Equity Research January 6, 2017

Haier Electronics 4Q16 retail sales improved

Company Update Maintain BUY

What's new Ticker 01169.HK According to CMM data for January~November 2016: CICC investment rating BUY 1) retail sales +9% YoY, Last close HK$12.98

+13% YoY, water heater +14% YoY; and, 2) air conditioner CICC target HK$16.20

+15% YoY, an obvious turnaround compared to 1~3Q16. 52wk price range HK$14.78~10.73 Market cap (bn) HK$36 Comments Daily value (mn) HK$32.32 Shares outstanding (mn) 2,792 4Q16, Haier retail sales clearly improved: 1) Haier has very Free float (%) 100 good high-end products. After digesting technologies from Fisher Daily volume (mn sh) 2.59 & Paykel and , Casarte has launched very competitive Business sector Home Appliances & Electronics products that gained market reorganization; and,

2) the consumption upgrade trend is obvious in Tier-1/-2 cities; 01169.HK HSCEI as seen by the large increases in its ASP in Beijing and Shanghai. 118 109 Haier’s weak points (sales & marketing) began to improve: 1) dual managed (by both Qingdao Haier & Haier 100 electronics) channel mode switched and channel efficiency 91

improved; 2) retail-based assessment of dealers, and specialty (%) Value Relative 82 stores, channel inventory turnover efficiency improved; 73 3) products no longer blindly emphasize high-end; since 2H16, Jan-2016 Apr-2016 Jul-2016 Oct-2016 Jan-2017 Casarte is no longer limited to products >Rmb10k (market space too small); the launch of ~Rmb5,000 products puts its products (Rmb mn) 2015A 2016E 2017E 2018E in the price range of products; 4) increased branding 62,826 62,843 68,173 73,135 through traditional media; and, 5) its product innovation gained Revenue the market’s attention thanks to a report by CCTV. (+/-) -6.4% 0.0% 8.5% 7.3% Net profit 2,703 2,817 3,143 3,521 Outlook: 1) 3Q16, Haier has ended a downturn cycle, which (+/-) 10.5% 4.2% 11.6% 12.0% was mainly caused by channel business contraction and poor EPS 0.97 1.01 1.13 1.26 retail performance; and, 2) in 4Q16, Haier's retail sales are BPS 5.63 6.55 7.59 8.76 expected grow >10%, a significant improvement. DPS 0.10 0.10 0.11 0.13

For more details, see our in-depth company report Product CPS 1.07 0.42 1.71 0.98 competitiveness brought business improvement, published P/E 11.2 11.5 10.6 8.8 December 15, 2016. P/B 1.9 1.8 1.6 1.3 EV/EBITDA 6.2 6.3 5.0 3.9

Dividend yield 0.9% 0.9% 0.9% 1.1% Valuation and recommendation ROAA 9.4% 9.1% 9.2% 9.3% We expect 2016/17/18 EPS of Rmb1.01/1.13/1.26 ROAE 19.4% 16.6% 15.9% 15.4% (+4%/+12%/+12%). Maintain BUY and TP at HK$16.2, implying 13x 2017e P/E.

Risks Source: Wind, Bloomberg, company data, CICC Research Market demand fluctuates.

Wei HE Haiyan GUO

Analyst Analyst [email protected] [email protected] SAC Reg. No.: S0080512010001 SAC Reg. No.: S0080511080006 SFC CE Ref: BBH812 SFC CE Ref: AIQ935

Please read carefully the important disclosures at the end of this report CICC Research: January 6, 2017

Financial summary

Financial statement (Rmb mn) 2015A 2016E 2017E 2018E Financial ratios 2015A 2016E 2017E 2018E Income statement Growth ability Revenue 62,826 62,843 68,173 73,135 Revenue -6.4% 0.0% 8.5% 7.3% Operating costs 52,833 52,541 56,752 60,949 Operating profit 4.3% 6.2% 12.2% 10.8% Business tax and surcharges 0 0 0 0 EBITDA 4.1% 11.5% 14.1% 12.0% Selling expenses -5,348 -5,342 -5,795 -6,070 Net profit 10.5% 4.2% 11.6% 12.0% Administrative expenses -1,973 -1,948 -2,113 -2,194 Profitability Finance costs -71 -60 -67 -26 Gross margin 15.9% 16.4% 16.8% 16.7% Others -72 -72 -72 -72 Operating margin 5.4% 5.7% 5.9% 6.1% Operating profit 3,403 3,612 4,055 4,494 EBITDA margin 5.7% 6.3% 6.6% 6.9% Non-operating income and expense 12 0 0 0 Net margin 4.3% 4.5% 4.6% 4.8% Profit before income tax 3,344 3,552 3,988 4,468 Liquidity Income tax -609 -693 -798 -894 Current ratio 1.79 2.00 2.01 2.22 Minority interest 32 43 48 54 Quick ratio 1.45 1.70 1.65 1.90 Net profit 2,703 2,817 3,143 3,521 Cash ratio 0.79 0.81 0.94 1.03 EBITDA 3,558 3,966 4,526 5,071 Liability / asset 48.1% 42.7% 41.9% 37.9% Balance sheet Net debt / equity net cash net cash net cash net cash Cash and bank balances 10,244 9,726 12,828 13,699 Return Trade and bill receivables 8,362 10,242 9,364 11,175 RoA 9.4% 9.1% 9.2% 9.3% Prepayments 0 0 0 0 RoE 19.4% 16.6% 15.9% 15.4% Inventories 4,399 3,623 5,043 4,264 Per-share data Other current assets 282 512 402 461 EPS (Rmb) 0.97 1.01 1.13 1.26 Total current assets 23,288 24,103 27,636 29,600 BPS (Rmb) 5.63 6.55 7.59 8.76 Fixed assets and CIP 3,943 5,115 6,169 7,116 DPS (Rmb) 0.10 0.10 0.11 0.13 Intangible assets 7,010 7,836 8,864 9,787 Cash flow per share (Rmb) 1.07 0.42 1.71 0.98 Total non-current assets 0 0 0 0 Valuation Total assets 30,297 31,939 36,501 39,387 P/E 11.2 11.5 10.6 8.8 ST borrowings 86 86 86 86 P/B 1.9 1.8 1.6 1.3 Trade and bill payables 4,090 3,070 4,664 3,641 EV/EBITDA 6.2 6.3 5.0 3.9 Other current liabilities 8,826 8,908 8,968 9,616 Dividend yield 0.9% 0.9% 0.9% 1.1% Total current liabilities 13,002 12,064 13,718 13,344 LT borrowings and bonds payable 1,125 1,125 1,125 1,125 Total non-current liabilities 1,573 1,573 1,573 1,573 Total liabilities 14,575 13,638 15,291 14,918 Shareholders' equity 15,722 18,301 21,210 24,470 Minority interest 879 922 970 1,024 Total liabilities & equity 30,297 31,939 36,501 39,387 Cash flow statement Net income 2,703 2,817 3,143 3,521 Depreciation & amortization 0 0 0 0 Change in working capital 0 0 0 0 Others 32 43 48 54 Cash flow from operations 2,990 1,172 4,769 2,742 Cash inflows from investing activities 0 0 0 0 Cash outflows from investing activities 2,544 1,409 1,385 1,557 Cash flow from investing -2,544 -1,409 -1,385 -1,557 Equity financing 0 0 0 0 Bank borrowings 876 -590 0 0 Others 63 -1,188 -281 -282 Cash flow from financing -750 -281 -282 -314 Foreign exchange gain (loss) 85 0 0 0 Net changes in cash -219 -518 3,102 871 Source: Company data, CICC Research

Company description

Haier Electronics is a subsidiary of Qingdao Haier. The company manufactures and sells washing machines and water heaters and uses Goodaymart to expand its integrated channel services to sell Haier-brand home appliances. Haier Electronics is orienting towards becoming a leading sales platform. The company will use Goodaymart’s franchise store layout, large service system, and its large-format goods logistics capability to create a O2O model for home furnishings.

Please read carefully the important disclosures at the end of this report 2 CICC Research: January 6, 2017

Figure 1: Quarterly revenue and net profit trend 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 Washing machines 6.4% 4.1% 1.5% -6.7% 2.3% -0.1% 2.0% Water heaters 7.3% 1.1% -1.6% -0.4% 8.2% 6.1% 8.7% Service 1.8% -12.8% -13.1% -2.3% -13.3% -3.8% 6.3% Total Revenue 2.5% -11.8% -12.3% -2.8% -11.3% -4.6% 5.4% Net profit attributable to shareholders 15.0% 9.6% 7.7% 10.7% 5.8% 0.4% -2.0%

Source: Company announcement, CICC Research

Washing machines

According to CMM, Haier’s washing machine retail sales +12.7% YoY over October~November, higher than both the industry average of +5.7% YoY as well as its own accumulated retail sales of +3.5% YoY over January~November. Haier’s share of the washing machine market increased by 1ppt over January~November.

Figure 2: Washing machine retail (offline) sales monitored by CMM Washing machines 2016.11 2016.10-11 2016.1-11 2015.1-12 Sales YoY Market Share YoY Market Share YoY Market Share YoY Market Share Haier 17.8% 27% 12.7% 28% 3.5% 28% -4.2% 27% Little Swan 6.5% 18% 6.6% 18% 5.0% 17% 6.9% 15% Siemens 24.3% 14% 10.9% 13% 2.3% 14% 4.8% 14% Royalstar -23.0% 1% -23.0% 1% -32.8% 1% 138.9% 1% Midea 17.8% 6% 17.1% 6% 10.8% 6% 12.5% 4% Sanyo 7.8% 7% 2.5% 6% -4.9% 6% -18.7% 7% 4.2% 8% -0.3% 8% -2.3% 8% -10.5% 8%

Total 10.7% 5.7% -0.4% -1.1% Source: CMM, CICC Research

Figure 3: Market shares of offline retail sales of Figure 4: Domestic ASP and YoY growth of washing washing machines by brand machines (Rmb/unit)

2,600 6% Haier 2,333 2,385 2,400 2,250 18% 2,166 5% Midea+Little 2,200 28% 2,002 2,061 Swan 4% 4% 21% 2,000 1% 27% Siemens 5% 3% 1,800 4% 3% Sanyo 1% 1,600 2.04% 3% 3% 2% 8% 2% 8% Panasonic 1,400 1% 1,200 7% Bosch 6% 21% 1,000 0% 13% Royalstar 2011 2012 2013 2014 2015 16.1~11 23% 14% Inner circle: 2015 ASP (LHS) ASP YoY (RHS) Outer circle: 16.1~11

Source: CMM, CICC Research Source: CMM, CICC Research

Please read carefully the important disclosures at the end of this report 3 CICC Research: January 6, 2017

Refrigerators

According to CMM, Haier’s refrigerator retail sales value +9% YoY over October~November, clearly higher than the industry average of +3.1% YoY; as well as beating its own accumulated retail sales of -0.9% YoY over January~November. Haier’s share of the refrigerator market increased by 1ppt over January~November.

Figure 5: Refrigerator retail (offline) sales monitored by CMM 2016.11 2016.10-11 2016.1-11 2015.1-12 Sales YoY Market Share YoY Market Share YoY Market Share YoY Market Share Haier 20.7% 30% 9.0% 30% -0.9% 28% -7.9% 27% Midea 21.5% 10% 15.6% 10% 4.3% 11% 13.6% 9% Meiling 20.2% 8% 14.7% 8% 6.1% 9% -9.2% 8% BSH 28.3% 15% 9.1% 14% -0.2% 13% -2.3% 13% RonShen 0.1% 9% 2.0% 10% -1.3% 10% -5.7% 10% -0.4% 4% -3.3% 4% -4.0% 4% -7.6% 4% Homa 3.9% 1% -2.9% 1% -24.1% 1% 0.3% 1% Royalstar -39.1% 0% -45.4% 0% -44.4% 0% 378.1% 0% Total 11.0% 3.1% -4.2% -3.8%

Source: CMM, CICC Research

Figure 6: Market shares of offline retail sales of Figure 7: Domestic ASP and YoY growth of refrigerators by brand refrigerators (Rmb/unit)

3,500 3,286 3,300 6% Haier 3,300 3,174 3,052 5% 25% 3,100 28% Siemens 2,835 2,891 2,900 4% 4% 27% Rongsheng 2,700 33% 6% 2,500 4% 3% Midea 2,300 1% Meiling 2,100 2% 4% 1,900 2% 0% Hisense 1% 12% 1,700 1% 8% Others 9% 13% 1,500 0% 10% 10% 2011 2012 2013 2014 2015 16.1~11 Inner circle: 2015 11% 10% ASP (LHS) ASP YoY (RHS) Outer circle: 16.1~11

Source: CMM, CICC Research Source: CMM, CICC Research

Please read carefully the important disclosures at the end of this report 4 CICC Research: January 6, 2017

Water heaters

According to CMM, Haier water heater retail sales value +14% YoY over October~November, slightly higher than the industry average of +13% YoY as well as higher than its own accumulated retail sales of +11% YoY over January~November. The market shares of Haier’s gas/electric water heaters increased by 1ppt/2ppt respectively over January~November.

Figure 8: Water heaters retail (offline) sales monitored by CMM 2016.11 2016.10-11 2016.1-11 2015.1-12 Water heater Market Market Market Market Sales YoY YoY YoY YoY Share Share Share Share Vanward 10.4% 8% 13.9% 8% 10.7% 8% 2.3% 8% Macro 10.2% 8% 9.6% 7% 10.4% 7% -0.3% 7% Haier 7.2% 15% 13.7% 15% 11.0% 15% -1.3% 15% Midea 14.4% 13% 19.0% 13% 14.0% 13% 9.1% 12% Rinnai 19.8% 6% 15.4% 6% 15.3% 7% 13.0% 6% A.O.Smith 8.5% 26% 11.6% 26% 8.2% 26% 4.4% 26% Total 8.8% 12.5% 8.2% -0.3%

Source: CMM, CICC Research

Figure 9: Market shares of offline retail sales of gas Figure 10: Market shares of offline retail sales of water heaters by brand electric water heaters by brand

A.O.Smith A.O.Smith 12% 16% 20% Rinnai 1% Haier Vanward 3% 17% 18% 13% 34% Midea 4% Macro 3% 1% 3% 34% Vanward 4% Noritz 3% 3% 7% 3% 6% 13% Midea Macro 13% Haier Whirlpool 8% 17% 8% Vatti 18% Vatti 9% 12% 12% Others 24% Others 9% 12% Inner circle: 2015 Inner circle: 2015 26% 11% Outer circle: 16.1~10 Outer circle: 16.1~10

Source: CMM, CICC Research Source: CMM, CICC Research

Please read carefully the important disclosures at the end of this report 5 CICC Research: January 6, 2017

Air conditioners

According to CMM, Haier refrigerator retail sales value +15% YoY over October~November, clearly higher than the industry average of -7.9% YoY. Gree ignored Gome and Suning before, however, it has enhanced its cooperation with them over the last two years, leading to market share boost (CMM data); which is why Haier’s share of the air conditioner market decreased by 1ppt over January~November.

Figure 11: Air conditioners retail (offline) sales monitored by CMM Air-conditioners 2016.11 2016.10-11 2016.1-11 2015.1-12 Sales YoY Market Share YoY Market Share YoY Market Share YoY Market Share Midea 13.9% 23% 10.3% 22% 0.9% 24% -5.9% 25% Gree 48.4% 37% 45.7% 38% 13.0% 34% 0.4% 31% Haier 19.7% 10% 14.9% 10% -7.9% 11% -8.9% 12% Chigo -4.7% 2% -2.4% 2% 3.4% 3% 1.9% 3% Kelon 8.2% 1% 13.0% 1% -11.9% 2% -20.8% 2% Hisense 34.4% 6% 36.2% 6% 9.7% 6% -6.9% 6% 39.9% 1% 48.3% 1% 17.9% 2% -23.7% 1% Total 27.2% 27.6% 4.8% -8.1%

Source: CMM, CICC Research

Figure 12: Market shares of offline retail sales of air Figure 13: Domestic ASP and YoY growth of air conditioners by brand conditioners (Rmb/unit)

4,000 15% 3,681 3,658 16% 3,589 3,552 3,429 3,495 24% 3,500 10% 17% Midea 25% 14% Gree 3,000 3% 2% 5% 8% 8% Haier 5% -1% Chigo 2,500 0% 4% 4% -4% 3% Aux 3% 2,000 -5% 12% 31% Others 1,500 -10% 11% 2011 2012 2013 2014 2015 16.1~11 34% Inner circle: 2015 ASP (LHS) ASP YoY (RHS) Outer circle: 16.1~11

Source: CMM, CICC Research Source: CMM, CICC Research

Figure 14: Historical P/E and P/B bands

PE Band PB Band Haier Electronics 5x 10x 15x 20x Haier Electronics 2x 3x 4x 5x 30 Rmb 40 Rmb 35 25 30 20 25 15 20 15 10 10 5 5

0 0

12/07 16/01 16/07 09/01 09/07 10/01 10/07 11/01 11/07 12/01 13/01 13/07 14/01 14/07 15/01 15/07 17/01

11/07 13/07 09/01 09/07 10/01 10/07 11/01 12/01 12/07 13/01 14/01 14/07 15/01 15/07 16/01 16/07 17/01

Source: Wind, CICC Research

Please read carefully the important disclosures at the end of this report 6 CICC Research: January 6, 2017

Figure 15: Comparable valuations

Price Mkt cap Net profit (Local currency mn) Net profit YoY EPS （Local) P/E Ticker Company (Local) (USD mn) 2016E 2017E 2016E 2017E 2016E 2017E 2016E 2017E FY/16/17 FY/17/18 FY/16/17 FY/17/18 FY/16/17 FY/17/18 FY/16/17 FY/17/18 A-Share 000651.SZ 25.26 22,067 14,437 15,717 15% 9% 2.40 2.61 10.5 9.7 000333.SZ 29.69 27,702 14,875 17,400 17% 17% 2.32 2.71 12.8 11.0 600690.SH Qingdao Haier 10.04 8,890 4,891 6,217 14% 27% 0.80 1.02 12.5 9.8 002508.SZ Robam 37.58 3,984 1,181 1,535 42% 30% 1.62 2.10 23.2 17.9 002035.SZ Vatti 25.80 1,362 316 390 52% 23% 0.87 1.07 29.6 24.0 002032.SZ Supor 33.86 3,107 1,041 1,214 17% 17% 1.65 1.92 20.6 17.6 002242.SZ Joy oung 18.34 2,044 697 801 12% 15% 0.91 1.04 20.2 17.6 603355.SH Lexy 46.25 2,693 554 686 52% 24% 1.38 1.71 33.5 27.0 603868.SH Fly co 46.93 2,969 624 775 24% 24% 1.43 1.78 32.7 26.4 002705.SZ Xinbao Electric 17.10 1,427 420 530 48% 26% 0.73 0.92 23.4 18.5 002403.SZ Aishida 14.95 761 149 190 31% 28% 0.42 0.54 35.2 27.5 600060.SH Hisense 17.33 3,293 1,749 2,053 17% 17% 1.34 1.57 13.0 11.0 300403.SZ Idear Hany u 62.17 1,210 205 317 39% 55% 1.53 2.37 40.6 26.3 000921.SZ Hisense Kelon 10.78 2,133 1,062 1,264 83% 19% 0.78 0.93 13.8 11.6 600983.SH Whirlpool () 11.98 1,333 453 525 24% 16% 0.59 0.69 20.3 17.5 600839.SH Sichuan Changhong 4.25 2,849 465 397 -15% 0.10 0.09 42.2 49.4 000418.SZ Little Swan 33.67 3,093 1,206 1,485 31% 23% 1.91 2.35 17.7 14.3 A-share average 14.1 12.2 H-Share 1169.HK Haier Electronics 12.98 4,674 2,817 3,143 4% 12% 1.01 1.13 11.5 10.6 0751.HK Sky worth 4.45 1,719 2,081 2,515 -4% 21% 0.69 0.84 6.4 5.3 1070.HK TCL Multimedia 3.82 855 285 410 994% 44% 0.16 0.24 23.3 16.2 0921.HK Hisense Kelon 6.27 1,102 1,062 1,264 83% 19% 0.78 0.93 7.2 6.1 H-share average 9.7 8.3 US WHR US Whirlpool 185.42 13,927 1,074 1,197 37% 11% 14.30 15.94 13.0 11.6 UTX US United Technology 110.90 91,316 5,363 5,188 -30% -3% 6.51 6.30 17.0 17.6 AOS US A.O.Smith 47.92 8,334 324 362 15% 12% 1.86 2.08 25.7 23.0 IR US Ingersoll-Rand plc 76.12 19,664 1,120 1,164 69% 4% 4.34 4.51 17.6 16.9 HELE US Helen of Troy Ltd 87.65 2,443 134 187 2% 40% 4.81 6.71 18.2 13.1 CREE US Cree, Inc 27.35 2,727 89 57 -36% 0.89 0.57 30.6 48.1 IRBT US IROBOT 59.22 1,607 45 50 3% 9% 1.67 1.83 35.4 32.4 GPRO US GPRO 9.02 1,268 -207 -46 -78% -1.47 -0.32 -6.1 -27.8 FIT US FIT 8.12 1,817 141 168 -20% 19% 0.63 0.75 12.9 10.8 US Average 17.7 17.2 Europe ELUXB.SS 222.50 7,586 4,495 4,864 187% 8% 14.55 15.74 15.3 14.1 DLG.IM De'Longhi 22.98 3,610 158 178 6% 13% 1.06 1.19 21.7 19.3 SK.FP SEB 124.90 6,584 271 381 32% 40% 5.41 7.60 23.1 16.4 RAA GY Rational 427.10 5,103 129 145 6% 12% 11.39 12.77 37.5 33.4 OSR GR OSRAM 49.18 5,410 337 258 103% -23% 3.22 2.46 15.3 20.0 PHIA.NA 28.65 27,982 1,475 1,661 129% 13% 1.59 1.79 18.1 16.0 AMC PW AMICA WRONKI SA 180.00 336 120 124 23% 4% 15.41 15.95 11.7 11.3 METN SW Metall zug 3,282.00 7,108 74 91 30% 23% 33.61 41.23 97.7 79.6 Europe Average 20.6 18.8 Japan 6502.JP Toshiba 291 10,563 106,293 142,303 34% 25 34 11.6 8.7 6367.JP Daikin Industries 11,065 27,830 149,231 166,668 9% 12% 509 569 21.7 19.5 6752.JP Panasonic 1,219 25,659 154,135 189,069 -20% 23% 63 77 19.4 15.8 6758.JP Sony 3,296 35,728 92,183 244,205 -38% 165% 73 193 45.2 17.1 6501.JP Hitachi 659 27,332 233,674 277,022 36% 19% 48 57 13.6 11.5 6503.JP 1,643 30,272 201,328 233,209 -12% 16% 94 109 17.5 15.1 5943.JP Noritz 2,032 886 3,164 5,979 89% 62 118 32.6 17.3 5947.JP Rinnai 9,660 4,328 23,463 25,381 3% 8% 449 486 21.5 19.9 7965 JP Zojirushi Corp 1,605 1,000 7,033 8,584 11% 22% 97 118 16.6 13.6 6753.JP Sharp 325 13,897 -53,742 11,166 -79% -11 2 -30.1 145.0 6755 JP FUJITSU GENERAL LTD 2,510 2,354 15,766 18,811 -10% 19% 144 172 17.4 14.6 Japan average 22.6 16.0 Korea 066570.KS LG Electronics 53,600 7,381 456,156 798,795 267% 75% 2,787 4,881 19.2 11.0 005930.KS 1,778,000 210,483 21,513,485 27,232,541 15% 27% 152,926 193,579 11.6 9.2 021240.KS Coway 91,500 5,881 257,791 377,691 -25% 47% 3,375 4,945 27.1 18.5 192400 KS CUCKOO 131,500 1,085 80,267 93,933 8% 17% 8,188 9,582 16.1 13.7 Korea average 12.2 9.5 Others FPH NZ Fisher & Pay kel 8.70 3,444 168 198 17% 18% 0.30 0.35 29.4 24.9 CIC PM Conception Industrial 60 409 920 1,098 38% 19% 2.72 3.25 22.0 18.4 ARCLK.TI Arcelik 20 3,699 1,156 1,059 30% -8% 1.71 1.57 11.6 12.6 VESBE TI VESTEL 12 625 145 168 -12% 16% 0.76 0.88 15.6 13.5 9911 TT TAIWAN SAKURA 33 228 727 856 41% 18% 3.29 3.87 10.0 8.5 PMM MK PANASONIC MANUFACTURING MALA 30 410 159 159 8% 0% 2.62 2.62 11.6 11.6 SINGER BD SINGER BANGLADESH LTD 195 190 687 877 86% 28% 8.96 11.43 21.7 17.0 BRG AU GROUP LTD 9 821 54 60 8% 10% 0.42 0.46 20.8 18.9 SODA US SODASTREAM INTERNATIONAL LTD 40 838 36 40 196% 11% 1.70 1.87 23.4 21.2 Others Average 16.6 16.1 Source: Bloomberg, CICC Research

Please read carefully the important disclosures at the end of this report 7 CICC Research

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Explanation of stock ratings: “Conviction BUY” indicates analyst perceives absolute return of 30% or more over the next 6~12 months; “BUY” absolute return of 20% or more; “HOLD” between +20% and -10%; “SELL” -10% and below; “Conviction SELL” -20% and below. Asterisk denotes non-directional rating change: coverage initiation or resumption, addition to or removal from Conviction BUY/SELL rating level.

Explanation of sector ratings: Analyst expects a sector rated “OVERWEIGHT” to outperform the market by 10% or more over the next 6~12 months, “EQUAL-WEIGHT” to end up between 10% below and 10% above the market, and “UNDERWEIGHT” to fall behind the market by 10% or more, over the next 6~12 months.

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Beijing Shanghai Hong Kong China International Capital China International Capital China International Capital Corporation Limited Corporation Limited – Shanghai Branch Corporation (Hong Kong) Limited 28th Floor, China World Office 2 32nd Floor Azia Center 29th Floor, One International Finance Centre 1 Jianguomenwai Avenue 1233 Lujiazui Ring Road 1 Harbour View Street Beijing 100004, P.R. China Shanghai 200120, P.R. China Central, Hong Kong Tel: (86-10) 6505-1166 Tel: (86-21) 5879-6226 Tel: (852) 2872-2000 Fax: (86-10) 6505-1156 Fax: (86-21) 5888-8976 Fax: (852) 2872-2100

Shenzhen Singapore United Kingdom China International Capital China International Capital China International Capital Corporation Limited – Shenzhen Branch Corporation (Singapore) Pte. Limited Corporation (UK) Limited #2503, 25th Floor, China Merchants Bank Tower #39-04, 6 Battery Road Level 25, 125 Old Broad Street 7088 Shennan Boulevard, Futian District Singapore 049909 London EC2N 1AR, United Kingdom Shenzhen 518040, P.R. China Tel: (65) 6572-1999 Tel: (44-20) 7367-5718 Tel: (86-755) 8319-5000 Fax: (65) 6327-1278 Fax: (44-20) 7367-5719 Fax: (86-755) 8319-9229

Beijing Jianguomenwai Avenue Branch Beijing Kexueyuan South Road Branch Shanghai Middle Huaihai Road Branch 1st Floor, Capital Tower 6th Floor, Block A, Raycom Infotech Park 398 Huaihai Road (M) 6A Jianguomenwai Avenue 2 Kexueyuan South Road, Haidian District Shanghai 200020, P.R. China Beijing 100022, P.R. China Beijing 100022, P.R. China Tel: (86-21) 6386-1195 Tel: (86-10) 8567-9238 Tel: (86-10) 8286-1086 Fax: (86-21) 6386-1180 Fax: (86-10) 8567-9235 Fax: (86-10) 8286 1106

Shanghai Defeng Road Branch Shenzhen Fuhuayilu Branch Jiaogong Road Branch Room 1105, Building A Room 201, Annex Building 1st Floor, Euro American Center 299-1 Defeng Road, Fengxian District Shenzhen Duty Free Commercial Tower 18 Jiaogong Road Shanghai 201400, P.R. China 6 Fuhua 1st Road, Futian District Hangzhou 310012, P.R. China Tel: (86-21) 5879-6226 Shenzhen 518048, P.R. China Tel: (86-571) 8849-8000 Fax: (86-21) 6887-5123 Tel: (86-755) 8832-2388 Fax: (86-571) 8735-7743 Fax: (86-755) 8254-8243

Nanjing Hanzhong Road Branch Guangzhou Tianhe Road Branch Chengdu Binjiang Road (East) Branch Section C, 30th Floor, Asia Pacific Tower 40th Floor, Teemtower 1st & 16th Floors, Shangri-La Center 2 Hanzhong Road, Gulou District 208 Tianhe Road Block 9B, Binjiang Road (East) Nanjing 210005, P.R. China Guangzhou 510620, P.R. China Chengdu 610021, P.R. China Tel: (86-25) 8316-8988 Tel: (86-20) 8396-3968 Tel: (86-28) 8612-8188 Fax: (86-25) 8316-8397 Fax: (86-20) 8516-8198 Fax: (86-28) 8444-7010

Xiamen Lianyue Road Branch Wuhan Zhongnan Road Branch Qingdao Middle Hongkong Road Branch 4th Floor, Office Building, Paragon Center 4301-B, Poly Plaza 11th Floor, Shangri-La Center 1 Lianyue Road, Siming District 99 Zhongnan Road, Wuchang District Block 9, Hongkong Road (M), South District Xiamen 361012, P.R. China Wuhan 430070, P.R. China Qingdao 266071, P.R. China Tel: (86-592) 515-7000 Tel: (86-27) 8334-3099 Tel: (86-532) 6670-6789 Fax: (86-592) 511-5527 Fax: (86-27) 8359-0535 Fax: (86-532) 6887-7018

Chongqing Honghu Road (West) Branch Tianjin Nanjing Road Branch Dalian Gangxing Road Branch 1st & 10th Floors, Ourui Lanjue Center 10th Floor, Tianjin Global Trading Center 16th Floor, Wanda Center Block 9, Honghu Road (W), New North District 219 Nanjing Road, Heping District 6 Gangxing Road, Zhongshan District Chongqing 401120, P.R. China Tianjin 300051, P.R. China Dalian 116001, P.R. China Tel: (86-23) 6307-7088 Tel: (86-22) 2317-6188 Tel: (86-411) 8237-2388 Fax: (86-23) 6739-6636 Fax: (86-22) 2321-5079 Fax: (86-411) 8814-2933

Foshan Jihua 5th Road Branch Yunfu Xinxing Dongdi North Road Branch Changsha Chezhan Road (North) Branch 12th Floor, Trend International Business Building 2nd Floor, Service Building C1, Wens Science & 3rd Floor, Annex Building, Securities Tower 2 Jihua 5th Road, Chancheng District Technology Garden, Dongdi North Road 459 Chezhan Road (North), Furong District Foshan 528000, P.R. China Xincheng Town, Xinxing County Changsha 410001, P.R. China Tel: (86-757) 8290-3588 Yunfu 527499, P.R. China Tel: (86-731) 8878-7088 Fax: (86-757) 8303-6299 Tel: (86-766) 2985-088 Fax: (86-731) 8446-2455 Fax: (86-766) 2985-018

Ningbo Yangfan Road Branch Fuzhou Wusi Road Branch 11th Floor, Building Five, 999 Yangfan Road 38th Floor, Henglicheng Office Building Hi-tech Industrial Development Zone No.128 Wusi Road, Gulou District Ningbo 315103, P.R. China Fuzhou 350001, P.R. China Tel: (86-574) 8907-7288 Tel: (86-591) 8625 3088 Fax: (86-574) 8907-7328 Fax: (86-591) 8625 3050