrande

Evergrande unding costs and costs unding

in 2017 and repay and 2017 in net gearing ratio net e

underlyingestimations. profit fo Tier r . .

With With disclaimer , 3.1% - 000 4 4 Cities,

’ e e revise . s

quality land bank and proper unit land cost land unit proper and bank land quality 's contracted sales will maintain will sales contracted's ’ mn and mn . s

oee, t However, Land Bank BreakdownbyLand Bank 6

elcmn o high of Replacement AverageCost Net Funding and Ratio Gearing

h Company the

in 2017 up ing repay RMB23 100% 150% 200% 250% 300% 350%

50% 2017F and

0% , capital injection from injection capital , the reminder of of reminder the . tl orwn ad perpetual and borrowing otal Overall, we Overall, F ment of ment

and 2018 , Net Gearing RatioNet (Inc. Gearing perpetual instruments) 085 2013 will

mn, respectively. mn, 2018F total revenue by

elc pril high partial replace perpetual perpetual Total previous by 47.9%. thanour assumption revenue was 2016 higher in - il et n rpyet f perpetual of repayment and debts yield

F dramatically

by Tier

2 Cities, 2 Cities, 57.9% perpetual capital capital perpetual In order to support the strong growth in contracted sales, the Company the sales, contracted in growth strong the support to order In GFA 2.5 11.301 - 2014 1 1 Tier and

strong growthstrong

ppts andppts capital

strategic strategic at at

bn, bn, and revise revise -

Source: Source: Figure Due to strong contracted sales and profitability recovery, w recovery, profitability and sales contracted strong to Due

record record over 191.0% during 2017 instruments will will instruments

- 4.9 215 il debts yield , w , capital investors up the Company the 71.6

RMB 9 instruments due to su to due ppts, respectively. ppts, e expect e

: 2017F and 2018F underlying net profit by profit net underlying 2018F and 2017F

Evergrande Value Tier % % and

Average Funding Average Cost 10

23.0% ntuet, s t 1 e. 07 aone to amounted 2017, Dec. 31 at as instruments, -

3 3 Cities,

. dramatically 646 and net profit requirements from requirements profit net and 2016 ,

Tier

at end of the 201 .

fficient saleable resourcesfficient saleable

repay that that 96.4

2.3%

- a 4 4 Cities, bn, respectively. still still in 2018 in

tremendous dramatically promote dramatically ’

gross ma gross

% % to s ing rema period

10.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% Land Bank BreakdownbyLand Bank

capital around sque RMB288 , thus, thus, , in at a high level. Therefore, level. high a at in

the , rgins in 2017F and 2018F will 2018F and 2017F in rgins eze

- instruments will significantly will instruments 6 dramatically 70.0% of of 70.0% 2019 et scale. debt

d the Company's profit Company's the d financial , Meanwhile 015 .

Evergrande mn and Tier 2 Cities, 2 Cities, 74.7% in

- perpetual capital perpetual 1 1 Tier and

the Company's the costs wide geographic wide , promot h weighted The net profit

the RMB351

Page Page ( 99.2 03333 HK 03333 n profit and -

Original Original previous ing 5 % and %

of of was , . In . n 712 the We We 9 ) et

Company Report Evergrande 中国恒大 (03333 HK) 12 April 2017 Se Source: Table missing replacement rating investment Evergrande's maintain to discount revise we likely to remain at a high level. spinoff perpetual distribution. development" M Source: Net ROA ROCE ROE Underlying Net Operating Gross Underlying Net Operatingprofit Gross Total RMB Table Source: Bloomberg, Source: Bloomberg, Figure NAV/Share NAV ( GrossAsset Value Investment DevelopmentProperties aintain NetDebt e

g p p th

earing rofit rofit mn r e evenue

m p the Company the 3 Junan Guotai 2

rofit las can argin : of Breakdown : 11

m Revision p t )/ Net)/ Cash

n p up : argin instruments rofit " pag r

et et rofit

also also Accumulate atio Evergrande Property the Company the

q A

underlying net profit, we revise revise we profit, net underlying p . e

rofit

fo otatd ae sol miti srn got. h Cmay lo piie is iesfe business diversified its optimized also Company The growth. strong maintain should sales Contracted uality argin Guotai Junan Junan Guotai be a catalyst for its valuation. its for catalyst a be r ,

International Guotai Junan Junan Guotai disclaimer m s

argin to

expectation

ad ak ih rpr nt ad ot stabilize cost land unit proper with bank land

repayment 201

’ "

Evergran s ’ . s revised s

3 7 . International h Company The

- -

YearP/B Historical International 201 288,015 252.7%

17,000 18,592 65,148 82,084 We We think 14.9% 34.7% 22.6% 28.5% 201 4.5% 5.9% 6.5% 9 , perpetual,

7 de Profit EstimationProfit il rmtcly rmt te opn' profitability. Company's the promote dramatically will F 201 Newestimation

. ’

s 2017 .

351,712 7 that 220.9% 25,585 77,956 98,835 23,085 E NAV of HK$ NAV of E 201 17.1% 36.0% 22.2% 28.1% as 5.2% 6.6% 7.3% (334,252) (RMB m)

has these negative factors still lead to a high NAV 284,253 618,504 597,754 capital

up 20,751 "Accumulate". NAV F 20.46 However,

the Company the transfer

107,596 379,098

190.7%

83,299 24,572 27,611

instruments 17.7% 31.9% 22.0% 28.4% 201

5.3% 6.5% 7.3% s

9 2 F red a 2.

t 99 remendous debt scale debt remendous

Key risk factors include: factors risk Key 167,868 255.2%

t srtg fo " from strategy its

(375,564) 38,464 47,408 ’ 11,815 per share per 10.6% 17.8% 22.9% 28.2% 201 s (HK 8,535 319,385 694,949 671,633 3.8% 5.1% 7.0%

repaymentmissing and p target price price target Source: Bloomberg, Source: Bloomberg, Figure 23,315 22.99 7 $ F

Old estimationOld d

179,074

t gos agn. n diin db rpaeet and replacement debt addition, In margins. gross its 225.8% 12 , 42,529 50,923

11,965 16.4% 23.7% 28.4% 201 11.6% 8,824 7.0 4.0% 4.9% 6.7% :

Evergrande 8 from from x underlying 201 underlying x F

NAV/share Guotai Junan Junan Guotai

scale HK$ (27.03) will be maintained be will 201 (HK 22.99 50.02 48.34 1.68 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

5.17 l

9 ower $ F eeomn" o "scale to development" ) ’

otential liquidity risk.

Evergrande's 3 to iscount for Evergrande. Overall, as International - - than YearP/E Historical

HK$ 7 16.9 - - - 2.5 0.7 4.3 0.8 0.6 0.3 0.3

PER 99.2% 57.4% 69.4% 73.1% 71.6% 201 - expected house sales, house expected % of NAV% 9.66 ppts ppts ppts ppts ppts ppts ppts ppts 7 100.0% 217.6% 210.3%

(1.2)% F . and and the leverage ratio is ratio leverage the and

7.3%

which

Evergrande

el sae business estate real Change 1. 19.6

- - - 4.9 1.1 5.5 1.6 0.6 1.6 9 0.3 161.6% 113.8%

x 83.3% 94.1% 96.4% 201

represents 201 ppts ppts ppts ppts ppts ppts ppts ppts

F &

Page Page 7 (

% of GAV% 03333 HK 03333

PB efficiency 100.0% 96.6% 3.4% 6 R 201

of of . a debt

n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. We We 9 ) 9 58

Company Report Evergrande 中国恒大 (03333 HK) 12 April 2017 Se Source: Weighted Average Simple Average Median Property HoldingsGlorious Holdings LtdKaisa Group Zhong An Real Beijing Capital LtdLand Top Spring International Hld HoldingsSce Property China Real China Central Estate Yuzhou Properties Co Co Holdings Group Fantasia Holdings C LtdC Land China Aoyuan Group Property Real Powerlong Estate Holdin China Land LtdModern Co ShInd Urban Co Group Poly Property Ltd Overseas Grand China Oceans listed HK mid Weighted Average Simple Average Median VankeChina LtdCo China HoldingsGreentown Yuexiu EstateReal Investmen Beijing StarNorth Co Development Hopson Holdings InvestmentShenzhen Ltd Yuexiu Property LtdCo Ltd Holding Kwg Property Shui LtdOn Land Franshion Properties Sino R&F Guangzhou Properties Shimao Holdings LtdProperty LtdSoho China Agile Holdings LtdProperty PropertiesLongfor Garden Holdings CoCountry Bbmg Corporation LandResources China Ltd EstateReal Evergrande Group &Overseas Land China Invest mainland from revenue major with large developers HKlisted Company Table e - Ocean Land Ocean Holdings

th e

Bloomberg 4 las :Comparison Peers - small major developers mainland with from revenue Estate Ltd t

H pag -

Ltd

- H - e

, Guotai Junan Junan , Guotai fo -

disclaimer Stock Code

International 02009 HK 02009 HK 03333 HK 00688 00845 HK 00845 HK 01638 HK 00672 HK 02868 HK 03688 HK 01966 HK 00832 HK 01628 HK 01777 HK 01224 HK 03883 HK 01238 HK 00563 HK 00081 HK 02202 HK 03900 HK 00405 HK 00588 HK 00754 HK 00604 HK 00123 HK 01813 HK 00272 HK 00817 HK 03377 HK 02777 HK 00813 HK 00410 HK 03383 HK 00960 HK 02007

01109 HK 01107 HK 00119 HK

Mkt Cap (HK$ m) CapMkt (HK$ .

254,416.2 162,289.2 154,906.5 251,444.8 116,719.5 13,354.3 10,203.0 13,013.9 12,871.3 16,224.2 13,271.5 19,855.8 16,246.6 26,313.1 16,245.7 17,528.8 14,126.9 26,787.5 28,706.8 41,310.7 43,489.4 22,098.0 26,440.1 78,690.0 81,209.9 11,264.0 11,643.7 7,169.2 1,526.6 3,231.8 4,664.7 7,375.3 7,920.0 6,251.5 3,329.7 8,419.7 7,074.9

Last Price HK$ Last Price 21.100 12.820 12.840 13.440 22.350 22.950 0.650 3.720 2.730 2.980 1.910 3.410 1.280 2.040 2.340 3.220 1.330 1.750 3.180 4.080 7.500 4.520 3.130 7.300 3.440 1.310 5.740 1.760 2.510 3.820 4.250 6.750 7.600 4.610 8.500 0.920 2.600

2017F 24.3 20.9 48.4 10.3 13.0 10.7 13.0 32.1 11.2 n.a. n.a. n.a. n.a. n.a. 8.0 8.2 7.7 7.9 8.0 9.2 4.5 8.4 7.7 6.9 5.0 5.8 6.7 7.5 8.1 7.1 6.8 8.3 5.6 5.9 5.6 3.6 4.8 7.3 4.0 5.0 3.5 5.9 9.3

PE 2018F 21.9 19.2 39.3 10.9 12.5 18.5

n.a. n.a. n.a. n.a. n.a. n.a. 7.0 7.1 6.6 7.0 7.9 4.1 7.2 6.5 6.0 4.5 5.1 5.9 6.5 8.5 7.0 7.5 6.3 5.0 6.2 4.3 4.2 4.3 2.8 4.0 5.8 3.2 4.3 3.1 4.9 7.8 9.7

2019F 19.9 36.6 10.7 14.3 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 6.3 6.5 7.0 6.5 7.4 3.4 6.3 5.6 5.3 4.1 4.5 5.1 5.5 6.4 6.3 5.9 5.7 3.0 5.0 3.6 3.3 3.3 4.9 2.6 4.0 2.7 4.5 6.7 8.3

2017F n.a. n.a. n.a. n.a. n.a. n.a. 0.7 1.6 0.5 1.0 0.5 0.7 0.4 0.6 0.3 0.7 0.5 0.8 0.7 0.6 0.6 1.0 1.8 1.0 1.1 1.8 1.0 0.5 0.6 0.6 0.6 0.9 0.5 0.9 0.6 0.6 0.4 0.5 0.6 0.5 0.7 1.2 0.9

PB 2018F

n.a. n.a. n.a. n.a. n.a. n.a. n.a. 0.6 1.4 0.5 1.0 0.6 0.4 0.5 0.3 0.6 0.5 0.7 0.6 0.6 0.5 0.9 1.5 0.9 1.0 1.7 0.9 0.4 0.6 0.6 0.6 0.8 0.4 0.8 0.5 0.5 0.4 0.6 0.6 0.4 0.6 1.0 0.8

2019F n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 0.6 1.3 0.5 1.0 0.6 0.4 0.5 0.3 0.6 0.5 0.6 0.5 0.6 0.5 0.8 1.1 0.8 0.9 1.0 0.8 0.3 0.5 0.5 0.6 0.7 0.5 0.4 0.4 0.5 0.4 0.6 0.9 0.7

2017F D/Y% 10.1 n.a. n.a. n.a. n.a. n.a. 4.9 5.1 2.2 6.6 2.2 1.4 6.2 4.7 8.0 2.8 5.1 5.7 8.2 6.0 5.8 5.9 4.3 3.0 1.1 3.5 4.9 3.7 3.8 5.4 5.5 6.4 5.5 7.7 7.4 5.0 5.4 7.7 2.3 0.6 1.0 4.2 4.6

Evergrande 2017F ROE 20.8 13.8 10.3 15.7 12.1 14.8 18.8 15.4 15.1 14.8 13.0 15.4 19.3 17.8 15.4 18.0 15.7 19.7 13.6 14.6 10.7 n.a. n.a. n.a. n.a. n.a. n.a. 9.9 6.5 4.0 6.6 9.4 5.1 3.9 8.5 1.3 8.7 7.7 9.3 8.4 9.9 4.5 1.3

EV/EBITDA

Page Page ( 2017F 03333 HK 03333 13.0 21.2 10.2 29.5 14.7 14.2 10.0 11.0 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 7.9 4.9 4.3 9.2 9.3 7.9 6.4 7.8 7.9 5.5 8.1 7.3 5.8 5.0 3.8 6.5 5.3 9.1 5.1 2.9 3.7 5.3 5.4 7.5

7 of of 9 )

Company Report Evergrande 中国恒大 (03333 HK) 12 April 2017 Se Total eq Perpetual capital instruments Minority interest Total equity common Total li Total non Other payable income tax Deferred liabilities Borrowings Total liabilitiescurrent Other current liabilities Bank borrowings other and payablesTrade Advanced proceeds Total as Total current Other non other and receivables Trade and equivalentsCash cash Restricted cash propertiesCompleted under Properties development Total non Other current assets Investment property rightsuse Land Property, plant equipment and As at (RMB m) 31 Dec payout ratio Dividend DPS (RMB) EPSUnderlying (RMB) Ba Profit to attributable Profit for periodthe Profit incomebefore tax Op Gross profit ofCost sales Other income Sales of properties Total revenue Year (RMB End m) Dec Statements Financial and ------Source: the Company, Guotai Junan Junan Guotai Company, the Source:

Minority Minority interest Perpetual capital instruments (Underlying Shareholders Profit) (NetShareholders income) Income tax expense income/(costs), Finance net Others incomes (expenses) Others Administrative expenses Selling costs marketing and on FAsgains Fair value Fair sic EPSsic (RMB) erating erating profit e

value gains on IPsgains value abilities th sets uity & liabilities

- - - e current assets current liabilitiescurrent assets current

las

assets

pag

disclaimer

(95,717) (14,105) (13,325) 126,449 133,130 138,162 456,681 158,744 191,309 757,035 612,344 103,090 329,610 144,691 757,035 614,893 158,212 (2,994) (6,139) Income Statement 12,859 37,413 75,737 15,399 51,006 17,569 23,567 83,061 42,886 21,708 60,932 54,118 27,200 97,146 16,720 10,460 17,340 31,445 32,316 2015A 2015A 49.7%

6,681 2,481 3,625 0.380 0.479 0.713 1,792 5,088 7,128 2,123 1,508 Balance Sheet Balance

Ratios

0 International

1,350,868 1,158,336 1,350,868 1,113,635 (152,022) (19,245) (11,301) (15,983) 203,890 211,444 112,944 424,942 332,164 733,394 202,906 299,905 194,961 198,420 105,909 577,851 237,233 132,045 (9,598) 59,422 35,348 44,240 54,354 38,424 35,622 74,245 76,434 80,776 78,954 20,833 10,646 17,617 36,862 48,225 2016A 2016A 49.7% 5,401 0.000 0.364 0.372 1,880 5,061 5,091 9,260 5,124 7,554

(62)

1,438,891 1,178,638 1,438,891 1,286,124 (205,930) (30,045) (11,277) (18,779) 456,593 365,380 829,530 223,197 305,903 264,096 104,113 181,240 106,968 642,221 260,252 145,250 276,927 288,015 (8,164) 33,883 56,052 62,832 51,636 39,577 36,334 67,359 76,737 88,082 21,250 17,000 18,592 26,851 56,896 65,148 82,084 11,088 2017F 2017F 49.8% 5,671 0.666 1.224 1.338 5,704 2,555 5,793 7,327 (88) 0

1,507,681 1,243,629 1,507,681 1,364,995 (252,878) (36,886) (12,906) (21,492) 383,649 891,527 234,356 312,021 308,088 127,139 194,713 108,038 678,643 264,052 159,774 336,869 351,712 473,468 (7,908) 40,764 37,061 62,195 72,900 76,648 21,675 23,085 25,585 33,054 69,940 77,956 98,835 14,843 63,521 79,165 49,054 2018F 2018F 49.8% 5,955 0.917 1.662 1.842 7,469 5,459 8,060 (108) 0 0 0

1,561,482 1,395,440 1,561,482 1,285,255 (271,503) (38,877) (14,622) (24,350) 107,596 360,232 379,098 483,748 395,159 911,692 241,387 318,262 314,241 137,039 210,807 109,118 701,440 276,226 175,752 (8,197) 24,572 27,611 36,101 74,977 83,299 18,866 72,011 94,031 46,602 41,987 37,802 57,595 69,255 72,114 22,108 49.9% 2019F 2019F 0.991 1.769 1.987 8,489 5,809 8,866 6,252 (124) 0 0 0

Exchange Exchange losses Balance Cash Beginning in Net cash increase flow Cash from financing cash flowOther financing Repayment of paid to Dividends shareholders Debt raised/(repaid) flow Cash from investments Other ofPurchase PPE IPsand cash from Net operating activities Interest paid paid Tax cash from Net operations in capital:Changes working After adjustments: above Others D&A Income tax expenses Profit for periodthe Year (RMB End m) Dec EBITDAMargin Net Underlying Profit Margin ProfitOperating Margin Margin Gross Yield (%) Dividend P/B (x) P/E (x) (Diluted) P/E (Basic) P/EUnderlying (x) (Diluted) Debt to Equity Ratio Ratio Net Gearing ROA ROCE ROE Balance Ending Cash -

Adjustments Adjustments for:

investing cash flow investing

(x)

perpetuity

Cash FlowCash Statement (58,031) (12,553) (15,518) (23,749) (19,575) (17,600) (13,408) 109,446 130,107 103,090 582.1% 200.1% (6,952) (6,065) 29,847 73,144 44,322 19,491 14,105 17,340 2015A 2015A 2015A 2015A 27.4% 24.3% 28.1% 13.4% 20.5% 2,965 1,891 1,454 10.13 14.86 5.4% 4.3% 5.34 2.05 9.98 Valuations 99 Margins Ratios

1209.5% (91,758) (82,177) (43,165) (39,012) (31,668) (12,244)

103,090 178,413 238,164 198,420 289.9%

(5,200) (1,450) 95,280 37,207 42,956 44,406 19,245 17,617 2016A 2016A 2016A 2016A 24.1% 22.8% 28.1% 13.8% 10.7%

4,803 2,741 20.64 20.33 20.77 (956) 2.4% 3.6% 0.00 2.34 50

Evergrande (17,204) (28,714) (79,061) (26,945) (29,760) 198,420 181,240 936.8% 252.7% (3,160) (5,965) (9,535) 53,507 17,474 74,179 14,747 59,432 30,045 26,851 2017F 23.6% 22.6% 28.5% 2017F 2017F 14.9% 34.7% 2017F 3,570 3,015 (479) 5.9% 4.5% 8.80 1.67 5.65 5.65 6.18 25 0

(14,662) (33,883) (37,945) (30,464) 181,240 194,713 780.7% 220.9%

(9,252) (7,475) (1,416) 13,461 29,429 10,296 17,771 17,826 86,235 14,394 71,841 36,886 33,054 Page Page ( 2018F 23.1% 22.2% 28.1% 2018F 2018F 17.1% 36.0% 2018F 3,317 12.13 03333 HK 03333 (955) 6.6% 5.2% 1.33 4.11 4.11 4.55 12

8 of of (12,744) (40,242) (18,892) 210,807 194,713 677.0% 190.7% (8,205) (7,588) (1,887) 16,088 18,540 10,016 69,151 76,739 38,877 36,101 22.9% 22.0% 28.4% 2019F 2019F 17.7% 31.9% 2019F 2019F 13.10 6,141 8,137 3,648 6.5% 5.3% 9 1.12 3.81 3.81 4.28 ) (69) 345

6 0

Company Report Evergrande 中国恒大 (03333 HK) 12 April 2017 Se Website:www.gtja.com.hk Tel.:(852) 2509 27/F.,Low Block, GrandMillennium Plaza, 181 Queen’s Road Central, Hong Kong. 201 © subjectGuotai Junanand groupits companies any to registration or licensingrequirement within such jurisdiction i Research This Report isnot directed at,or intended distributionfor to orby,use any person orentity who isa orcitizen andwhere necessary consult their own financial advisers prior to any investment decision. its andobjectivesinvestment comprehend the understandand shouldInvestors contain. uncertainty may so situation, mutable est forwardsome contain may ReportResearch This herein. dataand information the ofcompleteness and accuracy the guarantee not Thoughbest effort becontrary to opinions orinvestment decisions madeby assetthe managementand investment banking groups of Guotai Junan. otherdealersand persons, Any opinions expressed in this report may differ or be contrary to opinions or investment strategies expressed orally or in w orinvest proprietarily). research reports, including investment banking, investment services Limited Kong) (Hong d Report Research This DISCLAIMER (6) (5) (4) (3) (2) (1) DISCLOSURE OF INTERESTS Horizon: Time to6 18 months The Sector Horizon: Time to6 18 months TheBenchmark: Hong KongHang Seng Index Company n any jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulatio or law applicable to contrary be would use or availability publication, distribution, such where jurisdiction any n e Underperform Neutral Outperform Rating Sell Reduce Neutral Accumulate Buy Rating

mts n frcss eie fo te supin o te uue oiia ad cnmc odtos ih neety unpredictab inherently with conditions economic and political future the of assumptions the from derived forecasts and imates

Benchmark:Hong KongHang Seng Index th Report. There isno in mentionedissuer the ofofficer an as servingindividual an employednot havecompanies group its and Junan Guotai Report. companies group its and Junan Guotai withinprecedingthe 12 months. companies group its and Junan Guotai issuerthe Holdings Limited (08237 HK), HK), (01788 HK), (00198 Limited Group Holdings SMI for Except The Analystsand their associates The Analystsand their associates 7 e

RatingDefinition GuotaiJunan Securities(Hong Kong) Limited. AllRights Reserved. las

t RatingDefinition pag

e mentionedin thisResearch Report. -

18 Fax:(852) 2509 9118 fo

GFI MSCI A I A MSCI GFI r hasbeen ensuremade to the accuracy of the information and data containedin this ResearchReport, Guotai Junandoes disclaimer

( Goa Jnn) Goa Jnn n is ru cmais a d bsns ta rlts o opne cvrd in covered companies to relates that business do may companies group its and Junan Guotai Junan"). "Guotai oes not constitute an invitation or offer to acquire, purchase or subscribe or purchase acquire, to offer or invitation an constitute not oes officerof the issuer mentionedin thisResearch Report associated with Guotai J

professional executives of Guotai Junan group of companies. Any opinions expressed in this report may differ or report may this professionalopinionsexpressedcompanies.in AnyexecutivesGuotai Junan of group of

ort RelativePerformance ort RelativePerformance Definition ort RelativePerformance < ort RelativePerformance ort RelativePerformance or RelativePerformance or RelativePerformance or RelativePerformance Definition

(03156 HK), (03156

the th t Guotai Junan and its group companies do not hold equal to or more than he he he he he he e

fundamental fundamental fundamental fundamental fundamental fundamental fundamental fundamental

dohavenot any donot

- 7793 have had have are not making not are

serve Binhai Investment Company Limited (02886 HK) (02886 Limited Company Investment Binhai

outlook outlook outlook outlook outlook outlook outlook outlook

asanofficer of the

is is is is >15% < >5%

investment banking relationships with the with relationships banking investment - -

financialinterests relationin to the 15% 5% 5% - - - 5% 5% 5% GFI MSCI AI MSCI GFI ; ofthe companyor sector ofthe companyor sector ofthe companyor sector ofthe companyor sector ofthe companyor sector ofthe sector ofthe sector ofthe sector

;

; to to to

a market in the securities in respect of the issuer mentioned in this Research this in mentioned issuer the of respect in securities the in market a 15% - 5% 5% 15% ; ; , , etc. ;

;

issuer

- is is is favorable (for example R (CNY) R un neutral

favorable

mentionedin thisResearch Report. .

(83156 HK), (83156

is is is is favorable. is favorable , , the placing agent, lead manager, sponsor, underwriter . un un neutral favorable. favorable.

issuer .

, Guotai .

CAM SCSMALLCAP CAM mentionedin thisResearch Report. issuer for securiti for

Junan International Holdings Limited Holdings International Junan

unanandgroup its companies. mentioned in this Research Report Research this in mentioned 1% 1% of the market capitalization of es by Guotai Junan Securities Junan Guotai by es .

Evergrande

(03157 HK) (03157 residentor of located ritten form by sales n or which would which or n

this Researchthis related risks,related

Page Page ( 03333 HK 03333

and Link and -

looking 9 le and and le of of

9 )

Company Report Evergrande 中国恒大 (03333 HK) 12 April 2017