/ Monthly Chart Book

China Food & Beverage Monthly

Refer to important disclosures at the end of this report

Page 1 DBS Group Research . Equity 11 Jan 2017

Diverging material trends HSI: 22,745  Soft grain prices to keep feedstock costs low  Dairy prices could rise, but pork prices should retreat ANALYST  Potential pressure from sugar and PET prices on beverage players Alice HUI, CFA +852 2971 1960 Grain prices remain favourable. Despite prior concerns on [email protected]

impact from La Nina in 2016, production volume for grains (corn, Alison Fok +852 2971 1938 soybean) remained robust. According to USDA, global corn [email protected] production is expected to rise in FY17F. This, coupled with the cessation of the Chinese government’s corn reserve purchasing Mavis HUI+852 2863 8879; system since late 2016, would likely continue to put pressure on [email protected] corn prices. Corn prices in China have fallen by another 4.4% Eric YEE, CFA +86 21 6888 3360 m-o-m in January 2017, after dropping some 24% in 2016. As [email protected] corn makes up a large portion of meat and dairy upstream players’ raw material costs (est. 60-70% of total), lower corn F&B peer table prices should bode well for their margins. Meanwhile, prices of other grains such as soybean will also likely see limited upside as Price Target Upside Rec Mkt FY17 a result of a change in acreage planting in China (a shift from HK$ Price % Cap PE (x) lower-margin corn to other grains with better margins), as well HK$ (US$m) as stable global production volume growth, according to USDA. China F oods 3.54 3.95 12 Buy 1,277 30.0 (506 HK) Higher dairy prices; expected pork price retreat. International Uni-President 5.31 4.6* (13) Hold 2,957 26.0 dairy prices have rallied 49.8% from a low since July 2015, on (220 HK) reduction in production from New Zealand and EU. In FY17F, Want Want 5.01 5.3 6 Hold 8,094 13.8 international dairy prices will likely stay supportive as top dairy- (151 HK) exporting countries continue to cut production volume. Yet, we Vitasoy # 15.40 16 4 Hold 2,088 27.2 expect domestic dairy prices, which have rebounded 4.4% since (345 HK) May 2015, to rise mildly by 2% y-o-y in 2017F as (i) the gap Bright Dairy 13.23 14.5 10 Hold 2,338 32.1 between domestic and international milk prices remains wide; (600597 CH)^ and hence (ii) the demand is likely to be more than sufficiently Tsingtao 29.05 28.2 (3) Hold 5,422 23.3 filled by imported milk powder. As for pork, after reaching a (168 HK) peak in June 2016 at Rmb20.5/kg, we expect pork prices to Tsingtao decline mildly by c.11% to avg. Rmb16.5/kg in 2017F. This is 29.54 24.4 (17) FV 5,422 26.5 (600600 CH)^

still a relatively high level versus 2012-15’s historical range of Rmb13.4-15.3/kg, as the accelerating industry consolidation would cap overall production growth, hence supporting pork * Under Review # FY17: FY18 ^ RMB prices. All-in, we expect hog-to-grain ratio to remain supported Source: Thomson Reuters, DBS Vickers by softer grain prices.

Watch out for sugar and PET prices. Prices of sugar, a key raw material for beverages, have rallied 30% yoy in 2016 on tight supply. Although sugar prices have started to retreat in the past few months from October’s peak, outlook remained mixed given low stock level globally. Meanwhile, PET prices, which rose 10.6% in 2016, could see further recovery as oil prices trend higher. To alleviate potential cost pressure, we expect beverage players will continue to focus on new products and upgrades. And despite a possible recovery in sales momentum stemming from low base, we see limited room for the sector to re-rate at currently valuation of 19x FY17F PE.

ed-TH / sa-CW

China / Hong Kong Monthly Chart Book Food & Beverage

Table of Contents

Share price performance 3 Valuation 4 F&B shareholding changes 6 Raw material cost trends 8 F&B retail price trends 9 Sector – 10 Sector – other alcohol (wine, baiju) 12 Sector – Dairy 13 Sector – Beverages 15 Sector – Edible oil 18 Sector – Meat 20 Sub-sector – Others 23 Monitor of F&B climate in China 24

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China / Hong Kong Monthly Chart Book Food & Beverage

Share price performance

F&B Sector PE vs. HSI PE HK-listed F&B Sector PE vs. A-share F&B Sector PE

x x 45 40 40 35 35 30 30 25 25 20 20 15 15 10 10 5 Jan-15 Jun-14 Oct-13 Sep-15 Dec-16 Mar-13 May-16 Jan-15 Jun-14 Oct-13 Sep-15 Dec-16 Mar-13 May-16 HK-listed F&B Sector PE HSI PE China listed F&B Sector PE HK-listed F&B Sector PE

Source: Thomson Reuters, DBS Vickers

F&B sector price performance T ick er Company 1 mt h 3 mt hs 6 mt hs 12 mt hs Ev ent s Brewery sector 168 HK -H (7.8) (9.5) 9.2 (8.1) 600600 CH Tsingtao Brewery -A (3.4) (8.6) (2.6) (0.7) CR-Beer completes 49% stake acquisition from SAB-Miller in Oct-16. 291 HK CR-Beer (1.8) (10.0) (2.4) 9.8 000729 CH Beijing Yanjing (3.0) (8.8) (8.8) (1.0) Wine sector 200869 CH Yantai (3.7) (8.5) (12.6) (20.3) Dairy sector downstream Yili proposes Rmb9bn new share placement in Oct'16 (1) to buy 37% of Shengmu, the largest organic upstream milk producer, for 600887 CH IM Yili (3.3) 9.8 (0.9) 22.7 HK$5.2bn, and (2) to issue new shares to create poison pill to avoid hostile takeover by Sunshine Insurance Group. 600597 CH Bright Dairy (4.4) (8.0) (5.7) 1.5 Dairy sector - upstream 6863 HK Huishan Dairy 1.4 0.0 (7.7) (3.0) Short-seller report attacks Huishan Dairy in Dec'16 YST Dairy proposes for new share placement of 781.7m shares (20% 1431 Hk YST Dairy (17.2) (10.2) 16.5 (3.6) of existing share cap/ 16.67% of expanded share capital) at HK$0.5/sh in 22-Dec-16 Dairy sector - infant formula powder Biostime acquires the remainder 17% interest of Swiss brand for 1112 HK Biostime 5.3 21.5 (10.3) 45.8 AUD311.3m (HK$1.7bn), or 21x EV/EBITDA, based on FYJun16. 002570 CH Beingmate 2.4 11.4 (1.0) 19.9 Instant Noodle & Beverage and Others 322 HK Tingyi (6.6) (9.0) 21.7 (9.7) Tingyi's Taiwan operations will be fully shut down starting J an'17. 151 HK Want Want (1.0) (1.2) (4.1) (6.3) 220 HK UPC 1.1 (1.1) (16.8) 1.5 Coca-Cola realigns its bottling system from 3 bottlers to 2 bottlers, of which China Foods increases its market share from 33% to 50%, 506 HK China Food 6.0 (7.1) 33.0 16.2 adding Chongqing, Sichuan, Jilin, Heilongjiang, Shanxi, Liaoning, Shaanxi. 3799 HK Dali Foods 3.4 3.4 (6.6) (0.5) Slaughter Sector After reaching trough of RMB15.8/kg in Oct'16, live pork prices climbed to RMB18.4/kg in anticipation for CNY. We expect prices 1068 HK China Yurun 3.4 (4.7) 0.0 (15.2) will begin to lower when the demand softens.

288 HK WH Group (4.1) (6.8) 3.8 48.8 Source: Bloomberg Finance L.P., DBS Vickers

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China / Hong Kong Monthly Chart Book Food & Beverage

Valuation

Valuation table

Target Mkt PE PE Yield Yield P/Bk P/Bk ROE ROE Price PriceRec Cap Fiscal 16F 17F 16F 17F 16F 17F 16F 17F Company Name Code HK $ HK $ HK $m Y r x x % % x x % % HK listed Brewery Sector Tsingtao Brewery 'H'* 168 HK 29.05 28.20 Hold 42,020 Dec 21.2 23.3 1.5 1.3 2.0 1.9 9.7 8.3 CR Beer 291 HK 15.52 n.a. NR 50,350 Dec 39.3 24.2 0.6 1.3 2.3 2.2 7.4 9.4 MC Wt. average 31.1 23.8 1.0 1.3 2.2 2.1 8.4 8.9

Dairy Sector Biostime Intl.Holdings 1112 HK 24.40 n.a. NR 15,384 Dec 22.0 19.3 0.5 0.6 3.4 3.0 16.1 16.0 China Huishan Dairy# 6863 HK 2.90 n.a. NR 39,082 Mar 37.1 31.2 0.7 0.7 2.7 2.6 7.6 8.2 Yuanshengtai Dairy 1431 HK 0.54 n.a. NR 2,111 Dec n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. MC Wt. average 14.6 22.7 0.8 0.9 2.5 2.3 3.9 10.9

Instant Noodle & Beverage and Others Tingyi* 322 HK 8.94 8.90 Hold 50,104 Dec 34.7 24.2 2.0 2.1 2.2 2.1 6.3 8.8 * 151 HK 5.01 5.30 Hold 62,779 Dec 14.3 13.8 3.1 3.3 4.0 3.5 29.6 27.0 Uni-President China Hdg.* 220 HK 5.31 4.60 Hold 22,936 Dec 27.1 26.0 0.7 0.8 1.7 1.6 6.4 6.3 V itasoy Intl.Hdg.*# 345 HK 15.40 16.00 Hold 16,193 Mar 25.6 27.2 2.3 2.2 6.4 5.9 26.7 21.2 China Foods* 506 HK 3.54 3.95 Buy 9,902 Dec 14.7 30.0 2.4 1.2 1.6 1.6 11.5 5.3 Dali Foods Group Co. 3799 HK 4.15 n.a. NR 56,831 Dec 16.4 15.0 3.3 3.7 3.8 3.3 25.4 24.7 MC Wt. average 21.4 18.9 2.6 2.7 3.1 2.8 19.2 18.4

Pork Sector China WH Group 288 HK 6.25 n.a. NR 91,569 Dec 12.4 11.3 2.4 3.1 1.9 1.7 15.7 15.6 Cofco Meat Holdings 1610 HK 1.53 n.a. NR 5,970 Dec 7.0 6.7 0.0 0.0 1.2 0.9 21.4 15.5 MC Wt. average 12.1 11.1 2.2 2.9 1.8 1.7 16.0 15.6 HK-listed simple average 23.4 20.6 1.5 1.5 2.6 2.4 13.3 13.2 HK-listed MC Wt. Avg 20.4 19.2 1.8 2.1 2.6 2.3 13.0 14.4 # FY16: FY17; FY17: FY18

Source: Thomson Reuters, *DBS Vickers

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China / Hong Kong Monthly Chart Book Food & Beverage

Valuation table (continued)

Mkt PE PE Yield Yield P/Bk P/Bk ROE ROE Currency Price Cap Fiscal 16F 17F 16F 17F 16F 17F 16F 17F Company Name Code Local$ US$m Yr x x % % x x % % A-share listed Wine Sector Yantai Changyu Pion.Wine 'B' 200869 CH HKD 20.65 1,825 Dec 12.2 11.5 2.6 3.3 1.5 1.4 13.0 12.8 Brewery Sector Beijing Yanjing Brew.'A' 000729 CH CNY 7.16 2,909 Dec 36.0 31.1 0.9 1.0 1.5 1.5 4.4 4.7 Tsingtao Brewery 'A'* 600600 CH CNY 29.54 5,422 Dec 24.1 26.5 1.3 1.2 2.3 2.1 9.7 8.3 MC wt. Average 28.2 28.1 1.2 1.1 2.0 1.9 7.9 7.1

Dairy Sector Inner Mongolia Yili Indl.Gp.'A' 600887 CH CNY 17.83 15,589 Dec 20.4 17.6 2.5 2.7 4.9 4.2 24.8 24.8 Bright Dairy & Food 'A'* 600597 CH CNY 13.23 2,338 Dec 35.4 32.1 1.7 1.9 3.4 3.3 9.9 10.5 Beingmate Baby & Child Food 'A' 002570 CH CNY 13.5 1,990 Dec n.a. 500.0 0.0 0.0 4.0 4.0 (8.7) 1.1 MC wt. Average (ex. Beingmate) 22.4 19.5 2.4 2.6 4.7 4.1 22.9 22.9

Beverage and Others Hebei Chengde Lolo 'A' 000848 CH CNY 11.6 1,636 Dec 22.9 21.5 3.4 3.7 5.2 5.5 25.4 25.6 Slaughter Sector Henan Shuanghui Inv.& Dev.'A' 000895 CH CNY 20.87 9,927 Dec 15.1 13.7 5.6 6.1 4.0 3.7 26.3 27.5 Chinese Liqueor Sector Yibin 'A' 000858 CH CNY 36.5 19,974 Dec 19.6 17.2 2.3 2.7 2.9 2.7 15.1 15.8 'A' 600519 CH CNY 349 63,203 Dec 25.6 21.9 1.8 2.1 5.9 5.1 24.1 24.2 Luzhou Lao J iao 'A' 000568 CH CNY 34.36 6,946 Dec 27.3 22.5 2.1 2.5 4.4 3.8 16.3 17.5 Xinghuacun Fen Wine 'A' 600809 CH CNY 25.46 3,178 Dec 35.2 29.4 1.2 1.4 4.6 4.2 13.6 14.7 Jiangsu Yanghe Brew.J st. 'A' 002304 CH CNY 70.91 15,405 Dec 18.8 16.6 2.7 3.1 4.1 3.6 22.8 22.8 MC wt. Average 23.9 20.5 2.0 2.3 5.0 4.3 21.4 21.8 Condiments and Sauces Foshan Hai Tian Flfd.'A' 603288 CH CNY 30.25 11,796 Dec 28.6 24.4 2.0 2.2 8.3 7.1 29.8 29.9 J onjee Hi-Tech Indl. & Coml.Hldg.' 600872 CH CNY 14.53 1,669 Dec 34.2 28.4 0.6 0.9 4.3 3.9 12.8 14.0 J ig.Hengshun V gr.Ind. 'A' 600305 CH CNY 11.46 996 Dec 39.1 31.1 0.8 0.8 3.0 3.1 10.0 12.1 Jiajia Foodstuff Gp.'A' 002650 CH CNY 7.13 1,184 Dec 48.5 43.0 0.7 0.8 4.2 4.0 8.9 10.2 MC wt. Average 31.3 26.7 1.7 1.9 7.2 6.2 25.2 25.6 A-share listed simple av erage (ex Beingmate) 28.8 24.9 1.9 2.2 4.2 3.8 16.6 17.3 A-share listed MC Wt. av erage (ex Beingmate) 24.0 20.9 2.2 2.5 4.9 4.3 21.5 21.8

Multinational Companies Nestle 'R' NESN VX CHF 74.3 227,794 Dec 22.0 20.6 3.1 3.3 3.5 3.4 16.1 16.8 Unilever (Uk) ULVR LN GBP 33.35 115,410 Dec 20.9 19.1 3.3 3.5 7.1 6.4 35.7 35.0 Coca Cola KO US USD 41.04 177,004 Dec 21.5 20.7 3.4 3.6 7.1 8.4 33.1 37.4 Pepsico PEP US USD 101.97 146,244 Dec 21.2 19.7 2.9 3.1 12.5 12.0 56.7 60.3 Danone BN FP EUR 61.2 42,436 Dec 20.1 18.7 2.7 2.9 2.8 2.6 14.4 15.0 Mondelez International Cl.A MDLZ US USD 44.17 68,217 Dec 22.7 20.9 1.6 1.7 2.4 2.3 10.5 11.8 Hormel Foods HRL US USD 34.92 18,466 Oct 21.3 20.5 1.7 1.9 4.1 3.9 21.1 19.2 Tyson Foods 'A' TSN US USD 61.21 17,610 Sep n.a. 12.7 1.2 1.5 n.a. 2.2 18.3 18.1 Average 21.5 19.1 2.4 2.6 5.4 5.0 24.3 25.5

# FY16: FY17; FY17: FY18 Source: Thomson Reuters, *DBS Vickers

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China / Hong Kong Monthly Chart Book Food & Beverage

F&B shareholding changes

Shareholding changes (%)

Average Tota l % of share Add/ Shares Value price shareholding capital Date Ticker CompanyShareholderreduce Type Mill (HK$m) (HK$/share) (m share) % Aug-16 288 HK WH Group Heroic Zone (Mgmt) Add Connected 292.00 1,737 5.95 3,474 23.7% Aug-16 288 HK WH Group CDH Reduce Connected 1,554.93 9,252 5.95 2,896 19.8% Jul-16 345 HK Vitasoy Mathews International Reduce Open Market 0.69 11 15.19 52 5.0% Commonwealth Bank Jul-16 345 HK Vitasoy Add Open Market 3.50 53 15.13 117 11.2% of Australia Commonwealth Bank Jun-16 345 HK Vitasoy Add Open Market 4.26 58 13.64 108 10.3% of Australia Tsai Eng Meng May-16 151 HK Want Want Add Open Market 5.50 30 5.46 6,342 49.8% (Chairman) Tsai Eng Meng May-16 151 HK Want Want Add Open Market 5.00 27 5.45 6,337 49.8% (Chairman) Tsai Eng Meng May-16 151 HK Want Want Add Open Market 6.00 33 5.58 6,332 49.7% (Chairman) Commonwealth Bank Jul-16 345 HK Vitasoy Add Open Market 3.50 53 15.13 117 11.2% of Australia Commonwealth Bank Jun-16 345 HK Vitasoy Add Open Market 4.26 58 13.64 108 10.3% of Australia Tsai Eng Meng May-16 151 HK Want Want Add Open Market 5.50 30 5.46 6,342 49.8% (Chairman) Tsai Eng Meng May-16 151 HK Want Want Add Open Market 5.00 27 5.45 6,337 49.8% (Chairman) Tsai Eng Meng May-16 151 HK Want Want Add Open Market 6.00 34 5.73 6,326 49.7% (Chairman)

May-16 538 HK Ajisen China Poon Wai (CEO) Add Open Market 0.13 0 3.20 508 46.5%

China Re sourc e s May-16 291 HK CR Beer Add Rights issue 811.04 9,514 11.73 2,074 63.9% National Corporation

May-16 538 HK Ajisen China Poon Wai (CEO) Add Open Market 0.20 1 3.19 508 46.5%

Source: Company data, other sources

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China / Hong Kong Monthly Chart Book Food & Beverage

F&B related share repurchases

Shares purchased YTD Ranging since ordinary resolution Date Ticker Company Shares Valueprices Shares % of share (m) (HK$m) (HK$/share) (m) capital

Jan-17 151 Want Want China 2.97 14.77 5.00-4.95 220.2 1.728

Jan-17 151 Want Want China 2.90 14.47 5.00-4.99 217.2 1.705

Jan-17 151 Want Want China 0.97 4.76 4.95-4.89 214.3 1.682

Dec-16 151 Want Want China 0.90 4.42 4.95-4.83 213.3 1.675

Dec-16 151 Want Want China 3.85 18.60 4.85-4.81 212.4 1.668

Dec-16 151 Want Want China 2.10 10.15 4.85-4.8 208.6 1.64

Dec-16 151 Want Want China 2.20 10.56 4.80 206.5 1.62

Dec-16 151 Want Want China 2.65 12.73 4.81-4.8 204.3 1.6

Dec-16 151 Want Want China 1.00 4.79 4.80-4.79 201.6 1.58 Dec-16 52 Fairwood Hold 0.05 1.42 28.50-28.2 0.2 0.188

Dec-16 151 Want Want China 1.25 5.98 4.80 200.6 1.575

Dec-16 151 Want Want China 15.10 73.31 4.88-4.81 199.4 1.565

Dec-16 151 Want Want China 8.54 41.50 4.89-4.82 184.3 1.447

Dec-16 151 Want Want China 8.12 39.61 4.93-4.81 175.7 1.38

Dec-16 52 Fairwood Hold 0.10 3.04 30.45-29.3 0.2 0.149

Dec-16 151 Want Want China 7.18 35.11 4.95-4.86 167.6 1.316

Dec-16 52 Fairwood Hold 0.05 1.52 30.50-30.4 0.1 0.069

Dec-16 151 Want Want China 0.56 2.72 4.95-4.84 160.4 1.26 Dec-16 151 Want Want China 2.76 13.46 5.03-4.77 159.9 1.255

Dec-16 151 Want Want China 4.09 20.29 5.07-4.94 157.1 1.23

Dec-16 151 Want Want China 4.29 21.21 4.98-4.93 153.0 1.2

Dec-16 52 Fairwood Hold 0.03 0.85 30.50-30.35 0.0 0.022

Dec-16 151 Want Want China 1.03 5.08 4.95-4.94 148.7 1.168

Dec-16 151 Want Want China 4.00 19.83 4.96-4.93 147.7 1.16

Source: Company data, other sources

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China / Hong Kong Monthly Chart Book Food & Beverage

Raw material cost trends

Overview of pricing change of raw materials

Jan-17 Dec-16 y-o-y m-o-m YTD y-o-y y-o-y m-o-m YTD y-o-y %%% %%% Gra in Wheat China 13.9 6.4 (2.9) 6.4 6.7 4.0

Rice China (11.3) (0.8) (3.1) (0.2) (7.1) 20.0

Corn China (25.7) (4.4) (13.9) (23.9) (6.0) (21.4)

Dairy

Whole milk powder Fonterra 49.8 (8.0) 14.9 56.9 6.2 1.9 Skimmed milk powder Fonterra 41.6 1.7 11.6 37.9 6.4 (4.0)

Raw milk China 1.4 0.0 (0.6) 0.3 1.4 0.6

USDA Whole milk powder 53.0 (1.9) 18.2 45.6 4.8 (1.4)

USDA Skimme d milk powde r 29.7 1.6 9.1 25.2 0.5 (7.7)

Oil crushing Soybean CBOT 13.3 (2.5) 12.4 16.1 1.9 4.4

Crude Palm Oil (KLCE) 39.6 1.5 16.8 42.5 9.4 21.1

Other agricultural goods

White sugar China 30.3 (0.3) 10.5 28.2 5.6 12.8

White sugar Brazil 34.3 0.0 21.8 32.2 (5.9) 47.6 Coffe e ( ICE ) 21.4 2.4 16.7 15.3 (13.5) 2.5 Coc oa ( ICE ) (23.2) (1.8) (3.2) (31.2) (8.6) (7.7) Orange Juice (NYCE) 46.0 (6.5) 30.4 40.1 (6.2) 31.9 Feedstuff Soybean meal ( CBOT ) 15.3 (0.9) 17.5 13.8 0.0 (0.7) DDGS (26-28%) Southern China 53.2 2.5 24.4 51.1 5.4 5.1 Packaging PET China 10.6 (2.9) 10.6 19.6 2.5 (0.9) Aluminum China 16.3 (3.8) 14.4 23.0 (8.5) 1.8 Tin LME 54.0 (0.4) 32.3 44.8 0.2 11.8

Source: Bloomberg Finance L.P, CEIC

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China / Hong Kong Monthly Chart Book Food & Beverage

F&B retail price trends

Overview of retail pricing changes Dec-16 Nov-16 y-o-y m-o-m YTD y-o-ys. y-o-y m-o-m YTD y-o-y %%% %%%

Beer Beer 4.4 4.4 3.0 4.4 4.4 3.0 Dairy Milk 1.7 0.5 1.3 1.6 0.3 1.4 Yogurt 0.5 0.3 0.8 1.1 0.2 0.8 Infant formula local brands 1.0 0.3 0.6 1.2 (0.1) 0.6 Infant formula foreign brands 2.2 0.3 1.0 1.9 0.1 1.0 Fruits & Vegetable Cabbage 21.3 1.7 14.8 (0.3) (0.3) 0.6 Apple (12.0) (0.5) (17.6) 3.1 5.1 (7.3) Edible oil Soybean Oil 0.9 0.2 (0.7) 0.8 0.0 (0.8) Peanut Oil 1.2 0.1 1.3 1.7 0.1 1.3 Rape oil 1.2 1.5 (28.4) 1.6 1.5 23.7 Gra in Rice (0.2) 0.3 0.6 (0.3) (0.3) 0.6 Flour 1.3 0.4 1.6 1.0 0.0 1.6 Sugar 12.3 12.0 4.6 12.2 11.9 3.6 Meat & poultry Pork 5.5 1.1 21.0 5.1 (0.6) 22.0 Beef (0.2) 0.1 (0.1) (0.3) (0.0) (0.1) Mutton (0.8) 0.8 (2.6) (3.3) (0.2) (2.9) Chic ke n 2.5 0.2 1.6 2.7 (0.1) 1.6 Egg (2.5) (0.6) (3.4) (2.1) (0.6) (3.4)

Source: CEIC, MOC, NDRC, NBS

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China / Hong Kong Monthly Chart Book Food & Beverage

Sector – Beer

Date Company Ticker News & comments Jul-16 CR-Beer 291.HK CR-Beer proposes to raise net proceeds of HK$9,508m through an 1-for-3 right issue exercise at HK$11.73/sh. Last trade price was at HK$16.94/sh, indicating ex-rights price as HK$15.64/sh.

Jul-16 CR-Beer 291.HK MOFCOM grants conditional approval to (i) divest 49% equity interest in CR- held by SAB-Miller, (ii) sell 49% equity interest in CR-Snow and (iii) ensure the divestment is completed within 24 hours of the completion of SAB-Miller acquisition. Oct-16 AB InBev, SAB 291 HK AB-InBev completes SAB-Miller acquisition. CR-Beer subsequently acquires remainder 49% stake. Miller, CR Beer

Sales volume (by Company) Top domestic players – sales volume % yoy

'00 kl (%) 400,000 6 350,000 4 300,000 57,140 53,211 48,300 2 54,040 0 250,000 (2) 117,220 118,430 116,830 200,000 106,390 (4) 150,000 (6) (8) 87,000 91,540 84,800 100,000 79,000 (10) 50,000 (12) 57,470 65,523 71,412 74,562 (14) 0 (16) 2012 2013 2014 2015 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 AB-INBev Tsingtao CR-Beer Yanjing AB-INBev Tsingtao CR-Beer Yanjing Grain: Rice (China) prices Grain: Barley (Canada) spot price

RMB/ton US$/BSL 3,400 300 3,200 250 3,000 2,800 200 2,600 150 2,400 2,200 100

2,000 50 1,800 0 Jun/16 Feb/14 Sep/14 Apr/15 Dec/16 Nov/15 Aug/13 Jun/16

Feb/14 Sep/14 Apr/15 Dec/16 Nov/15 Aug/13

Source: CEIC, Wind, Euromonitor, Bloomberg Finance L.P., Company data, DBS Vickers

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China / Hong Kong Monthly Chart Book Food & Beverage

Grain: Malting barley Australia spot price

US$/ton 400

350

300

250

200

150 Jan/13 Jul/13 Jan/14 Jul/14 Jan/15 Jul/15 Jan/16 Jul/16 Jan/17

Source: CEIC, Wind, Euromonitor, Bloomberg Finance L.P., Company data, DBS Vickers

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China / Hong Kong Monthly Chart Book Food & Beverage

Sector – other alcohol (wine, baiju)

Date Company Ticker News & comments Nov-16 n.a n.a In 11M16, China imported 51.8m litres of spirits worth US$756m (+0.42% y-o-y). In 11M16, China also imported 567.5m litres of wine worth US$2.12bn. Dec-16 n.a n.a Wholesale prices for Kweichow Moutai have risen by RMB100 each month since June, and have climbed to Rmb1000/bottle by end-Oct (typically an off-season for liquor sales). Retail prices continued to climb to Rmb1099/bottle, according to JD.com. The firm plans to release less than expected 4,000 tonnes of spirits to maintain ASP. Jan-00 Wuliangye 000858:CH Wuliangye plans to lower its production volume on its 52 degree Crystal brand by 20% y-o-y and focus overall ASP y-o-y.

Wine market share (by Company) 2014 Import wine market share (by country) 2015

Yantai Weilong , COFCO , 3.0 Italy Changyu, 3.0 0.9 Citic Guoan , 0.9 Vats, 0.9 4% Others 11% Castel Group, France 0.7 29%

Macrolink, 0.6 Spain 14%

Australia Others, 90.0 13% Chile 29%

Import volume (wine) Import ASP (wine)

KL % US$/kl % 80,000 100 7,000 20 70,000 80 6,000 10 60,000 60 5,000 50,000 0 40 4,000 40,000 (10) 20 30,000 3,000 (20) 20,000 0 2,000 10,000 (20) 1,000 (30)

0 (40) 0 (40) 14 15 16 14 15 16 14 15 16 14 14 15 14 15 16 15 16 16 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 15 16 15 16 15 16 14 15 15 15 16 16 16 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ Jul Jul Jul Jan Jan Jan Sep Sep Sep Nov Jul Nov Jul Nov Mar Mar Mar May May May Jan Jan Sep Sep Nov Nov Nov Mar Mar May Volume % y‐o‐y May Series1 % y‐o‐y

Source: CEIC, WIND, Euromonitor, Bloomberg Finance L.P., Company data

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China / Hong Kong Monthly Chart Book Food & Beverage

Sector – Dairy News flow

Date Company Ticker News & comments Oct-16 Yili 600887:CH Yili issues Rmb9bn worth of new shares which include the acquisition of stake in China Shengmu for 37% stake, in addition with the intention to diluting Sunshine Insurance stake. Dec-16 Fonterra n.a Fonterra will roll out a premium line with 2 new UHT products, LiveUp and Naturalup, made from organic milk produced in NZ.

Jan-17 FrieslandCampina N.A FrieslandCampina plans to expand its infant formula brand, Dutch Lady, in 2017 in 5 more provinces in east and south china.

Market share (by Company) 2015 Import volume: liquid milk

MT % 70,000 300

A 60,000 250 Others 25% 50,000 200 28% 40,000 150 30,000 100 20,000 50 10,000 0 Nestle 0 (50) Wahaha Yili 6% Bright 7% 25% Dairy Jun-13 Jun-14 Jun-15 Jun-16 9% Oct-13 Feb-14 Oct-14 Feb-15 Oct-15 Feb-16 Oct-16

Liquid milk % y-o-y

Import volume – milk powder Dairy: raw milk prices (China)

MT % RMB/kg 180000 200 4.4 160000 150 4.2 140000 120000 100 4.0 100000 50 3.8 80000 60000 0 3.6 40000 (50) 20000 3.4 0 (100) 3.2

-13 -14 -15 -16 3.0 p p p p Jun-14 Jun-15 Jun-16 Jun-13 Se Se Se Se Dec-13 Dec-14 Dec-15 Mar-14 Mar-15 Mar-16 /13 /14 /16 /13 /14 /15 /16 y y y Milk powder % y-o-y g g g g Feb/14 Feb/15 Feb/16 Feb/17 Nov/13 Nov/14 Nov/15 Nov/16 Au Au Au Au Ma Ma May/15 Ma

Source: CEIC, Euromonitor, Bloomberg Finance L.P., Company data

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China / Hong Kong Monthly Chart Book Food & Beverage

Dairy: WMP Fonterra price Grain: Alfalfa (US) price

US$/ton US$/ton 5,500 400 5,000 350 4,500 300 4,000 250 3,500 200 3,000 2,500 150 2,000 100 1,500 50 1,000 0 Jul/14 Jul/15 Jul/16 Nov/13 Nov/14 Nov/15 Nov/16 Mar/14 Mar/15 Mar/16 Jun/16 Feb/14 Sep/14 Apr/15 Dec/16 Nov/15 Aug/13

Grain – soybean meal price Grain: Corn (China) price

US$/ton Rmb/ton 550 2,800 2,600 500 2,400 450 2,200 2,000 400 1,800 350 1,600 1,400 300 1,200 250 1,000 Jul/14 Jul/15 Jul/16 Jan/14 Jan/15 Jan/16 Jan/17 Oct/14 Oct/15 Oct/16 Apr/14 Apr/15 Apr/16 Nov/13 Nov/10 Nov/11 Nov/12 Nov/13 Nov/14 Nov/15 Nov/16 May/11 May/12 May/13 May/14 May/15 May/16

Source: CEIC, Euromonitor

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China / Hong Kong Monthly Chart Book Food & Beverage

Sector – Beverages

Date Company Ticker News & comments Nov-16 China Foods Coca Cola Coca Cola consolidates from 3 to 2 bottlers in China. China Food increases its market share consolidates bottling from 34% to 50%, with a reshuffling of region of control with Swire Pacific. assets Nov-16 Wahaha Wahaha introduces Wahaha introduces new SKUs such as yogurt flavoured beverage "Jiao Su," MIAO yogurt, new beverages for Wahaha vegetable + fruit yogurt, Wahaha congee drink, Little Coco Coconut Drink, 2017 Burnlaxy energy drink, Bai Weite BV Premium UHT milk.

Market share – water (by volume) White sugar (China) price

Run Tian RMB/ton 1% 6,000 Coca‐Cola 5,800 11% Tingyi 5,600 25% 5,400 5,200 5,000 C'estbon 4,800 23% 4,600 Wahaha 4,400 13% 4,200 4,000 Farmer's Spring 27% Apr/14 Apr/15 Apr/16 Dec/13 Dec/14 Dec/15 Dec/16 Aug/14 Aug/15 Aug/16

White sugar (Brazil) price Packaging – PET China price

US$/ton RMB/ton 50 13,000 45 12,500 40 12,000 35 11,500 30 11,000 25 10,500 20 10,000 9,500 15 9,000 10 8,500 8,000 Apr/14 Apr/15 Apr/16 Dec/13 Dec/14 Dec/15 Dec/16 Aug/14 Aug/15 Aug/16 Jul/16 Jul/15 Jul/14 Jan/17 Jan/16 Jan/15 Jan/14 Oct/16 Oct/15 Oct/14 Apr/16 Apr/15 Apr/14 Nov/13

Source: AC Nielson CEIC, Euromonitor

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China / Hong Kong Monthly Chart Book Food & Beverage

Packaging – Tin LME price Packaging – Aluminium (China) price

US$/ton RMB/ton 26,000 18,000 24,000 16,000 22,000

20,000 14,000 18,000 16,000 12,000 14,000 10,000 12,000 10,000 8,000 Jul/14 Jul/15 Jul/16 Jan/16 Jan/17 Jul/16 Jul/15 Jul/14 Dec/14 Jan/17 Jan/16 Jan/15 Jan/14 Oct/16 Oct/15 Oct/14 Apr/16 Apr/15 Apr/14 Nov/13

Source: CEIC, Euromonitor

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China / Hong Kong Monthly Chart Book Food & Beverage

Sector – Instant noodles

Market share (by Company) 2015 Oil crushing – crude palm oil (KLCE) price

Uni- US$/ton president 2,900 17% Hualong 8% 2,700 Baixiang 2,500 8% 2,300 2,100 1,900 Others 1,700 21% Tingyi 1,500 46% Jul/14 Jul/15 Jul/16 Jan/14 Jan/15 Jan/16 Jan/17 Oct/14 Oct/15 Oct/16 Apr/14 Apr/15 Apr/16 Nov/13

Grain: Wheat (China) price

RMB/ton 3,500

3,300

3,100

2,900

2,700

2,500

2,300

2,100 Jul/14 Jul/15 Jul/16 Jan/14 Jan/15 Jan/16 Jan/17 Oct/14 Oct/15 Oct/16 Apr/14 Apr/15 Apr/16 Nov/13 Source: AC Nielson, CEIC, Euromonitor, Bloomberg Finance L.P., Company data

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China / Hong Kong Monthly Chart Book Food & Beverage

Sector – Edible oil

Market share (by Company) 2015 Import volume – soybean

Shandong '000 ton Luhua 1,200 COFCO 7% 10% 1,000 Shanghai 800 Kerry Liangyou 41% 3% 600 400 Shanghai Standard 200 Foods Others 3% 0 36% Jul/11 Jul/12 Oct/14 Dec/16 Nov/15 Aug/13

Import volume – soybean oil Oil crushing – soybean CBOT price

'000 ton US$/ton 300 650

250 600

200 550 500 150 450 100 400 50 350

0 300 Jul/11 Jul/12 Oct/14 Dec/16 Jul/14 Nov/15 Aug/13 Jan/12 Oct/15 Apr/13 Dec/16 Nov/10

China crushing margins Oil crushing – soybean oil price (China) Rmb/ton rmb/litre 600 12.6 400 12.4 200 12.2 0 12.0 (200) 11.8 (400) 11.6 (600) 11.4 (800) 11.2 11.0 Jul/13 Jul/14 Jul/15 Jul/16 Jan/14 Jan/15 Jan/16 Jan/17 Jun/16 Feb/14 Sep/14 Apr/15 Dec/16 Nov/15 Source: CEAug/13 IC, Euromonitor, Bloomberg Finance L.P.

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China / Hong Kong Monthly Chart Book Food & Beverage

Soybean meal price (US) Argentina crude soybean oil FOB price

US$/ton US$/ton 1,800 550 1,600 500 1,400 1,200 450 1,000 400 800 600 350 400 200 300 0 250 Jul/14 Jan/12 Oct/15 Apr/13 Dec/16 Nov/10 Jan/17 Oct/13 Dec/15 Nov/14 Aug/11 Aug/12 Oil crushing – crude palm oil (KLCE) price

US$/ton

2,900 2,700 2,500 2,300 2,100 1,900 1,700 1,500 Jul/16 Jul/15 Jul/14 Jan/17 Jan/16 Jan/15 Jan/14 Oct/16 Oct/15 Oct/14 Apr/16 Apr/15 Apr/14 Nov/13

Source: CEIC, Euromonitor, Bloomberg Finance L.P.

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China / Hong Kong Monthly Chart Book Food & Beverage

Sector – Meat News flow Date Company Title News & comments Nov-16 Danish Crown Danish Crown to open plant in Danish Crown will invest US$44m to open a pork processing plant in China. The China Company plans to focus on the growth in foodservice sector and e-commerce opportunities. It also recognizes the growing demand for retail packed products. Nov-16 Charoen Charoen Pokphand buys 70% CP Pokphand will buy 70% of Chinese poultry firm Fujian Sumpo, which processes Pokphand of Chinese poultry company chicken meat products and manufactures animal feed. Foods Nov-16 WH Group WH Group acquires WH Group acquires Hormel Food's Clougherty for US$145m, the largest California Clougherty pork processor with roughly 7,400 heads per day capacity. Dec-16 COFCO Meat, Charoen Pokphand Foods buys CP Pokphand will buy a poultry business in northern China for RMB187m, in efforts to Charoen COFCO Meat unit in China expand its agri-food business and reinforce its leading position in agri-food industry. Pokphand Dec-16 DaChan Food DaChan to set up 2 plants in DaChan will add 2 new processing plant, in addition to 4 processed food facilities in China China.

Dec-16 Nov-16

Unit Value y-o-y m-o-m Value y-o-y m-o-m %% %%

Pig to Feedstuff Ratio x 9.5 19.5 4.8 9.0 14.1 (0.2)

Hog Price rmb/kg 17.4 3.6 2.7 16.9 3.0 1.2 Corn wholesale price rmb/kg 1.8 (13.3) (2.0) 1.9 (9.8) 1.4

Ex-Factory pork price rmb/kg 23.0 3.0 2.4 22.4 1.9 (0.3)

Piglet price rmb/kg 38.9 31.6 (0.4) 39.1 30.9 (6.4) Number of Pig Stock 000 0.00 0.00 0.00 401,628 (4.0) (0.1) Number of Sow Pig Stock 000 0.00 0.00 0.00 37,548 (3.2) (0.2)

China hog price US hog prices

Rmb/kg US$/ton 22 3.0 20 2.8

18 2.6 2.4 16 2.2 14 2.0 12 1.8 1.6 10 1.4 8 1.2 1.0

Jul/14 Jan/12 Oct/15 Apr/13 Dec/16 Nov/10 Source: CEIC

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China / Hong Kong Monthly Chart Book Food & Beverage

China ex-factory pork price Number of sow pig stock

Rmb/kg '000 28 55,000 26 24 50,000 22 20 45,000 18 40,000 16 14 35,000 12 30,000 10

Number of slaughtered hog Number of pig stock

'000 '000 26,000 500,000 24,000 480,000 22,000 460,000 20,000 440,000 18,000 420,000 16,000 400,000 14,000 12,000 380,000 10,000 360,000 Jul/10 Jul/15 Jan/13 Oct/11 Apr/14 Nov/16

Pig to feedstuff ratio US & China hog price difference

X (x) 2.5 12.0

11.0 2.0 10.0 9.0 1.5 8.0 1.0 7.0 6.0 0.5 5.0 4.0 0.0 Jan/17 Jun/14 Feb/13 Jul/10 Sep/15 Nov/11 Jan/17 Aug/10 Jun/14 Oct/11 Feb/13 Sep/15 Source: CEIC

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China / Hong Kong Monthly Chart Book Food & Beverage

Feed stock: China DDGS (Southern China) price Soybean meal price

Rmb/ton US$/ton 3,000 550

2,600 500

450 2,200 400 1,800 350 1,400 300

1,000 250 Jul/14 Jan/12 Oct/15 Jan/17 Apr/13 Jun/14 Dec/16 Feb/13 Nov/10 Sep/15 Nov/11 Aug/10

Piglet price Rmb/kg 55 50 45 40 35 30 25 20 15 10

Source: CEIC, Bloomberg Finance L.P, Company data

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China / Hong Kong Monthly Chart Book Food & Beverage

Sub-sector – Others News flow Date Company Title News & comments Sep-16 Evergrande Evergrande sells non-core Evergrande will sell its non-core businesses, such as kitchen food, dairy, and water businesses separately, for a total of Rmb2700m and place its focus back to property business. Oct-16 Freedom Foods Freedom Foods invests in Freedom Food invests in Shenzhen JiaLiLe Food, to expand its presence in children's Group Shenzhen JialiLe Food milk brand. Dec-16 COFCO COFCO discovers US$150m COFCO discovered US$150m overstatement in its balance sheet in Brazil. International overstatement in Nidera Jan-17 COFCO Group COFCO International head COFCO International head, Matt Jansen, leaves. COFCO International has intention to leaves become an international grain trading business to compete with the ABCD commodity companies. Jan-17 CITIC, Carlyle Citic, Carlyle pay US$2.08bn McD will sell 8% of its fast food business in Hong Kong and mainland China for for McDonald's HK and China HK$16.14bn (US$2.08bn). Of which, CITIC will own 51%, Carlyle will own 28%, and businesses the remainder will be held by McDonald's.

Source: CEIC, Company data

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China / Hong Kong Monthly Chart Book Food & Beverage

Monitor of F&B climate in China

China - Temperature China - Precipitation

celcius Macrons 30 3,500

25 3,000

20 2,500

15 2,000

10 1,500

5 1,000

0 500 123456789101112 (5) 0 1 2 3 4 5 6 7 8 9

2014 2015 2016 10 11 12 2014 2015 2016

Beijing - Temperature Beijing - Precipitation

Celcius Macrons 35 9,000 8,000 30 7,000 25 6,000 20 5,000 4,000 15 3,000 10 2,000 1,000 5 0

0 1 2 3 4 5 6 7 8 9 10 11 12 0123456789101112 2014 2015 2016 (5) 2014 2015 2016 (10)

Shanghai - Temperature Shanghai - Precipitation

celcius Macrons 35 7,000

30 6,000

25 5,000 20 4,000 15 3,000 10 2,000 5 1,000 0 0 1 2 3 4 5 6 7 8 9 0123456789101112 10 11 12 2014 2015 2016 2014 2015 2016

Source: Bloomberg Finance L.P

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China / Hong Kong Monthly Chart Book Food & Beverage

Guangdong - Temperature Guangdong - Precipitation

celcius Macrons 35 18,010 30 16,010 14,010 25 12,010 20 10,010 15 8,010 10 6,010 4,010 5 2,010 0 10 0123456789101112 1 2 3 4 5 6 7 8 9 10 11 12 2014 2015 2016 2014 2015 2016

Chongqing - Temperature Chongqing - Precipitation

celcius Macrons 35 9,000

30 8,000 7,000 25 6,000 20 5,000

15 4,000 10 3,000

5 2,000 1,000 0 0123456789101112 0 1 2 3 4 5 6 7 8 9 2014 2015 2016 2014 2015 2016 10 11 12

Source: Bloomberg Finance L.P

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China / Hong Kong Monthly Chart Book Food & Beverage

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China / Hong Kong Monthly Chart Book Food & Beverage

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China / Hong Kong Monthly Chart Book Food & Beverage

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