25 February 2016 

EQUITIES Dongfeng Motor (489 HK) AUTOS

Buy: Don’t just focus on FX; still on track to grow in 2016 China

 Investors should not only focus on the FX loss arising from MAINTAIN BUY EUR debt  The two Japanese JVs have a relatively better model cycle TARGET PRICE (HKD) PREVIOUS TARGET (HKD) versus its peers in 2016e 11.40 12.70  Reiterate Buy with TP cut to HKD11.4 from HKD12.7 SHARE PRICE (HKD) UPSIDE/DOWNSIDE 9.77 +16.7% (as of 23 Feb 2016) Net FX loss arising from EUR debt. We estimate that the company had EUR1.3bn debt outstanding as at end-2015 and could incur RMB1.55bn FX loss in 2016e MARKET DATA assuming the RMB would depreciate 17% against the EUR in 2016, per HSBC FX Market cap (HKDm) 84,510 Free float 33% Market cap (USDm) 10,875 BBG 489 HK Research team’s forecast. Some of the negative impact should be partially offset by the 3m ADTV (USDm) 18.3 RIC 0489.HK share of income from Peugeot SA (PSA). We forecast the company to have EUR210m FINANCIALS AND RATIOS (RMB) (~RMB1.7bn) share of associate income from its 14.1% stake in PSA in 2016e. Year to 12/2014a 12/2015e 12/2016e 12/2017e HSBC EPS 1.32 1.34 1.23 1.54 Japanese JVs still on growth track in 2016e. Both DF Nissan and DF Honda had HSBC EPS (prev) - 1.34 1.47 1.56 brand new models and model changeovers in 2H15, such as Nissan compact SUV Change (%) - 0.1 -16.2 -1.4 Consensus EPS 1.46 1.58 1.86 1.70 Qashqai and Honda sub-compact sedan Griez. We raise our 2016 volume forecast PE (x) 6.2 6.1 6.7 5.3 for DF Nissan and DF Honda by 5% and 3%, respectively, and expect these models Dividend yield (%) 2.4 2.5 2.2 2.8 EV/EBITDA (x) 4.7 -2.1 -5.5 -8.4 to drive volume growth of 6% and 13% for DF Nissan and DF Honda in 2016e, ROE (%) 15.4 13.3 10.8 12.1 respectively. 52-WEEK PRICE (HKD) SUVs to drive DF domestic brands’ volume growth. Benefitting from the decent 15.00 reception of SUV AX7, DF Fengshen sales volume grew 18% y-o-y to 95k units in 10.55 2015. We expect the sub-compact SUV AX3 launched at year-end 2015 to be a 6.10 driver for the 35% y-o-y growth in 2016e. This shows that the increasing collaboration Feb 15 Aug 15 Feb 16 with PSA has been positive to the domestic brands. This could be a longer-term Target price: 11.40 High: 13.98 Low: 7.05 Current: 9.77

growth driver for Dongfeng. Source: HSBC estimates, Thomson Reuters IBES

DF Renault not as bad as it seems. With only 150 outlets at the beginning of 2016, Carson Ng* we expect the utilisation of the 150k units per annum plant to be low in the first year Analyst of operation. However, as DF Renault and DF Nissan share the same Common The Hongkong and Shanghai Banking Corporation Limited [email protected] Module Family (CMF) architecture, we believe the new JV could benefit from DF +852 2996 6625 Nissan’s procurement scale of close to 1m units volume in China. Therefore, we don’t Mike Yip* expect the JV to incur a large loss at the initial stage of operation. Associate The Hongkong and Shanghai Banking Corporation Limited Reiterate Buy but TP cut to HKD11.4 from HKD12.7. We revise our earnings forecasts [email protected] by -1.7%/-16.2% in 2015e/16e to reflect the increased volume assumption offset by the +852 2996 6942 net FX loss. Our earnings forecasts are 22% below consensus in 2016e as we think *Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is consensus has yet to factor in the negative FX impact. Investors should not only focus on not registered/ qualified pursuant to FINRA regulations the FX impact as we believe the company offers stable growth through an improving product cycle for its two key Japanese JVs. We roll over our valuation to 2016e and our target valuation of 8.2x 2016e PE is based on the five-year average PE of Dongfeng.

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

EQUITIES  AUTOS 25 February 2016 abc

Financials & valuation

Financial statements Valuation data Year to 12/2014a 12/2015e 12/2016e 12/2017e Year to 12/2014a 12/2015e 12/2016e 12/2017e Profit & loss summary (CNYm) PE* 6.2 6.2 6.7 5.3 Revenue 80,954 130,346 139,198 143,781 PB 1.0 0.8 0.7 0.6 EBITDA 2,283 2,726 2,972 3,182 Dividend yield (%) 2.4 2.4 2.2 2.8 Depreciation & amortisation -1,540 -1,520 -1,640 -1,790 * Based on HSBC EPS (diluted) Operating profit/EBIT 743 1,206 1,331 1,393 Net interest 1,189 1,025 -905 762 PBT 14,683 13,149 12,240 15,229 Price relative HSBC PBT 14,683 13,149 12,240 15,229 Taxation -1,365 -1,015 -1,066 -1,185 16.00 16.00 Net profit 12,845 11,381 10,586 13,268 14.00 14.00 HSBC net profit 11,336 11,381 10,586 13,268 Cash flow summary (CNYm) 12.00 12.00 Cash flow from operations -901 5,112 2,819 1,217 10.00 10.00 Capex -3,407 -2,489 -2,925 -3,140 8.00 8.00 Cash flow from investment -696 4,109 5,326 5,693 Dividends -1,582 -1,723 -1,707 -1,588 6.00 6.00 Change in net debt 7,558 -12,628 -6,438 -5,322 2014 2015 2016 2017 Dongfeng Motor Rel to HSCEI FCF equity -2,943 865 -710 -860 Balance sheet summary (CNYm) Source: HSBC Note: Priced at close of 23 Feb 2016 Intangible fixed assets 4,411 4,653 4,942 5,260 Tangible fixed assets 22,490 22,898 24,648 26,509 Current assets 69,157 89,192 99,926 109,279 Cash & others 28,559 41,342 47,780 53,102 Total assets 145,473 169,782 186,789 203,347 Operating liabilities 52,311 62,321 68,309 72,274 Gross debt 17,710 17,865 17,865 17,865 Net debt -10,849 -23,477 -29,915 -35,237 Shareholders' funds 73,829 87,220 97,651 109,469 Invested capital 15,188 13,080 13,427 15,672

Ratio, growth and per share analysis Year to 12/2014a 12/2015e 12/2016e 12/2017e Y-o-y % change Revenue 117.3 61.0 6.8 3.3 EBITDA 19.4 9.0 7.1 Operating profit 62.3 10.4 4.6 PBT 37.1 -10.4 -6.9 24.4 HSBC EPS 28.4 0.4 -7.0 25.3 Ratios (%) Revenue/IC (x) 6.5 9.2 10.5 9.9 ROIC 7.3 9.8 11.4 11.1 ROE 15.4 13.0 10.8 12.1 ROA 9.8 7.6 7.2 7.3 EBITDA margin 2.8 2.1 2.1 2.2 Operating profit margin 0.9 0.9 1.0 1.0 EBITDA/net interest (x) 3.3 Net debt/equity -14.7 -26.9 -30.6 -32.2 Net debt/EBITDA (x) -4.8 -8.6 -10.1 -11.1 CF from operations/net debt Per share data (CNY) EPS reported (diluted) 1.49 1.32 1.23 1.54 HSBC EPS (diluted) 1.32 1.32 1.23 1.54 DPS 0.20 0.20 0.18 0.23 Book value 8.57 10.12 11.33 12.71

2 EQUITIES  AUTOS 25 February 2016 abc

Analysis

 Investors should not only focus on the FX loss arising from the euro debt  The two Japanese JVs have relatively better model cycle versus its peers in 2016e  Reiterate Buy with TP revised to HKD11.4 (from HKD12.7)

Product line-up of major entities of Dongfeng DF Nissan DF Honda DF Peugeot DF Citroen DF Fengshen DF Renault Sub-compact sedan March, N/3Q10 Greiz, N/4Q15 C2, N/4Q06 Fluence ZE EV, N/2017 R30, N/3Q14 Greiz , N/2016 Compact sedan Livina, S/2Q13 Civic, S/4Q11 308, N/4Q11 Elysee, S/3Q13 A60, N/1Q12 Sylphy, S/2Q12 Ciimo, N/2Q12 301, N/4Q13 C4L, N/4Q12 H30, N/1Q10 Tiida, S/2Q11 Civic, N/1H16 408, N/1Q10 C-Quatre, S/1Q12 H30 , N/1Q11 Sunny, S/1Q11 408, S/Aug-14 S30, N/3Q09 Venucia D50, N/2Q12 308S, S/Apr-15 A30, N/Aug-14 , N/3Q12 308, S/2H16 L60, N/Mar-15 Venucia R50X, N/3Q13 Lannia, N/4Q15 Mid-size sedan Teana, S/1Q13 Spirior, N/4Q09 508, N/3Q11 C5, N/2012 Dongfeng No.1, N/1Q16 Infiniti Q50L, N/Nov-14 Spirior, S/Nov-14 508, S/2017 C6, N/2016 Maxima, N/2016 Sub-compact SUV XR-V, N/late 14 2008, N/Apr-14 AX3, N/2016 Compact SUV Qashqai, N/1Q08 CR-V, S/1Q12 3008, N/1Q13 C3-XR, N/late 2014 AX7, N/Nov-14 Kadjar, N/1Q16 X Trail, S/Mar-14 CR-V, S/2017 AX5, N/2016 , N/Jan-15 Qashqai, S/4Q15 Mid-size SUV Murano, N/3Q11 Concept D, N/2016 4008, N/2H16 TBC, N/2017 Koleos, N/3Q15 Murano, S/3Q15 Infiniti QX50L, N/Mar-15 MPV Elysion, N/2Q12 Scenic, N/2017 Jade, N/3Q13 Elysion, S/1Q16 Source: Company data, HSBC

Impact of FX  HSBC FX Research team forecasts the euro to appreciate 16.8% against the RMB in 2016e  Based on this assumption, we expect Dongfeng to incur 2016e FX loss of RMB1.5bn, which is booked in the finance cost, due to its EUR1.3bn debt exposure

 The FX loss is partially compensated by the share of net profit from the 14.1% stake in Peugeot SA. We expect the share of profit to be RMB1.7bn and RMB2.3bn in 2016e and 2017e, respectively

3 EQUITIES  AUTOS 25 February 2016 abc

Impact from FX 4Q15e 4Q16e EUR1.3bn debt (EUR m) 1,300 1,300 EURCNY FX rate 7.089 8.280 YoY% 16.8% EUR debt in RMB (RMB m) 9,216 10,764 FX loss of EUR debt in 2016e (RMB m) 1,548

2016e 2017e Net profit of Peugeot SA (EUR m) 1,488 1,985 Share held by Dongfeng 14.1% 14.1% Average EURCNY FX rate 7.989 8.280 Share of profit from PSA (RMB m) 1,676 2,318 Source: HSBC estimates

Dongfeng Renault was established in December 2013 as a 50/50 JV between Dongfeng and Renault. It has constructed a production facility in Wuhan, Hubei with phase 1 production capacity of 150,000 units per annum. Operation is expected to commence in 1H16.

Planned model launches of Dongfeng Renault:

 Compact SUV Kadjar (March 2016)  Mid-size SUV Mathon (September 2016)  Domestic brand subcompact sedan EV based on Fluence ZE (2017)  Domestic brand MPV based on Scenic (2017)

We expect sales volume of Dongfeng Renault to be 8,500 and 13,645 units in 2016e and 2017e, respectively.

Earnings revision ______2015e ______2016e ______2017e ______RMB m Revised Old Chg% Revised Old Chg% Revised Old Chg% Revenue 130,346 129,596 0.6% 139,198 138,602 0.4% 143,781 140,116 2.6% Cost of sales (113,553) (112,934) 0.5% (120,810) (120,346) 0.4% (124,716) (121,506) 2.6% Gross Profit 16,793 16,662 0.8% 18,388 18,256 0.7% 19,065 18,610 2.4% Gross Profit margin % 12.9% 12.9% 13.2% 13.2% 13.3% 13.3%

Other income/other gains 1,009 1,017 -0.7% 1,013 1,044 -3.0% 1,035 1,051 -1.6% Selling expenses (7,957) (7,640) 4.1% (8,736) (8,574) 1.9% (9,053) (8,787) 3.0% Administrative expenses (3,557) (3,416) 4.1% (3,905) (3,833) 1.9% (4,047) (3,929) 3.0% Other expenses (5,083) (5,054) 0.6% (5,429) (5,405) 0.4% (5,607) (5,465) 2.6% EBIT 1,206 1,569 -23.1% 1,331 1,487 -10.5% 1,393 1,481 -6.0% EBIT Margin % 0.9% 1.2% 1.0% 1.1% 1.0% 1.1%

Interest income 807 807 0.0% 946 954 -0.9% 1,063 1,087 -2.3% Finance costs 218 (215) -201.8% (1,851) (301) 515.4% (301) (301) 0.0%

Share of profit of JVs 9,673 9,852 -1.8% 9,740 10,631 -8.4% 10,360 10,835 -4.4% Share of profit of asso 1,245 1,599 -22.1% 2,073 1,867 11.1% 2,715 2,414 12.5%

Profit before tax 13,149 13,612 -3.4% 12,240 14,638 -16.4% 15,229 15,516 -1.8% Income tax (1,015) (1,188) -14.6% (1,066) (1,177) -9.6% (1,185) (1,224) -3.2% Net profit after tax 12,134 12,423 -2.3% 11,174 13,461 -17.0% 14,044 14,291 -1.7%

Attributable to Owner of company 11,381 11,574 -1.7% 10,586 12,629 -16.2% 13,268 13,450 -1.3% Non-controlling interests 753 850 -11.4% 588 832 -29.3% 776 841 -7.8% Source: HSBC estimates

4 EQUITIES  AUTOS 25 February 2016 abc

Change of sales volume assumptions ______2015e ______2016e ______2016e ______(Units) Announced HSBCe Chg% Revised Old Chg% Revised Old Chg% 1,026,146 947,708 8.3% 1,089,455 1,038,608 4.9% 1,106,765 1,038,608 6.6% 406,468 396,873 2.4% 459,207 445,824 3.0% 492,067 450,824 9.1% DPCA 710,696 705,654 0.7% 763,856 744,956 2.5% 787,458 746,456 5.5% Dongfeng PV 94,628 103,403 -8.5% 127,875 133,685 -4.3% 141,264 137,685 2.6% Dongfeng Liuzhou 250,678 254,597 -1.5% 279,175 267,327 4.4% 273,316 267,327 2.2% Zhengzhou Nissan 33,088 40,991 -19.3% 49,978 43,711 14.3% 65,978 43,711 50.9% Dongfeng Renault 0 5,000 -100.0% 45,000 42,000 7.1% 60,250 77,400 -22.2% Total passenger vehicles 2,521,704 2,454,227 2.7% 2,814,548 2,716,110 3.6% 2,927,098 2,762,010 6.0%

Commercial vehicles 345,225 346,108 -0.3% 343,002 343,632 -0.2% 338,361 338,914 -0.2% Total vehicles 2,866,929 2,800,335 2.4% 3,157,550 3,059,743 3.2% 3,265,459 3,100,924 5.3% Source: Company data, HSBC estimates

 We revise up our PV sales assumption for Dongfeng mainly due to the better-than-expected sales of DF Nissan, DF Honda and DPCA

 However, we revise down our profitability assumptions for the JV brands to factor in higher competition and pricing pressure

 We have taken into account the FX loss incurred from the euro debt in 2016e  We lower our earnings forecast by 2% in 2015 to incorporate the earnings of Peugeot SA and DPCA in 2015. We reduce our forecasts in 2016/17 by 16%/1%

5 EQUITIES  AUTOS 25 February 2016 abc

Valuation and risks

We use the historical average-based PE multiple methodology to value Dongfeng:

 We roll over our valuation to 2016e

 Our target PE multiple of 8.2x is based on five-year historical average forward PE to capture the better earnings growth profile (previously 7.9x)

 Applying our 2016e diluted EPS forecast of RMB1.23, our TP is HKD11.4 (previously HKD12.7) based on the HSBC FX team’s forecast RMB/HKD exchange rate of 1.13 for end-2016e

Downside risks include worse-than-expected deterioration of profitability, further pricing pressure in the market prompting Dongfeng JVs to steepen the discount level and the fluctuation of currencies which might lead to FX loss.

6 EQUITIES  AUTOS 25 February 2016 abc

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: Carson Ng and Mike Yip

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.

As of 24 February 2016, the distribution of all ratings published is as follows: Buy 49% (29% of these provided with Investment Banking Services) Hold 38% (27% of these provided with Investment Banking Services) Sell 13% (18% of these provided with Investment Banking Services)

7 EQUITIES  AUTOS 25 February 2016 abc

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.

Share price and rating changes for long-term investment opportunities Dongfeng Motor (0489.HK) share price performance Rating & target price history HKD Vs HSBC rating history From To Date Underweight (V) Neutral 21 August 2013 Neutral Overweight 03 March 2014 Overweight Neutral 31 July 2014 18 Neutral Hold 25 March 2015 16 Hold Buy 30 August 2015 14 Target price Value Date 12 Price 1 11.40 04 June 2013 10 Price 2 13.60 03 March 2014 8 Price 3 15.40 31 July 2014 6 Price 4 15.80 02 September 2014 4 Price 5 13.40 02 November 2014 2 Price 6 12.40 01 February 2015 Price 7 9.90 30 July 2015 Price 8 10.00 30 August 2015 Feb-11 Feb-12 Feb-13 Feb-14 Feb-15 Feb-16 Price 9 11.20 05 October 2015 Source: HSBC Price 10 12.70 29 October 2015 Source: HSBC HSBC & Analyst disclosures Disclosure checklist Company Ticker Recent price Price date Disclosure

DONGFENG MOTOR 0489.HK 9.77 23-Feb-2016 1, 2, 4, 5, 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 2016 HSBC beneficially owned 1% or more of a class of common equity securities of this company. 5 As of 31 December 2015, 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 December 2015, 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 As of 31 December 2015, 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

8 EQUITIES  AUTOS 25 February 2016 abc

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.

Additional disclosures 1 This report is dated as at 25 February 2016.

2 All market data included in this report are dated as at close 23 February 2016, unless otherwise 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.

9 EQUITIES  AUTOS 25 February 2016 abc

Disclaimer

Legal entities as at 30 May 2014 Issuer of report ‘UAE’ HSBC Bank Middle East Limited, Dubai; ‘HK’ The Hongkong and Shanghai Banking Corporation Limited, Hong The Hongkong and Shanghai Banking Corporation Kong; ‘TW’ HSBC Securities (Taiwan) Corporation Limited; 'CA' HSBC Bank Canada, Toronto; HSBC Bank, Paris Branch; Limited HSBC France; ‘DE’ HSBC Trinkaus & Burkhardt AG, Düsseldorf; 000 HSBC Bank (RR), Moscow; ‘IN’ HSBC Securities and Level 19, 1 Queen’s Road Central Capital Markets (India) Private Limited, Mumbai; ‘JP’ HSBC Securities (Japan) Limited, Tokyo; ‘EG’ HSBC Securities Egypt Hong Kong SAR SAE, Cairo; ‘CN’ HSBC Investment Bank Asia Limited, Beijing Representative Office; The Hongkong and Shanghai Telephone: +852 2843 9111 Banking Corporation Limited, Singapore Branch; The Hongkong and Shanghai Banking Corporation Limited, Seoul Fax: +852 2596 0200 Securities Branch; The Hongkong and Shanghai Banking Corporation Limited, Seoul Branch; HSBC Securities (South Website: www.research.hsbc.com 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 Brasil SA – Banco Múltiplo; 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 The Hongkong and Shanghai Banking Corporation Limited (“HSBC”) in the conduct of its Hong Kong regulated business for the information of its institutional and professional investor (as defined by Securities and Future Ordinance (Chapter 571)) customers; it is not intended for and should not be distributed to retail customers in Hong Kong. The Hongkong and Shanghai Banking Corporation Limited is regulated by the Hong Kong Monetary Authority. All enquires by recipients in Hong Kong must be directed to your HSBC contact in Hong Kong. If it is received by a customer of an affiliate of HSBC, its 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. 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 Securities (USA) Inc. accepts responsibility for the content of this research report prepared by its non-US foreign affiliate. All U.S. persons receiving and/or accessing 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 its non-US foreign affiliate, the issuer of this report. 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. 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 Korea, this publication is distributed by The Hongkong and Shanghai Banking Corporation Limited, Seoul Securities Branch ("HBAP SLS") 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. HBAP SLS is regulated by the Financial Services Commission and the Financial Supervisory Service of Korea. In Canada, this document has been distributed by HSBC Bank Canada and/or its affiliates. Where this document contains market updates/overviews, or similar materials (collectively deemed “Commentary” in Canada although other affiliate jurisdictions may term “Commentary” as either “macro-research” or “research”), the Commentary is not an offer to sell, or a solicitation of an offer to sell or subscribe for, any financial product or instrument (including, without limitation, any currencies, securities, commodities or other financial instruments). © Copyright 2016, The Hongkong and Shanghai Banking 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 The Hongkong and Shanghai Banking Corporation Limited. MICA (P) 073/06/2015 and MICA (P) 021/01/2016

[498182]

10 abc

Global Industrials Research Team

Industrials Autos Construction & Engineering Analyst Analyst Analyst Scott Cagehin +44 20 7992 1444 Horst Schneider +49 211 910 3285 Levent Bayar +90 212 376 46 17 [email protected] [email protected] [email protected]

Head of Research, Korea Analyst Analyst Brian Cho +822 3706 8750 Yogesh Aggarwal +91 22 2268 1246 Tarun Bhatnagar +65 6658 0614 [email protected] [email protected] [email protected]

Analyst Analyst Head of French Research Paul Choi +822 3706 8758 Henning Cosman +49 211 910 2461 Pierre Bosset +33 1 56 52 43 10 [email protected] [email protected] [email protected]

Analyst Analyst Analyst Anderson Chow +852 2996 6669 Vivek Gedda +91 22 6164 0693 Jonathan Brandt +1 212 525 4499 [email protected] [email protected] [email protected]

Analyst Analyst Analyst Puneet Gulati +91 22 2268 1235 Carson Ng +852 2822 4397 Botir Sharipov, CFA +1 212 525 5150 [email protected] [email protected] [email protected]

Analyst Associate Analyst Michael Hagmann +44 20 7991 2405 Mike Yip +852 2996 6942 Ivan Enriquez +52 55 5721 2397 [email protected] [email protected] [email protected]

Analyst Transportation Global Equity Head of Building Materials Yeon Lee +822 3706 8778 John Fraser-Andrews +44 20 7991 6732 [email protected] Analyst [email protected] Andrew Lobbenberg +44 20 7991 6816 Analyst [email protected] Analyst Kristy Lee +65 6658 0616 Tobias Loskamp +49 211 910 2828 [email protected] Associate [email protected] Aric Hui +852 2822 3165 Analyst [email protected] Analyst Sean McLoughlin +44 20 7991 3464 Lesley Liu +852 2822 4524 [email protected] Analyst [email protected] Parash Jain +852 2996 6717 Analyst [email protected] Analyst Ashutosh Narkar +91 22 2268 1474 Shishir Singh +852 2822 4292 [email protected] Analyst [email protected] Achal Kumar +91 80 3001 3722 Analyst [email protected] Analyst Shrinidhi Karlekar +91 22 6164 0689 Patrick Gaffney, CFA +966 11 299 2100 [email protected] Analyst [email protected] Wei Sim +852 2996 6602 Analyst [email protected] Analyst Nick Webster +27 11 676 4537 Nicholas Paton, CFA +971 4 423 6923 [email protected] Analyst [email protected] Shishir Singh +852 2822 4292 Analyst [email protected] Analyst Thomas Zhu, CFA +852 2822 4325 Sean Tian +852 2996 6916 [email protected] Analyst [email protected] Jack Xu +852 2996 6566 Analyst [email protected] Analyst Jörg-André Finke, CFA +49 211 910 3722 Liwei Zhou +852 2996 6743 [email protected] Analyst [email protected] Joe Thomas +44 20 7992 3618 [email protected] Analyst Emily Li +852 2996 6599 [email protected]

Specialist Sales Rod Turnbull +44 20 7991 5363 [email protected]

Oliver Magis +49 21 1910 4402 [email protected]

Billal Ismail +44 20 7991 5362 [email protected]

Jean Gael Tabet +44 20 7991 5342 [email protected]