Company Report: Guangzhou Automobile (02238

Home , Acura CDX, Denway Motors, GAC Fiat Chrysler, GAC Group, GAC Hino, GAC Mitsubishi

Se Source

52 Weeks high/low 52 Weeks vol. average 3 month m) (HK$ cap. Market (m) issue in Shares 2018F 2017F 2016F 2015A 2014A 12/31 年结 Year End       e 主要品牌发力 Engine 公司报告： Company Report:

th e :

he Company,he Guotai Junan las rallying GA that think We represents TPInitiate expansion GAM from growth 2018. year full a contribute GAMC from upturn respectively. 2018, EPS Basic respectively. 26.3%, increase to vehicles 2018 Companythegrowth fuelledfor at of theBeing6 因此，强劲 1 2017/2018 首予广州汽车“收集”的评级并给予我们并在传祺基本每股收益在将分别同比增长种趋势将在在作为中国 see accumulationopportunity. we therefore, 2016, Sep. since PER potential 月以来股价已上涨 t 2016 26.9

growth among the top 6 top the among growth pag 的预期和 2017 我们盈利广汽广州汽车集团 albe However, we forecast slower growth in 2017 and 2018 as as 2018 and 2017 in growth slower forecast we However, e %. 年，自广汽集团乘用车 88.0 RB m) (RMB 6 fo Turnove 年至 n 2 and 认为潜力菲亚特大汽车制造商，广 In 2016, its own Trumpchi brand 财年市盈率以及 r 2017 t in it

(HK$) 52 (HK$) 63,580 63,580 48,839 29,418 22,383 plan 67,767 67,767

Powering Powering disclaimer 总股数 forecasted

th 11.4 since % 3 市值收入

主

目前股价， 2 HK$ largest 26.3 , 个月平均成交股数 2016

及 018 s 品牌年和 GC a be taig under trading been has GAC ) 的首次覆盖并给予“收集”的投资评级 ls sgiiat anr W expect We manner. significant less a r

to 2

(HK$ m)

％， J 88.0 ） ad FCA and C 1 (m) - 10.4 C 年维持。 eep 周高传祺

广州汽车 remain conservative ’ 2018 3 2018

s International ’s

infcn improvement Significant

有“ 和 ( 96 Jan. 22 ％ automaker

of rmci n GC FCA GAC and Trumpchi 02238HK 在 x / ，以及合资公司菲亚特 valuati Net Profit 广汽低 (RMB m) Guangzhou Guangzhou Automobile Group ， increaseto

股东净利

年分别增长 1. 5 with anwith 年 rft n 06 n sustain and 2016 in profit

州 1.3 and PER 2017/2018 2016 收集

％和我们认为 3 然而，我们预计

8,547 7,414 6,265 4,21 3,194 持自汽 as 2016, 4 菲亚特

续，尽管

车 ” 倍 . 2016 n s tl atatv, ept the despite attractive, still is on automakers in China, in automakers

7.3 年有显 2 ( 的 ; 的 /

‘ normalized 1. 000) 22 ) weexpect

％。

“ 机会 1 的增长

2016 29 广州汽车 up for for up in Chinain 3.96 年 . 48 5 Accumulate

著 ad .% o i 21 t 2018, to 2016 in yoy 7.3% and % 48 较为温和倍的

9 . 1) 每股净利。 8

改善

年月以来一直％， (RMB) . 将正常化，

港元的目标价，相当于 . 8 1.191 1.089 0.974 0.654 0.496

GAC 汽车销售增长达 EPS 2017 %, 2017/2018 2017/2018 估值仍具吸引力，， 11.9 and , and - , 克莱斯勒为公司 this

这两个品牌在 11.9 GAC 。我们预计

the

年和 has

％和每股净利变动 expect joint venture trend ’s 13.24

M ” t peers its 低于 % and % 及 ih Honda with

urn sae price share current displ 2018 4 investment Jeep 9.3 exhibit 本田和丰田保守

财年市净率。 x/1.

ajor ajor 同业的 profit (

0 △ to to with ％。 ed EPS 19,079.7 83,259.4 48.8 48.8 31.9 20.4 11.9 26 6,454.2 / 2016 ayedthe 9.3 年的增长 %) 29 Bt bad ae to are brands Both .

continue in 2017inandcontinue

9.3 2016 6.63 ae of sales . n 06 u t the to due 2016 in 由于广带来 ’ 因 - ed 9

x making 市场％ 2016 egtd average weighted

% yoy in 2016 to2016 yoy in % - with

0721 PBR. 2017/2018 1 2018 0 ，为 11 ’s tog earnings strong ）年全年贡献利润，增长，我们预计这

B 加权平均

. rating 广州汽车表现出将会汽集团乘用车 ir 4 尽管自 n Toyot and

Fiat

6 growth rate growth 的 fastest 市盈率年 rands 倍 stock 大车企最快 n 07 to 2017 in PER passenger 10.5 10.5 16.4 20.4 扩张计划。 11.8 放缓，因为乘用车销量 FY FY (%) Free float Major shareholder

/ 9.6

10.4 (x) Chrysler , e see we

1 1 2016 市盈率，

which 7 7 s an as

price Est. gearing Net

rate 倍的 ( a 每股净 02238 HK 02238 年的 ’s 。 NAV

(RMB) , 9.643 9.289 6.687 6.006 5.509 B 资产自由流通比率

PS (HK$) Initiate Initiate

(%)

Source 大股东股价表现 Stock per

平均股价（港元） Avg 相对恒指变动 % HS to Rel. index 绝对变动 Abs.% 股价变动 Share Price Change in Shareprice 6 评级： Rating: 110.0 (50.0) (30.0) (10.0)

10.0 30.0 50.0 70.0 90.0

- FY FY 18m TP . Feb-16

share price(HK$) share : 1 1

) Bloomberg 7

7 市

净负债 P %return of 每股估值净 %

(%) BR

1.2 1.2 1.7 1. 1.8 (x)

率

formance

目标价 “

股价： / , May-16 股东资金 Guota Accumulate

HSI

( 每股股息港元

i (RMB) Juna : 0.357 0.327 0.292 0.200 0.160

DPS )

n ( 1

International. Aug-16 个月

1 M 1 1 2 11. )

8.2 3.8 [email protected]

Guangzhou Auto-H 4

Toliver Ma Toliver

6 eray 2017 February 16 股息率

Yield 3 Accumulate (%)

个月 Nov-16 3. 2. 2. 1.9 1.6 3 M 3 10. 32.2 3 +85225095317 9.9 收集 1 8 5

GAIG HK 净资产收益率

” Page Page

( $

首次研究 $ 马守彰 Net Cash 13.96 12.900

60.66 Feb-17 5 7 1 Initial 1 1 Y 9. 1.0 6.5 1 14.69 39.34 年 ROE 5

12.9 12.9 14.0 15.3 11.4 of of (%)

9.2

27 )

Company Report Guangzhou Auto Group 广州汽车 (02238 HK) GTJA Research 国泰君安研究

Se Investment ValuationThesis, Risk and 20 Company Analysis Industry d e

16 th e Fundraising Fundraising Activities Income Investment Gross and Revenue Margin Self Fiat GAC MitsubishiGAC GAC Toyota Gua and Market Share Sales and ContributionRevenue Profit CompositionBusiness History Development StructureShareholder VehiclesCommercial VehiclesPassenger - las 201 t pag - Overview ngqi Honda owned Brand owned Brand 8 e fo Salesand Financial r disclaimer

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23 23 20 19 19 16 15 14 12 10 27

9 8 7 6 6 6 5 3 3

Company Report Guangzhou Auto Group 广州汽车 (02238 HK) 16 February 2017 Se lower end. competition investment French brand 1 brand American and German Japanese, displacement heavily pp yoy self of share Market Source: Figure Source: Figure exp sales 4 s PV purchase tax cut policy 201 Chin A Industry d 110.0% - - - 10,000,000 10,000,000 15,000,000 20,000,000 25,000,000 30,000,000 6 3 Passenger Vehicles Passenger 10.0% 30.0% 50.0% 70.0% 90.0%

50.0% 30.0% 10.0% e good yearfor good 5,000,000 5,000,000 .8 t . s 1

Units

anded 6 th in 201 in

% to 15. to % % a vehicle sales vehicle a ales increased 15. increased ales to to , in which which in , e

increased much increased

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Sales GrowthDifferentof Type Sales VehicleChina Sales Growth and Sales 6 respectively,, while cross that of

7.4 8 pag

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produ % ppt

since Dec.2015 since in SUV in 2006 fo 22.3% below 1.6L below 2007 sales , r

s industry in automobile the and thus market share market thus and which which disclaimer

2007 since since

6.6% from Japanese and German brand German and Japanese from ct

2008 double showed an International an growth s - s

owned brand owned 2008 45.5% , , 2) , faster than other type other than faster 1 which Vehicle Vehicle sales MPV

including other brands andother brands growth

2009 %

2009 Dec

32.5%

vehicles a major beneficiary major a yoy

. 2015 2010 of

2010 heavily . 2.7% . increased increased p PV sales of self of PV sales Among different types of PV, of of sales types different Among

assenger vehicle assenger . .

lower 2011 2011 4.2% , the fastest growing sub

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2012 favored 13.9% 2012 rebounded localization

s 2013 has the

6.8% 7.2

2013 - in s over yoy yoy

of PV of

2014 % % and decreased 1 s 2016 smaller industry averageindustry 4.6% remain 2016. 2016.

2014 Crossover of PVs. of - from the from

s owned rapidly brands increased 2015 in

13.7% decreased s . 201

have of models and models of According to CAAM, sales sales CAAM, to According

2015 ( 2016 ed “ According to China Association China to According engine PV s 6, the highest since 2013 since highest the 6, 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

T stable for those brands those for stable

in the mid the in 2016 ” purchase been h )

is lead lead is continuously

- segment the PV in segment market. 21.2 displacement vehicles . roughly As a result As a Figure Source: Figure Source: 100% 4.7 10,000,000 10,000,000 15,000,000 20,000,000 25,000,000 30,000,000 % 20% 40% 60% 80% 5,000,000 5,000,000

to - (Units) 0% failing to meet to failing tax cut policy due to its high product high its to due policy cut tax

% % yoy, respectively yoy to high to

CAAM CAAM sedan - - . aligned with the industry, demonstrating growth from growth demonstrating industry, the with aligned significant 2 4

- expanded since 4Q15 since expanded Due to to Due 69.8% 11.2% 15.6% : : 2011 3.4%

China PV Sales PV GrowthChina and Sales Market Share Share DifferentMarket of Type , –

29.6% , , market share of self of share market end Guotai Junan International GuotaiJunan International GuotaiJunan s ,

Sedan 2006 MPV 22.3% of of . sturdy .

market 14.6% 69.4% 12.9% in recent years due to 1) its swift decision to swiftdecision its years to 1) recent due to in Underperformers in in Underperformers 2012 China 3.2%

consumer’s self 2007 of increase . 7.1%

s A

of Automobile Manufacturers ( Manufacturers Automobile of

long long with - and SUV and owned branded owned

2008 demand ofSUV 52.9% .

, as well as self as well as , vehicle sales increased increased sales vehicle Both Both brands suffer

MPV MPV PV sales 67.0% 16.7% 2013 9.1% 7.3% 2009 33.3%

2010 preference

market share of SUV of share market

5.4% s low base due -

o increased 62.8% 20.7% . . 2014 SUV 9.7% 6.8%

wned brand wned 2011 6.9% to the to

2016 2012 . 15.7%

s PVs in PVs Meanwhile, growth of growth Meanwhile, -

owned brand owned in recent years,in recent

comparison s 55.4% 10.0% 29.4% exposure 2013 2015 5.2% Crossover . They face They . 9.9%

introduction of introduction yoy yoy ed

s were 3.

of PV of 2014

1 s creased due to a lack of 7.2% %,

2015 1 Korean and and Korean creased 15.1% 3.

50.0% 10.3% 36.8% Page Page 2016 3.0% 18

7 to “ CAAM % s 2016 . in 2015, 9 s d , which , engine

% and and %

20.8 3 yoy in the the in 0% fierce 10% 20% 30% 40% 50% 60% of of SUV the the 1. 27

” % in

), 6

Company Report Guangzhou Auto Group 广州汽车 (02238 HK) 16 February 2017 Se Source: Figure we should 10%. to back revert will tax purchase and benefit tax no be will there of down scale a effectively 7.5%, 2010 and 2009 announced Finance of Ministry introduction the policy, cut tax 1.6Lbelow displacement with vehicles Though displacement displacement 2016 engine significant have in significantly increased 1.6L below the in base smaller been has market introd The Source: Automakers Figure d

10% 15% 20% 25% 30% 35% 40% 45% - e 10% 15% 20% 25% 30% 10% 0% 5% -

5% 0% 5% expect single expect th , e decline

and CAAM CAAM - - las expect displacement lower than 1.6Lthan lower displacement 7.8% 7 5 engine Jan : :

t 40.4%

Total Self pag 38.3% both sedan both - uction of purchase tax cut policy has has policy cut tax purchase of uction Market Share of Different Different of Share Market , ,

same period last period of same which year 0.8% 41.2% Feb owned Guotai Junan Internation GuotaiJunan International GuotaiJunan increased for displacement for increased

further d

42.8% e above 1.6L.above above 1.6L recorded recorded 1.6L above a fo

displacement vehic displacement

8.9% Vehicle Mar new ruling suggest ruling new 16.1% similar picture similar - r

digit growth digit 5% 7.5% year full to of in 2017. 15.8% disclaimer policy Japanese 15.9% 6.4% 2013

Apr 15.7%

s u to due 18.8%

and MPV and 9.9% - May S

led 20.0% 2015 German

ales 18.9%

14.8%

19.1% 2014

Jun

since 2009 since

12.6% h category the G to 23.2% al 12.8% a American rowth Jul . .

s 12.3%

2009 and 2010 when purchase tax cut taxcut purchase when 2010 and 2009 2.5

new round of tax cut policy cut tax of round new

les, especially SUV especially les, 12.2% 2015 have have a efciey skewed effectively has 24.4% s 2016 Aug

that 2016 have have 8.9% p

9.0% pts 19. in Chinain 26.6% Korean , and the the and ,

s 8.0% also Sep

7.3% 2016 in 2017 in

eo 1.6L below 3 , up 2 up , has has from the current tax policy tax current the from increased 7 increased 19.3% yy increase yoy % ’ of Nationalities in s Oct 3.1% experienced French 3.7% exhibited negative growth for 3.5% 17.1% eligib

Nov 2.6% 1 , the purchase tax associate tax purchase the , . re 7 ha

% yoy % 0.0% - 9.7% Dec introduction of purchase tax cut tax purchase of introduction 0.4%

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yoy

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Source: Figure Source: Figure , seeing a 10. a seeing ,

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. It was also announced that starting fr starting that announced also was It . oad lwr displacement. lower towards

CAAM CAAM increase in sales proportion in 2016. W 2016. in proportion sales in increase - -

9.4% 6 8 Jan Given ainstream choice of consumer of choice ainstream : : was s

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d that 9.9% beside

Mar PV ppt yoy jump of sales proportion to proportion sales of jump yoy ppt

with displacement with with PV of displacement below 1.6L will be be will 1.6L below displacement of PV with Japanese 2013 Looking Looking

d less benefit less 6.6% S s

Apr 15.8%

months.

down ales s s with s

11.4%

have have on 2014 May crossover 2015 German G in . engine 1

18.0% s S rowth o ifrn vhce ye, sales types, vehicle different to st Jun 13.8%

ales to slow down slow to ales Sales of PV of Sales

f end of had c. 06 spur 2016 Oct. 2015 26.5% Nationalities Nationalities of will be will Jul American . .

displacement eaie sales negative in China . In In . below 1.6L. below 26.6% 15.2% 2016 Aug - 2016

user n mid In received received particular 29.5% Sep s s Korean s

with even without the evenwithout . 21.0%

om 1 Jan. 2018, Jan. 1 om Oct - 7.2% h auto The e. 06 the 2016, Dec. red hile SUV hile

s displacement 17.9%

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in 2017 in

French above 2.0L above

Page Page ead of demand 2H17, growth - 55.5 9.4% 14.7% Dec mobile 4 ly, s s

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Company Report Guangzhou Auto Group 广州汽车 (02238 HK) 16 February 2017 Se Source: Figure yoy in 2015) 36.6% railway demand (5 reducing 1) national to due of mainly implementation nationwide the 3) and standard investment infrastructure spur to government act enforcement new the capacity, and truck decreases which 1)including the introductionof asset fixed healthy from support and market one t C Source: Figure Source: SUV MPV Sedan Types Table d ruck ruck sales (including incomplete vehicles and chassis) 10,000,000 10,000,000 12,000,000 14,000,000 16,000,000 18,000,000 1,000,000 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000

Commercial Vehicles Commercial 2,000,000 2,000,000 4,000,000 6,000,000 8,000,000 hina hina e (Units)

th of the of

e -

CAAM CAAM 1 CAAM - - c las - 11 9 traffic, especially traffic, : ommercial 0 s : Growth Growth t

Sales GrowthDifferentof Type Sales 14.1% pag hand, other the On 2017. Jan. in

top performer top China CVSalesand Growth Sales China , , Guotai Junan International GuotaiJunan , , - Guotai Junan International GuotaiJunan Guotai Junan International GuotaiJunan DISP 0.8% e 2006 22.2% fo DISP <1L 81.0% 54.9% r ≤

4.8%

2007 of 1.6L disclaimer 5.2% , 21.7%

v Different Vehicle Types by Displacement and 2) generally in weak(approximately exportdemand 2016 10% of sales are

2008 ehicle 26.4% 1L 1.6L DISP >

2009 with

29.8% CV sales CV in 2016. Sales momentum momentum Sales 2016. in 2014

7.8%

(

2010 “ 24.5% 24. - 2016 -

the 1.6L

6.0% 0.5% CV new national newstandards national on l 2011 4% . . . - - ”

improved improved 24.2% 5.6%

) recovered in 2016. in recovered ) Growth

2012 in 2.0L

od asne tafc dw 48 n c.21)a there as 2016) Oct. in 4.8% (down traffic passenger road Difference

2013 - 5.6%

6.8% G yoy (ppts) 30.51 30.51 56.49 rowth s coverage of high of coverage 2.5L

2014 demand for bus for demand - of PV of 8.8% investment

26.5%

2015 5.6%

3.0L

2016 DISP has has 119.7% 10% 20% 30% 40% 0% - - showing showing 0% - - - 10% 20% 30% 17.4% 20% 10% - 30% 20% 10% ≤ 2.5% s S 1.6L recovered sincerecovered . ales ales imits of dimensions and masses for

n 2H16, a number of factors of number a 2H16, n

- es speed railway speed in

DISP > 1.6L DISP >

Source: Figure aimed at aimed 8.8 remain 100% creased 2015 Source: Source: Figure 10% 20% 30% 40% 50% 60% 70% 80% 90% - - 20% 40% 40% 20% 0% % 0% - - 16.7% 13.5% 22.4%

yoy

CAAM 75.8% 24.2% - s 2015 CAAM 10 -

12 Sedan sluggish

Dec-12 5.6 tackl growth : the the

: s 81.0% 19.0% Sales Proportion , 2016

Mar-13 Guotai Junan International GuotaiJunan China BusChina andTruck Sales % ,

(high Guotai Junan International GuotaiJunan first hal first Difference

ing

Jun-13 yoy

G . In particular, heavy duty truck ,

(ppts) 10.99 10.99 97.29 34.07

rowth truck overload truck -

Sep-13 a recording speed railway passenger traffic increased traffic passenger railway speed in 201 in 16.4% 83.3% 2015 Dec-13 f

Below Below 1.6L of 2016 of

MPV

Mar-14 Bus have 88.0% 12.0% 2016 6 DISP .

Jun-14 The increase increase The

73.7% 24.2% 10.7% road vehicles of Different TypeDifferent of ≤ de

Sep-14 rebound a with been 1.6L , .

crease of of crease

Dec-14 2) the push of PPP by the by PPP of push the 2) Above 1.6L Above .

45.3% 54.7% 2015

was from

Mar-15 positive SUV DISP > 1.6L DISP > 55.5% 44.5% 2016

Jun-15 2016 nraig usage increasing th export Truck

is mainly driven by driven mainly is - -

17.0% Sep-15 19.3% 11.7% edition

9.9

(

GB 1589 Dec-15 growth, HDT to in the in % s s

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Mar-16 2015 Crossover 0.7%

“ yoy Page Page of PV of

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Jun-16 property . Difference

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Sep-16 G ) was of of (ppts) 35.92 35.92 27.67 54.38 rowth rowth

27 Dec-16 of

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Company Report Guangzhou Auto Group 广州汽车 (02238 HK) 16 February 2017 Se wewhich as the define speed underperformed unstable 3 of CAGR GAC of development The 2016. October 31 at as structure Shareholder Note: Source: Fi the stock basis andShanghaiplus subsequentlyStock listed in Exchange Mar.in 2012. GAC was Kong Stock Exchange through a reverse takeover in 2010. Guangzhou Automobile Industry Group and a joint State the by controlled ultimately Automob Guangzhou Company d

Development History History Development Shareholder gure e th subsequently replaced by GAC on on GAC by replaced subsequently Changfeng Changfeng e 2. 1. - the Company the up - las 13

when t in : 2008 1999 pag earthquake adverse strong much Accordingly,GAC suffer sales an Changfeng models generation new 4 and in competition The to 1999 in 7.1% in 2007. much faster than the 2004 and GAC Structure Shareholder 5

launch

. Analysis 5 e Honda Accord, Honda Fit, Honda Odyssey and Toyota Camry. % fo - - comparing

2012, the 200 r International Guotai Junan , S of GAC increased increased GAC of uig 2008 during (a listed company in the Shanghai Stock Exchange) in 2012 by acquiring the remaining interest using a cash

uig 1999 during disclaimer tructure

ing

events in events 7 , respectivel , ,

new models in 2011 the ile Group( ile er 1) 1) A-share public holdersA-share

Gonow d

competit Golden Age,

Miserable Golden A Golden o the to -

the the industry average of 17.8%, leading t

during 1999 1999 during

Three Major Three Major

- relat

the the 2012 - and 201 y

. Chinese PV Chinese

nuty average industry ion “ ion Both Honda and Toyotaand Honda Both models popular most their launched . Therefore, t ed 5 Sino . 8.25% d GAC , -

t CG o 9. of CAGR a at

rn 200 uring In Administration and Supervision Assets owned

uh atr than faster much Year from to Japanese automakers include automakers Japanese to from German from .

2) 2) - 2013 . the Japan ”

the the during 2008 during to 201 to or s fter a . D 30

- drop PV sales in China gradually fromchanged “ 2014 evelopment Stagesevelopment Miserable

ese the Company the 9 market was gett was market the Aug. he development of - 201 5 in

, br tension in 2012 can be divided into three stages three into divided be can . Guangzhou Automobile Guangzhou ned Guangzhou Stated-ow Group ("GAC" 02238Group HK/

vehicle sales sales vehicle brands 0 Industry Group ("GAIG") Supervision and Assets m 2010 via a stock swap. Twoswap. y stock a via 2010 eak o sales Vehicle Guangzhou Automobile P sales PV , 9 - arket fromshare in 7.1% 2007 to 4.6% in 2012. wasThis mainly due to - sto 2012 %

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after the launch launch the after , as well as well as , industry average of 18.5%. 18.5%. of average industry s ”

) and ing was established1997 in was 60.66% 100% of GAC still still GAC of

. more in more f GAC of GAC can be divided into 3 3) 3)

o o a increase significant in GAC’s market share f

7 the Back , GAC - GAC 2012

Toyota safety issues Toyotasafety GAC acquir tens recovered due to to due recovered outperformed the industry the outperformed

mc soe ta idsr aeae f 1 of average industry than slower much , of of set up new JV new up set PV sales of GAC increased at a CAGR of 31.1%, became listedbecame itsunder own name on the Hong nepromd h idsr average. industry the underperformed e - models ing to . Even though GAC l GAC though Even - the H-share public holders

ears later, the Company took full control of of control full took later,Company the ears several - Game . privatized tailored

a V Comission of Guangzhou Guangzhou of Comission

. ehicle sales of GAC increased increased GAC of sales ehicle sell However,

Post models through through models s

Years 31.09%

- stages in terms of market share,

with Honda and Toyotaand Honda with side side market to buy a in 2009 in

for - for reorganization in 2005, it 2005,in reorganization o cmaal base comparable low

Denway

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during 1999 during l a b

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12 new models new 12 acquisition acquisition

- side side market.

Limited and Page Page from 1.1% - 07 but 2007 through

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Company Report Guangzhou Auto Group 广州汽车 (02238 HK) 16 February 2017 Se Source: Figure finance insurance, investment, leasing bus use internal few a name to justHVAC systems, and seats car gearboxes, engines, as such parts Toyota,Fiat Honda, major parts automotive in engages principally GAC d

Business Composition Business e

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A0 A B C SUV MPV a established in in established 5.9

- - demand - class Sedan class Sedan class class Sedan class new version new -

Page Page class Sedan class Camry and Camry

o FAW of %

the , focusing ,

and FAW and while the while as such as such s

12 widely , GAC GAC GAC GAC

. of of We We the Fit 27 r

Company Report Guangzhou Auto Group 广州汽车 (02238 HK) 16 February 2017 Se Source: GuangzhouNansha GuangzhouNansha Place Table to used produce smallerwill be car most most and latest the is which Architecture), Global (ToyotaTNGANew platform, modular years until the deployment of the 3 2015, total constrain Capacity Source: Figure Source: Total Camry Levin Highlander Levin Verso/EZ L Yaris Camry Table market. plug of introduction the announced recently have version hybrid future, the In cars. electric array Align sales. Levin is new hasHybrid been plug hybrid and electric pure GAC Toyota the of test to water energyvehicles new introduced d

(Units) th

10,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 HEV production

5,000 5,000 e of HEV

- - existed in other countries since 2005 since countries other in existed performing quite well, especially well, quite performing

respectively, the Company the 7 t 8 CAAM, las - he Company he

27 : : Toyota

0 Summary Summary t

: pag

B A SUV A MPV A B types Vehicle sold GAC ed Jan

- - - - -

Guotai Junan International. GuotaiJunan Class Sedan Class Sedan Class Sedan Class Sedan Class Sedan and e

’

fo with s s model. Feb

an an average of 380,000 units annually. GAC Toyota has already produced 379,000 units and and units 379,000 produced already Toyota annually.has GAC units 380,000 of r

, Guotai Junan International Guotai Junan , International Guotai Junan ,

Toyota is is disclaimer - -

Mar

and and an competitive 2ndPhase 1st Phase a GAC Toyota GAC Toyota t

conservative approach, the Japanese joint venture mi venture joint Japanese the approach, conservative should limit gro limit should Apr

2015 2015 yoy 2015

Monthly Sales 259,800 259,800 139,800 239,800 107,800 149,800 184,800 h May

69,8 estimated e e new line production will only be completed

monthly monthly sales amount

Low

Jun 00 00 in Price ly

vehicles

priced Jul

Capacity Models2016 in

rd s

159,800 159,800 422,800 159,800 189,800 104,800 329,800 329,800 329,800 phase phase of Aug

such such as 42 . . High

wth for GAC Toyota.GAC for wth , along with the edge on hybrid technology, the 5 Sep

,000 can receive can

2016 yoy 2016

Oct

Levin Hybrid. Levin in 2016 in ,

the hybrid in and

the is expected Nov 374,108 374,108 150,311

s 84,490 84,490 49,112 16,896 73,298

Yaris and Levin. Nansha Nansha plant.

2014 given given Dec of of of Sales volume (Units) volume Sales

0 0 the

s su

10% 20% 30% 40% 0% - -

100 20% 10% for Capacity

the popularity of SUV of popularity the

bsid

120,000 260,000 380,000

Highlander might be in the pipeline, given pipeline, the in be might Highlander

Introduced in 1H15 and and 1H15 in Introduced for

403,049 403,049 122,533 121,291 the units and ha 75,166 75,166 64,724 ies 9,414 9,414 6,755 3,166

2015 2016 P

Corolla and Levin, which we could expect could we which Levin, and Corolla ) To elaborate, the 3 roduction facili roduction Source: Figure

from the from

figures

the the 421,800 421,800 133,139

CAAM, CAAM, 25,932 25,932 92,000 63,443 94,957 - at the Commencementdate 28 s s contributed 6% of 5,654 6,675 2016 China China market. . Maximum capacity government : GAC Toyota 21.8% ght not have not ght

Guotai Junan International. GuotaiJunan

end end of 2017 and start production in 2018, which s ties are located in Guangzhou Nansha Guangzhou in located are ties

in 2839% - - 2014 rd 23% 11% 15% the n..a. n..a. n..a. commencing sale commencing - China. Furthermore, China. 1%

production production line will employ Toyota 9.1% 31.6%

Levin hybrid should continue to support , the hybrid vehicles from Toyotafrom vehicles hybrid the , 2009 2006 Growth

Despite receiving noDespite receiving

Product Mix Product an effici 149% - - - - 2015 11% 44% 12% 19% n..a. n..a. 2016

6% Camry,Yaris, Highlander, LevinEZ, aggressive plan to introduce an introduce to plan aggressive

should should continue in the next few

ent

22.5%

vehicle sales.

403,000 units in 2014 and 2014 in units 403,000 platform that will underpin will that platform 15.0%

719

- - - 9.0 2016 that in Nov. 2015, the Levin Levin the 2015, Nov. in 16 22 29 2 -

2 2 7 in in 2016 % % % % % % % % Toyotaheadquarter

the hybrid version hybrid the to 100% 2014 23% 13% 20% 40%

0% 0% 5% hit the Chinese the hit subsidies subsidies

Weighting

The localized Page Page Others Highlander Levin Yaris L Camry 100% 2015 19% 30% 16% 30% 2% 1% 2% Model(s) ’ , s s latest

13 with a with

have have (only of of 2016 22% 32% 15% 23% 1% 6% 2% 0% 27 s s

Company Report Guangzhou Auto Group 广州汽车 (02238 HK) 16 February 2017 Se Source: Figure t continue industry with compete thewhichhard current automakers, to it makes other to the toMitsubishi due GAC growth of significant see not do month. per We thousand a than less operat has It China. in position SUV its consolidate focus Full segment and the timing aging of are give which highest models. been has beenexperiencing JV since growth The negative 2015. Source: Total Outlander Sport Pajero ASX Pajero Table remained ASX and Pajero extension has Mitsubishi GAC GAC, in JVyoungest The d

e GAC Mitsubishi

(Units) th 10,000 10,000 12,000 absorb

2,000 2,000 4,000 6,000 8,000 e

- able to su to able

ing the Company the 9 CAAM, CAAM, las -

: monthly sales of sales monthly Despite negative Despite . 0 Summary t

o for support the 2017sales JV through Monthly sales increased weak. under : to to the current 100,000 capacity in 2014. pag s

SUV SUV SUV SUV Vehic GAC ed

Jan on hope for the brand.expect the forWe hope Guotai Junan Intern GuotaiJunan e

fo h mnfcuig aiiis f A Cageg n Wunan in Changfeng GAC of facilities manufacturing the Feb le types le stain SUV. r The South East (Fujian) Motor (Fujian) East South , Guotai Junan International Guotai Junan ,

Mitsubishi have been have disclaimer Mar GAC Mitsubishi ASXMitsubishi was GAC growth

GAC Mitsubishi intends to to intends Mitsubishi GAC Apr 2015 2015 yoy 2015

May

growth 159,700 159,700 128,800 298,000 208,800 ,

892 the ational.

in 2015 and 2016. and 2015 in Monthly Sales the two main products main two the Jun Low

Price O units in units

u Jul

in 2016, the trend has been improving since the launch of launch the since improving been has trend the 2016, in

29.9 lander lander

308,800 308,800 223,800 223,800 218,800 398,600 Aug

Models inModels 2016 . High

% Sep Dec

has yoy

2016 yoy 2016 . Moreover,. Oct

thatthe

. 2016. .

was in come in a timely in a come manner

’ Nov s no

This is mainly due to the lack of investment in upgrading upgrading in investment of lack the to due mainly is This Dec key key

retain Dec but but As in neto t dvlp sedan develop to intention established in 2012. inestablished Sales volume (Units) volume Sales 55,420 55,420 Outlander should help rejuvenate the brand as rejuvenate the brand help should Outlander The localization of localization The . 2016.. 3,199 3,199 5,454 2,325 product since 2014

may may Mitsubishi 20% 40% 60% 80% - 0% - - - - 100% 120%

100% 80% 60% 40% 20% 2016 0 t focus its

flatten flatten 2018.out in inception. Despite launching Despite inception.

, GAC Mitsubishi and

56,317 56,317 50,781 5,236 5,236 2015 The Source: Figure 300 300

’ has s on 0 sedan (Lancer EX) (Lancer sedan

ASX has only g ASX only has

been the been the main contributor SUV

CAAM, CAAM, , 55,888 55,888 16,655 35,146 - the

30 4,087 4,087 which 2016 It is the third Japanese third the is It

: s Outlander was the first new product in two years, two in product new first the was Outlander with 0

GAC Mitsubishi Product Mix

n h future the in Guotai Junan International. GuotaiJunan 7.3%

29.8%

will could still ride on the wave ridecould the still of on

landscape i wih t which in ,

- 2014 47% 63% 54% 36% fully concentrate n.a.

origin iven

has not been not has Growth

the an . l aaiy f 000 nt and units 50,000 of capacity al

n weigh and We We that think h

instant sparkbut in 2014, - - Mitsubishi e 2015

11% 87% the Pajero - - n.a. 4% 8%

Outlander in Outlander lack JV 62.9%

sales.

on the

- for Sport in late 2013, sales sales 2013, late in Sport

100% - - 2016 of investment of very 22 31 - offering SUVs in n.a. 1

ASX and Pajero Sport ASXand % % % GAC the ’ s sedan is is sedan s on

and

popular in in 2016 100% 2014 Outlander should Outlander 88% the the . the the

0% 9% 4% 2016 GAC Mitsubishi GAC launching Weighting

growing SUV Outlander Sport Pajero ASX Ou Page Page , 100%

, recording , 2015 90% with compared tlander to to tlander 0% 9% 1% , in currently has

which which

sales

100% of of new 2016 30 6 not 3 7 0% an 27 % % %

Company Report Guangzhou Auto Group 广州汽车 (02238 HK) 16 February 2017 Se 4 to management withline in roughly to another be will competitive T total of 328,000 units. The localized Renegade will be manufactured and assemble has plant Guangzhou The Renegade. been never has Expansion Source: Figure FCA recognition brand the Given makes it price, lower a With allow localize to Changsha plant. its in production local for their FCAGAC Source: Total Renegade Cherokee Ottimo Viaggio Table in 2015. million rate, utilization low the with Along recognition, brand and channel distribution weak portfolio, product Even another A growing A an i An finally terminated in 2008. Two years later, GAC and Fiat Chrysler established partnered Chrysler Fiat d

e ep eeae a a ety rc o RB 134,800 RMB of price entry an has Renegade Jeep he GAC Fiat

(Units) e sales in 2016, with monthly sales of an average 10,000 10,000 12,000 14,000 16,000 18,000

, 2,000 2,000 4,000 6,000 8,000 th nitial production line line production nitial 2

- localized J sales sales e 0 class sedan called Viaggio. Back in 2010, the auto market market auto the 2010, in Back Viaggio. called sedan class -

the Company the 10 the Company the las Further, 0. we confident are - 0

segments : SUV SUV A A types Vehicle t

: Jan Summary with - - pag excelled their excelled and Class Sedan Class , directly competing with most most with competing directly , GAC FCA Monthly

Chrysler e Feb ’

s fo

Nanjing strong p strong 7 - eep Cherokee S s class class sedan, r 3 , Guotai Junan International Guotai Junan , International Guotai Junan , edan

eod tep in attempt second

Mar disclaimer % the . H

Apr o m to lower the the lower to m GAC FCA 2015 2015 yoy 2015

wever, sales sales

Auto. roduct

May

was

harvest in 2016 in harvest

134,800 134,800 209,800 108,800 108,800

Jun

for Jeep and the still red hot SUV market, SUV hot red still the and Jeep for

have been

the set up in Changsha with an annual capacityannual an with Changsha in up set However, due to However, due the

quicker the low in O and add and Price

Jul Sales Models in 2016 in Models

Ottimo expectation of around 40,000 to 50,000 sales annually,50,000to expectation40,000 around of 3,300 sales of to monthly translating Viaggio

Jeep more competitive against other self other against competitive more Jeep

c Aug GAC FCA was loss making for the first few years, in which it it which in years, few first the for making loss was FCA GAC about

t. 2015 202,800 202,800 315,800 148,800 148,800 selling selling

Sep . . the in 2016. in a

high a ,

attributable to

capacity of 164,000 units annually, therefore boosting GCAannually,boostingunits FCA 164,000 therefore of capacity was added in 2014 2016 yoy 2016 considerable portion of sales to GAC FCA. GAC to sales of portionconsiderable couldn this this due tomodel its compact and the offersize of displacementengine smaller Oct

The domestic .

, hns market. Chinese

The with sales up sales with price price

Nov

the lack of investmen of lack the investment has paid off and should start to generate profit in 2016. Being able Being 2016. in profit generate to start should offpaidand has investment In the first half of 2016, of half first the In ’ Jeep Jeep C

68,090 68,090 20,439 47,651 Dec t

as 2014 live of of Sal

top models. We think that given the price and price the given that think We models. top 3,700 3,700 units (excluding the first month). We believe the sales 0 0 compared to the imported version imported the to compared - - - - 0% 100% 200% 300% 400% 500% 600% 700% 800% es volume (Units) volume es

up up to expectation, with only 48,

200% 100% the

herokee

Cherokee 27

39,488 39,488 10,082 21,399 .

8,007 8,007

C 2015 0 n extends and n a In . ombined 8 0 was first imported in Source: Source: Figure %2016. in

ery s 1999 as early s was

sales t in new models, the business was loss making and was and making loss was business the models, new in t

in 2016 146,139 146,139 106,827 the Company the 26,264 26,264 - the launch of Jeep Cherokee has turned around around turned has Cherokee Jeep of launch the

32 sales sales 5,213 7,835 2016 fast GAC FCA started roll startedFCA GAC

of 164,000 units.164,000 of were :

GAC FCA Mix Product p o M 2000 Te rc rne s highly is range price The 200,000. RMB to up - GAC .

owned brands and locally built foreign built locally and brands owned growing

were a

17.9%

joint joint venture in a 50:50 shareholder structure. weak

, Guotai Junan International Guotai Junan , FCAexpongrew 2014 41% d - Fa Crse (omry nw a Fiat as known (Formerly Chrysler Fiat , n.a. n.a. n.a. only 68,000 in 2014. Due to 1%

to in in the new production line in Guangzhou. 000 units sold in its first full year in 2013. In

and

in t in China

, at least least at , 2016, Growth 5.4% he first few years of establishment of years few first he 72.9% the the

- - - The first locally produced car was car was produced locally first The 2015 42% 51% 55% 3.6% n.a. n.a. in 2014

the

ing sedan sedan

saving

Renegade had out its compac its out entially since the launch of launch the since entially the 1234%

in2016 271 - - 2016 and 4 6 wa n.a. made 8 3 .

Jeep % % % 25% s one of the fastest fastest the of one s

’ was s

100% total capacity to a to capacitytotal

2014

30% 70% ’ s brand name, it name, brand s

a loss a contributed 0% 0% in

made made available Weighting an

import tariffs import Renegade Cherokee Ottimo Viaggio numbers t SUV, Jeep t Page Page 100% incomplete 2015

20% 26% 54%

RMB 513 513 RMB 0% rivalries

GAC GAC s 1 100% of of 2016

1 7 . are 8

8 3 4% 5 27 % % % % ) . . .

Company Report Guangzhou Auto Group 广州汽车 (02238 HK) 16 February 2017 Se GAMC other models, at and competitive due months recent in down slowed but 2016, in months most of 88.2% 1 eight, GS4 Trumpchi units.10,000 Financially, GAMC improved invest and developed from the Alfa Romeo 166 platform in 2008 and launched in 2010. slowlyand brand owned e was GAMC Source: SAIC VW Mazda Chang'an Toyota FAW DFG Nissan DFG Hon Greatwall FCAGAC Company Table Source: Guangzhou H Place Table Renegade, in sales was as it one of the popular most imported Jeep SUV CR those mid price selling reduced beingand imported be to used with of options 1.4T DCT 2.0L or AT and Renegade mid to compact of launch The d 57 unan Self e

- - 0 yy GAMC yoy. .0% th V,VolkswagenToyota Tiguanand RAV4. Non growth momentum growth unitsonly17,000 its 2011 sold in year in first and level income

e Changsha - - ed - adding segments 12 Company the 11 the Company the las Brand owned da

the

: :

in a brand new SUV model SUV new brand a in t

total

significantly Summary Comparison pag optimizing optimizing

the prior year prior price range and benefit and range price e the

s. tbihdi 21 a awol ondcmay f A, t srtg cnb reference be can strategy its GAC, of company owned wholly a as 2010 in stablished sales. Full year effect has boost has effect year Full sales. Tiguan CX5 RAV4 X CR Haval H7 Compass Model fo Compass will be Cherokee in terms of size and price. and size of terms in Cherokee -

turned around GAMC performance since launch in in launch since performance GAMC around turned rail the r - , International Guotai Junan , 150,000. RMB below The i The

GS8 and GA8 in 2016.GA8in GS8and size SUVs size disclaimer CAAM, V segment

’ p s ep ops i Compass Jeep GAC FACGAC . This is the third localized product product localized third the is This . I 2014 In . ), and ),

nitial strategy was to to was strategy nitial it

s productoffering s other to

– ’ has been has G s saleswouldbe s signif erformance of Major SUVModels

uotai Junan International Junan uotai Trumpchi

( price range price

has expectationshas . The Jeep Compass Jeep The GM luce both launched GAMC , able Capacity produced in the Guangzhou and factory should maxthe capacity the out production in line. has been has maintain , s

to be to , the , in which 4WDa system is also an option

from the from

. 41 hs opee its completed has 4Q16 n The new Jeep Compass will be competing against strong models such as such models strong against competing be will Compass Jeep new The

199,800 199,800 169,800 179,800 181,800 179,800 149,800 170,000 of RMB 150,000 to RMB 200,000) 200,000) RMB to 150,000 RMB of

vulnerable GS5 icantly icantly

in 2016 in locally produce locally ed loss loss even making Low 2016, sales increased sales2016, brand itself brand Pr .

in 2016, largely due to the stimulus the to largelydue 2016, in of selling 100,000 units 100,000 selling of ice

continuing which which

weigh

sub

e sales up in 2016. GAMC has been able to maintain above 100% growth in in growth 100% above maintain to able been has GAMC 2016. in up sales made its debut in the 2016 Guangzhou Auto Guangzhou 2016 the in its debut made

theless, m theless,

as other products decreased significant - s Retail declined debut segments

d in ed based on historical figure in the Capa d 328,000 328,000 164,000 164,000 from popularity of SUV. of popularity as , the , 315,800 315,800 245,800 269 267,800 249,800 193,800 240,000 ed AS n G5,ad boost and GS5S, and GA5S

prices after on ci a mid a anagement anagement

High ,800 ,800 ty in 2012. Benefit 2012. in thereafter. Jeep C . to

the

It hina made vers made hina

the improvementdue t 98 s

a - s

first model, model, first tart from RMB 170,000 170,000 RMB from tart

to product GS4 in 2015 and 2016, in which which in 2016, and 2015 in GS4 . high base comparison. base high in just a year a just in 3 (monthly sales of 8,300) 8,300) of sales(monthly

% yoy,% drivenby mainly high

1H15 is aspiring to aspiring is Due to the weak sedan performance,GAMCDue the weak sedan to swiftly Commencement date Commencement - as

Launch date Launch end However, sales of

Growth Aug. 2013 Aug. 2009 Aug. 2016 Nov. . for the Mar. Mar. 2010 Feb. 2014 Feb. 2012 Apr. 2016 Apr. portfolio

ing it is it GAMC

Trumpchi GA5

ion will be much more competitive much be will ion automaker

of purchase taxHowever, purchase ofcut. when

(contributing roughly 50% of from the fast growing SUV seg SUV growing fast the from , and , currently st currently premium has continued has

has extended its product its extended has replicat sann is rdc rne from range product its spanning , 2016 2012 o o low utilization management choose management ed

ly and heavily reliedly and on

by purchasing by and extend and

monthly The

end ill not ill e , is a a is ,

the the in the first year.first the in

Latest Latest facelift the Show

the success of success the Aug. 2016 Aug. Mar. Mar. 2016 Jun. 2015 Jun. Apr. 2013 Apr. 2015 Apr. . Similar to GS4 is offered in the most the in offered is GS4 GA GS4, which has increased has which GS4,

B competitive surging since Apr. 2015,Apr. since surging , and it and , - ae to sales 5 class sedan n.a. n.a. the were Viaggio, Ottimo, Cherokee Ottimo, Viaggio, rate up to RMB 2 RMB to up

Model(s) manufacture Model(s)

a GS4 06 a 2016 . Renegade, Compass Renegade, sits not not as expected the foreign d

s an Jeep Jeep A the

oohr self other to s

compared to compared to target to between between

ong witong C represented ment, sales ment, to a total of total a to

Page Page v

average of of average h the which era

Ch through the erokee, it

imported

platform g 4 looking e erokee 16 Honda

0,000, 0,000,

GS4. 15,000 15,000 15,000 sales sales h

5,400 5,400 4,200 9,700 of of was was

the the the the n.a. n.a. 27 a

Company Report Guangzhou Auto Group 广州汽车 (02238 HK) 16 February 2017 Se nextintroduced year. by contributed mainly units 500,000 reach to sales expect management units.T 350,000 operation shift has Production overtime. capacityconstrain relieve to up ramp Capacity may wil designer and executives top recruited WEY (set up by GWM). to comparedwhen appealing less be to appeared GAMC2) and high in segment t this battle an in uphill car will face expectation, viewthe a our but weabove that in are Nov. which 2016),25 of (as orders 20,000 roughly accumulated setting self BAIC of D70 and D50 and Auto Brilliance of brand Huasong brand local forward and mid the entered GAMC Source: Figure Source: GA5 1.0L GA8 GS8 GS4 GA6 GS5S GA3S GS5 GA3 GA5 Table d

(Units) e l l launch SUV 10,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000

5,000 5,000 th s - it it was

not replicate not the sales of end e - r vn he egt or shift hour eight three even or the Company the 13 the Company the las - 0 its retail price to a range of RMB 170,000 to RMB 200,000. According to manag to According 200,000. RMB to 170,000 RMB of range a to price retail its

33 for GAMC due to GAMC to for due

: NE B SUV SUV B SUV A SUV A A types Vehicle t market

: in Sep. 2016, adding 2016, Sep. in Jan Summary - - - - - pag ready for

sedan class sedan class Class Sedan Class Sedan Class Sedan s GA V

e rig o ne into enter to trying Feb MC fo s h r

, Guotai Junan International Guotai Junan , International Guotai Junan , is dominated by JV OEM

Mar as as their first model with price is relieveis should capacity 2016 its Stepping tension. 20 into disclaimer

Monthly

sale by

Apr GAMC 2015 2015 yoy 2015

Lync & Co. is supported by Volvo and May

the use of of use the

to exce

Jun the 199,300 169,800 163,800 102,800 123,800 150,800 105,800 105,800

Sales Models in2016 Models 99,800 99,800 75,800 75,800 69,800 69,800 high the

Low eded Jul end of Oct. 2016. Price an GS4 though the -

Aug end segment once again. once segment end

additional 150,000 units 150,000 additional

the same brand name name brand platform. theand same Historyshown it has that s

its capacity.its

s mid Sep . . hog recruiting through

219,300 219,300 299,800 259,800 161,800 196,800 229,800 156,800 119,800 119,800 119,800 149,800 from BMW and Audi to independently manage its manage independently to Audi and BMW from 2016 yoy 2016 , Oct - High

which which is to to

Nov

s high it it

just between RMB 150,000 to RMB 200,000. Therefore, we think that

could could supportGAMC. sales of Dec We We a 116,313 116,313 Workers work in two eight hour shift hour eight two in work Workers t 12,147 12,147 24,797 24,797 70,299 - . difficult end 5,001 5,001 4,069

2014 Due Due Sales volume (Units) volume Sales 50% 0% - 100% 150% 200% 50% re skeptical about the launch of large SUV

- - - - -

segmen

Fortun .

to the popularity of of popularity the to

to compete

188,008 188,008 127,312 20,120 20,120 21,486 to to was 9,663 9,663 6,571 1,431 2015

In Aug. 2016, GAMC launched the brand new Trumpchi new brand the launched GAMC 2016, Aug. In 990 990 435 Figure Source: Source: annual , uh as such t, was tl, h 2 the ately, new high new - - -

built built based on Volvo owned brand. owned

rather surprising. The orders amount orders The surprising. rather 370,767 370,767 327,

the Company the against, 12,746 12,746 - 34 3,378 3,378 2,809 9,006 6,600 8,274 capacit 2016 006 006 925 925 the the : 23 - end brand Lync & Co. (set up by Ge by up (set Co. Lync& brand end G - ra Wl Motor Wall Great

nd 17, 17, capacitystill should the the

AMC GS8 and and GS8

y rdcin ie n Guangzhou in line production especially localized

, Guotai Junan International Guotai Junan , GS4, orders can only can orders GS4, However, GAMC did something different by different something did However,GAMC which extended total capacity of GAMC to GAMC of capacity total extended which -

2014 38% 48%

n.a. n.a. n.a. n.a. n.a. n.a. n.a. Product Mix Product 8% 4%

’ 88.2% s s latest CMA platform, s Growth , but have but , ement, the newly launched GS8 has has GS8 launched newly the ement, another new model new another WEY brand. Most important Most brand. WEY 302% - - - - 2015 61% 13% 91% 96% 65% n.a. n.a. n.a. n.a. n.a. ’ s

( s, it may in 2016 in “ GWM

he future as 1) the the mid as 1) future he JV JV extend - 100% 242% 157% be - - - - 2016 98% 67% 61% 86% 98% n.a. n.a. n.a. models .

be ” in )

is extremely risky for

create create another lea

ed aa H ad H9, and H8 Haval a fulfilled ed 100% 2014 , 21% 60% 10% tight conditiontight

0% 0% 0% 0% 0% 4% 3% while GWM has to two ten hour hour ten two to the was with was Weighting

ely Auto) ely GM8 Page Page 100% by working by 2015

68% 11% 11% somewhat lower ASP 1% 0% 0% 5% 3% 0% 1% ready Others GS4 GA6 GS5S GA3S

the ly

, 17

, both ,

to be to

GS8 GS8 100% of of 2016 and 88 - for 1% 1% 2 3% 2% 2% 0% 0% 0%

as 27 to to % % p

Company Report Guangzhou Auto Group 广州汽车 (02238 HK) 16 February 2017 Se Source: GA5 GS4 GA6 PHEV GS4 PHEV GS4 EV GA4 GS3 GM8 GS7 GA6 GS8 PHEV GA3S Models Table believe capacity under will still be for pressure NEVs three of out Two GS3. vehicle compactits optimize further will Moreover,GAMC and GS3. GAMC faceliftstwovehicles and energythreenew models, new brand four including Aggressive 1 by capacity. divided monthlycapacity by capacity=annual divided Monthly production = Monthly rate Utilization Note: Source: Figure Source: (2 Guangzhou Guangzhou Place Table d

e - -

CAAM, CAAM, Compa the 14 t 15 las - he Company he 35

: : t (1

: Pip Summary pag

nd st GAMC Utilization GAMCrate Utilization

Production line) Production Guotai Junan International. GuotaiJunan Production line) Production model model e eline of New eline of Models fo ny r , Guotai Junan International Guotai Junan , International Guotai Junan ,

will enter into the growing MPV bysegment launching GM8, which disclaimer plan plan GAMC

for

Capacity 2017.

will be based on its current flagship model GS4, offering either plug in or pure electric. We We electric. pure or in plug either offering GS4, model flagship current its on based be will

100% 150% 200% 250%

Having launched three new models in 2016, 2017 will have more new models launch models new more have will 2017 2016, in models new three launched Having 50% in2016 0%

. . in 2016 in

Mid Mid Vehicle types Vehicle Compact SUV Compact SUV Compact SUV Compact SUV Compact B A B A B - - - - - class sedan class sedan class sedan class sedan class sedan class - -

large SUV large SUV large Feb 13

and 2017

MPV the Jun 13 next be year and sales might

Oct 13

Feb 14 Capa 350,000 350,000 150,000 20 portfolio Jun 14 0,000 Mode of Upgrade of Mode ci

Oct 14 ty

by launch by Feb 15 Facelift Facelift

New New New New New New New New New New Jun 15 Commencement date Commencement

ing Oct 15 .

AGM8, include GA4 to at look models key few

suppress

an A an Feb 16 will

- Jun 16 class sedan, GA4 and a compact SUV compact a and GA4 sedan, class be be introduced in the first half of 2017. 2016 2010

ed due ed due to capacity constrain Oct 16 Fuel / NEV Fuel /

All Trumpchi models manufactured in manufactured models Trumpchi All NEV NEV NEV NEV Fuel Fuel Fuel Fuel Fuel Fuel Fuel Fuel

Model(s) manufacture Model(s)

Page Page Launch date Launch Guangzhou Guangzhou ts 18 .

1Q16 3Q16 2Q16 2H17 2H17 1H17 of of 2017 2017 2017 2017 2017 2017 ed, 27 d

Company Report Guangzhou Auto Group 广州汽车 (02238 HK) 16 February 2017 Se Source: Figure Source: Figure ever the price 2017 in launched be to models new the down slow launchof ppts 20.5%, the 8.1 mainly due to to Sig management vehicle new GS8 of the for Demand 2018. and 2017 immaterial are Bus GAC and 100 almost level, consolidated sales overall expect We 20 d

(RMB mn) (RMB Margin andGross Revenue 10,000 10,000 20,000 30,000 40,000 50,000 60,000 e 16

nificant margin nificant GS4 Haval H6 and CS74 in in CS74 and H6 Haval th - s crowded GA5 1.0L (RMB) e -

- CAAM, CAAM, CAAM, to las - - 201 , 38 36

GS5S GA3S , and the launch of GM8 (assume full year co year full (assume GM8 of launch the and

GA3 GS4 GA6 GA5 GS5 GS8 GA8 t keep sales up, such that its that such up, sales keep to be launch

: : pag

Vehicle and related(from external customers) external related(from Vehicle and

in 2017 in GAC Revenue GAMC 8 s 2014 Guotai Junan International. GuotaiJunan International. GuotaiJunan

’

0 e launch s

Salesand Financial market fo targetof 500,000 units in 2017. r disclaimer

Trumpchi Range Price Product and 2 and ed 100,000 100,000 improvement

2015 should give on pressure its se ed , we expectwe ,

in 2017.in 018 given given 018

2016

f AC Trumpchi GAMC of

the to sales to 200,000 200,000 % 2016F . GS4 of of Since we think SUV think we Since A key

that in sales are contributed by contributed are sales stiff competition in the market the in competition stiff

. Sales growth Sales . peers was 2016 sales will not beat significant not will sales driver 2017F 300,000 300,000 . Forecasts

We think GAC think We still still , but should face pressure in 2017 and 2018. and 2017 in pressure face should but , such as GWM and Chang and GWM as such

for nextyear would in high the 2018F

400,000 400,000 o in to GS4 which has benefited from economies benefited scales. of has e GS4 which We Others lling price and pricelling margin. and thus

for GAMCTrumpchi for ntribution as should launch in Jan. 2017). Jan. in launch should as ntribution s

2016

will crease crease ’ s

margin continue to be the main driver for overall vehicle sales growth,t sales vehicle overall fordriver main the be to continue , and should maintain strong performance with a faceliftwith a performance strongshould maintain and ,

the 9 Source: Figure Source: Figure Trumpchi brand, while other Trumpchiwhile brand, 8 s

(RMB (RMB mn) be a a be . that

3 10,000 10,000 20,000 30,000 40,000 50,000 60,000 may 10.00% 11.00% 12.00% 13.00% 14.00% 15.00% 16.00% %,

this

’ CAAM, CAAM, CAAM, GAMC positive an have both reduced the MSRP of their star model star their of MSRP the reduced both have an - - 0 33.1 39 37 succumb

should slow down but continue but down slowshould early stageearlyand : : GAC Margin Profit Gross GAMC % and and % 2014 Guotai Junan International. GuotaiJunan International. GuotaiJunan 11.40% 2014 is is

performance fromGS4and

operating in operating

to the general downward trend of lowering of trend downward general the to Trumpchi 2015 8.4 ASP (LHS) Revenue GAMC's 11.71% 2015 % Gross profit margin profit Gross

overall sales - n 2016 in RMB/unit (RHS) RMB/unit 2016F In 1 In

PV and initial cost initial and Revenue and and Revenue ASP Whilst there will be a batch of batch a be will there Whilst 15.21% 2016F - subsidiar 3Q16, gross margin gross 3Q16,

- 2017F 2018

should fall short of shortfallshould d ,

14.71%

2017F ies respectively. to exhibit to 2018F

the year full effect s xpectmargin

such as Gonow as such associated with with associated

Page Page 14.51% 2018F 110,000 110,000 115,000 120,000 125,000 130,000 135,000 140,000 version growth

was 19

At of of

the he up

27 of of to s, in

Company Report Guangzhou Auto Group 广州汽车 (02238 HK) 16 February 2017 Se that and dealers as significant be not be will CDXfirst the of contribution 3 of phase expect We 2015. in comparison respectively. sales Vehicle HondaGuangqi Source: Total Others W Sofinco F GAC GAC G Honda Guangqi Composition Total Others W Sofinco F GAC GAC Toyota GAC Honda Guangqi YoY Total Others W Sofinco F GAC GAC Toyota GAC Honda Guangqi mn) (RMB Revenue Table Source: Fig (Toyota,Honda and Fiat grow will SOFINCO, units, Toyotaand rise a seeing role, significant more will a take 46 mainly Honda d

AC Toyota AC Investment Income Investment u u u e (RMB mn) (RMB 3.5 yang yang yang 100,000 150,000 200,000 250,000 300,000

ure 50,000 th

Mits Mits Mits the newAvancier model

CA CA CA e %, %, -

- - - 16 Company the the Company the las - Honda Honda Honda , Toyota, Fiat and led u u u 0 40

b b b : 94.6 t i i i

shi shi shi :

Revenue Summary for Major SummaryRevenue Major JVs for pag

rd FCA GAC by Revenue fromRevenue JVs Major will

production line) can only be added added be only can line) production % and 12. and % e 2014 Despite seeing Despite fo Others GAC Mitsibushi Guangqi Honda continue growth growth r International. Guotai Junan , , disclaimer Guotai Junan International. Guotai Junan 2015 8

of Guangqi Honda is expected to increase increase to expected is Honda Guangqi of to to be major

hylr. Chrysler). – % yoy increase of revenue from GAC FCA GAC from revenue of increase yoy % due to a revamp a to due Chrysler to deliver solid growth

Share of Profit from JV from Profit of Share

according to to according

has double Sofinco GAC Toyota single 2016F notyetproven a to be star we model, the believe contribution

- contributors, albeitcontributors, in a more

digit

140,472.4 140,472.4

53,879.0 53,879.0 59,809.0 - digit growth in 2017 and 2018 due to capacity constrain capacity to due 2018 and 2017 in growth digit 100.0% 5,090.5 5,090.5 5,724.8 1,677.1 6,814.2 7,478.0 38.4% 42.6% 39.3% 62.4% 34.9% 26.5%

h oeal eil ae, hrfr sen a seeing therefore sales, vehicle overall the growth 3.6% 4.1% 1.2% 4.9% 5.3% 6.4% 3.6% 2.8% 2.3% 2014 in 2017F Wuyang GAC FCA product portfolio product in

revenue composition

to date, we believe growth in - Honda

2018.

2018F

147,460.8 147,460.8 54,663.3 54,663.3 69,396.8

Also, despite launching despite Also, in2016 to 2018 100.0% 4,900.6 4,900.6 5,647.5 1,886.8 4,822.2 6,143.5 - - 29.2% 17.8% 37.1% 47.1% 12.5% 16.0%

- - , 3.3% 3.8% 1.3% 3.3% 4.2% 5.0% 3.7% 1.4% 1.5% 2015

which should add profit to investment income. investment to profit add should which Figure Source: (RMB mn) (RMB stabilized

1,000 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000

the , during 2016 to 2018 to 2016 during

rising to 2 to rising the Company the - 41

brand name has not name brand

10.1 :

2014 Share of Share from Profit andGrowth JV

fashion. . will slow down Dec. in 2016 due theto base high We should We see growthhigher in and2016 2017 179,558.9 179,558.9 %, 27,172.7 27,172.7 56,472.4 75,789.4 100.0% 463.5% 5,075.1 5,075.1 5,752.0 3,985.9 5,311.4 111.2% - 5.1 13.5% 15.1% 31.5% 42.2% 21.8% 2016F , 2.8% 3.2% 2.2% 3.0% 3.6% 1.9% 3.3% 9.2% Guotai Junan International. Guotai Junan 9.2 Share of profit from JV from profit of Share % in from % 2018

2015 Meanwhile,itswe expect vehicle finance the % and and %

consistent p , respectively , eimbad cr, e hn the think we Acura, brand remium

2016F

been 4.8 of this this will be of lowmodel the in yoy % ts 220,326.0 220,326.0

52,875.3 52,875.3 58,669.6 83,744.8 . We expect capacity (2 capacity expect We . only built up yet. up built rwh rn o P sales PV of trend growth 100. 5 5,802.6 6,835.1 7,076.4 24.0% 26.6% 38.0% 22.7% 71.5% 94.6% 33.2% 10.5% 2017F ,322.2 ,322.2 2017F 2.4% 2.6% 3.1% 3.2% 4.9% 0.9% 3.9% . The European brand European The . 0%

3.3% in 2015. 2015. in 3.3%

uig 201 during

yoy 2018F

We forecast a forecast We

Page Page e also also 238,148.4 238,148.4

6 10,455.2 10,455.2 59,663.0 62,493.4 86,947.3 0% 5% 10% 15% 20% 25% 30% 35% 40% 20 Honda - 100.0% 5,581.3 5,581.3 5,459.7 7,548.5 201 25.1% 26.2% 36.5% 53.0% 12.8% 2018F think

- of of 2.3% 2.3% 4.4% 3.2% 8.1% 4.9% 5.9% 6.7% 6.5% 3.8% 27 8 nd

, ,

Company Report Guangzhou Auto Group 广州汽车 (02238 HK) 16 February 2017 Se compare 8,000 of sales of effect year growth for GAC FCA i We GAC FCA Source: Figure mid f Toyota our GAC slowly in ASPfor decline that will that think We 2018). constrain capacity Toyota and we think vehicles. small are which of all Yaris L, of version sedan a Yaris and L Show Nov. in models number a of 2016, on focus a Toyota has GAC Vehicle sales GAC Toyota Source: Figure adding of morethe expensive as such models Acura CDX , Avancier and HEV.Accord viewof general our (Crider,modelsaging from Crosstour).sales Odysseyand fewfirst years. Overall, d

Accord Hybrid Accord Camry Hybrid Camry e Levin Hybrid Levin

- th except Acura Acura CDX Highlander

to small car Crosstour (RMB) Verso/EZ (RMB) e Avancier Odyssey

CAAM, CAAM, the Company the las - - Accord Everus Yaris Yaris L Camry 44 42 Crider Vezel Levin d CITY t

FIT : : pag to to

GAC Toyota Guangqi GAC FCA' Guotai Junan International. GuotaiJunan

pre e - 0 the growth - fo 10,000 units. Due Due units. 10,000 - r s ,

2015 level

, with, disclaimer Guotai Junan International. Guotai Junan Renegade and Compass, in which we forecast strong sales contribution from from contribution sales strong forecast we which in Compass, and Renegade ts 100,000 100,000

a that

but 100,000 100,000 Honda n 2016 and 2017 due to the introduction of strong SUV models. downward selling price for price selling downward s of G of

the the the

vehicle vehicle sales to increase ’ should set off another string of growth in 2018 after a ramp up in capacity (adding 220,000 units in units 220,000 (adding capacity in up ramp a after 2018 in growth of string another off set should the launch s Product Price Range Product s

200,000 200,000 Acura CDX and Avancier should provide support ei n ai rcdlwrta vrg. Levin and Yaris priced lower thanaverage. AC Toyota s

’

. We expecta 52.0% s Range Price Product the 200,000 200,000

mid

o h srn focus strong the to 300,000 300,000 should should -

to small car segment and new energy vehicles in the future. In the Guangzhou Auto Auto Guangzhou the In future. the in vehicles energy new and segment car small to

i s 300,000 300,000 are expected to be expected be are to expected to expected keep keep Toyota grow 400,000 400,000 the the

400,000 400,000 increase 500,000 500,000 270 overall market, we expect Honda to keep its current level of ASP due to to dueASP of level current its keep to Honda expect we market, overall

increase . on 8 %, U, e e a infcn jm i AP n u frcse period forecasted our in ASP in jump significant a see we SUV, ASP in 2016

lau 96.9 ing

nch

Source: Figure Source: Figure is in in 201 7.3 % and 11. (RMB (RMB mn) (RMB (RMB mn) to remain stable during 2016 to remain2016 to stableduringto , ed, 10,000 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 48,000 48,000 50,000 52,000 54,000 56,000 58,000 60,000 62,000 64,000 66,000

%, and

7, 7, however, we think growth will be limited to CAAM, CAAM, the Company the which Turbo a include o version - - 4.9

0 43 45 Both stabilization orecasted period due to to due period orecasted

% and : :

9 Sales and Sales and ASP Sales and Sales and ASP 2014 2014 to % in to2016 2018, respectively. Guotai Junan International. GuotaiJunan the sales , Yaris and Levin are top models under GAC under models top are Levin Yarisand 7.6 Guotai Junan International. Guotai Junan 2015 2015 ,

% in 2017in and 2018. which should be able to cover up loss of A catalyst ASP (LHS) Revenue Toyota's ASP (LHS) Revenue Honda's

yoy - - RMB/unit (RHS) RMB/unit RMB/unit (RHS) RMB/unit

2016F 2016F

d of HondaGuangqi of uring 201 uring GAC To for nextyear would be the full the

the the 2018. 2017F 2017F

tendency Compass with monthly monthly with Compass f

yota 6 the the

- Though we maintainweThough 201 2018F 2018F Levin, a facelifta Levin,

8 We expect We fast , respectively in focusing in

Page Page 7 114,000 114,000 116,000 118,000 120,000 122,000 124,000 126,000 120,000 120,000 125,000 130,000 135,000 140,000 145,000 150,000 % % due to 21 of of on ed 27

Company Report Guangzhou Auto Group 广州汽车 (02238 HK) 16 February 2017 Se Source: (ppts) Margin Net Profit (ppts) Margin Profit Gross basics EPS, Shareholders associate JV from profit of Share profit Operating SG&A profit Gross Revenue Growth Margin Net Profit Margin Profit Gross basics EPS, Shareholders associate JV from profit of Share profit Operating SG&A profit Gross Revenue Financial Table Total Others FCAGAC GAC GAC Toyota Honda Guangqi GAMC Trumpchi Vehiclesales Table Source: Figure rate utilization and impactfull year both of operation in unutilized of volume only make to venture joint GAC FCA and Compass. Capacity Eyes on 2017 onwards for profit. d Source: yoy yoy yoy yoy yoy yoy yoy

th Mits Renegade

Cherokee Compass

(RMB) e - -

17 Company the the Company,the International. Guotai Junan 18 Viaggio las -

Ottimo the Company,the International. Guotai Junan u 46

: : t s i

shi

: GAC Vehicle SalesSummary Brands Major for ’ pag ’ made made

in 2016. Forward looking, we believe GAC FCA will be profit making in 2017 and 2018 given the expecta the profit profit GAC FCA

2016 0 e fo

Renegade is still low and and low still is Renegade

Financial Summary Financial r , a loss of RMB 513.5 million in 2015 2015 RMB in lossmillion a of 513.5 disclaimer Guotai Junan In Guotai Junan / asso / asso /

e eiv te unzo pat il otiue lre osad acl u te profit the out cancel and loss large a contribute will plant Guangzhou the believe We .

100,000 100,000 ’ s

Product Price Range Price Product

was

increase marginal loss in loss marginal ternational. 200,000 200,000

Product Product re 1,168,519 1,168,519

(3,723.6) 374,108 480,060 116,313 22,383.4 22,383.4 d - 66,749 66,749 68,090 63,199 11.40% 3,194.2 4,181.2 2,552.3 21.2% 16.9% 40.8% 46.9% 23.4% 10.2% 37.7% -

42.2% 20.4% 20.4% 33.8% 28.0% 18.9% 14.3% - to to 328,000 units 2014

0.496 490.9 300,000 300,000 4.0% 2014 0.18 0.18 0.81 the the the

Renegade and Compass.

2016 shuffle ops wl ol b aalbe n a. 07 makin 2017, Jan. in available be only will Compass

400,000 400,000

even though even but was

, 1,300,386 1,300,386

which we forecast narrowed (3,903.6) 393,128 393,128 580,068 187,018 29,418.2 29,418.2 - largely comp - - - 44,367 44,367 39,488 56,317 178.8% 11.71% 4,720.1 3,443.6 4,211.6 33.5% 42.0% 10.9% 20.8% 60.8% 11.3%

31.9% 31.9% 12.9% 34.9% 31.4% 14.3% 5.1% 2015 386.9 386.9 0.654 4.8% 2015 0.05 0.05 0.30

Figure Source:

(RMB (RMB mn)

we expect a expect we

10,000 10,000 20,000 30,000 40,000 50,000 60,000 it it to only a loss a only to

the Company the

- lete

0 47

: d d in

full capacity GAC FCA 2014 1,642,473 1,642,473 (6,480.7) 146,439 146,439 421,800 638,791 3 48,839.1 48,839.1 270.8%

- 308.2% 15.21% 55,888 55,888 70,767 2016 after launching 115.7% 6,265.2 5,490.3 1,579.6 7,426.3 strong contribution from contribution strong 80.2% 26.3% 10.1% 98.3% 2016F - 48.8% 48.8% 16.3% 66.0% 66.0% 12.8% 2016F 8,788 0.8% 7.3% 0.974 - , 1.49 1.49 3.50 Guotai Junan International. Guotai Junan of RMB 4.6 million in 1H16. in RMB million 1H16. of expect4.6 the We 2015

ASP (LHS) Revenue FCA's GAC

’

should be achieved in Revenue and and Revenue ASP -

RMB/unit (RHS) RMB/unit

2016F

2,012,065 2,012,065 (9,072.5) 63,579.8 63,579.8 288,399 288,399 442,637 697,642 493,447 14.71% 2017F 7,414.1 7,414.1 6,974.4 9,349.8 - 81,170 81,170

22.5% 96.9% 45.2% 33.1% 2017F 39. 18.3% 27.0% 40.0% 25.9% 30.2% 2017F the 11.9% 11.7% - 8,770 8,770 952.5 952.5 1.089 0.2% 4.9% 9.2% - - te e pat largely plant new the g 1.17 1.17 0.50 7%

Cherokee, Cherokee, Renegade the

2018F

Cherokee. Sales Sales Cherokee. from

2017 and

Page Page Changsha tion on full 100,000 100,000 120,000 140,000 160,000 180,000 200,000 - 20,000 20,000 40,000 60,000 80,000 2,159,921 2,159,921 (9,670.0) 67,767.4 67,767.4 22 322,675 322,675 476,249 731,387 534,969 14.51% 8,547.2 8,547.2 7,983.5 9,8

85,760 85,760 2018. 15.3% 14.5% 12.6% 2018F 2018F 11.9%

- 878.9 878.9 8,881 1.191 of of 9.3% 7.7% 6.6% 5.1% 6.6% 7.3% 1.3% 5.7% 7.6% 4.8% 8.4% - 0.95 0.95 0.20 30.1 27

Company Report Guangzhou Auto Group 广州汽车 (02238 HK) 16 February 2017 Se Source: Figure v 2018 and 2017 in growth industry estimated our than higher is growth sales vehicle GAC on forecast our 2011 GAC GAC at PBR. 2017/2018 Initiate these in name models 2015, in Cherokee Jeep FCAand TrumpchiGAC launchingGS4 after and which Toyota),the and (Honda balanced the of most product one GAC has InvestmentThesis, Source: proceeds: Use of Proceeds Price: Issue A of Number Item Table GAC Group. of are 20.23 RMB of price issued with million raising. 2016 during placement private fund of round another for cos development preparing already is GAC 2016, Jan. Strongactivities raising fund in d aluation is undervaluedatthe aluation moment. T

Fundraising Fundraising Activitie e about 11 13 15 17 19

th to be raised 3 5 7 9 - e 2012 when GAC has been has exhibits -

was pr was International. GuotaiJunan Companies, the 19 the Company the las - .

TP of HK$1 of TP

Feb 11 the about excited are We 1 : t

- 2 : GAC s pag May 11

. hares to be issued: hares to PE (historical high) PE (historical PE (2018F) PE band GAC PEBand 8 (X) Aug 11 % % above Bloomberg eviously

e strong earnings potential with self with potential earnings strong past fo

Nov 11

We expect We , trading under trading non r

, which which

Feb 12 t GAC disclaimer Guotai Junan Interna Guotai Junan s

May 12 two to years, wouldbe them which beneficial launchnew for in the future. models to adhere t adhere to - 3 Aug 12 public A

. non 96 was has rallied has

Nov 12 represent

Feb 13 ir Valuation - with a with

performing before 2015. before performing the A European

suffering from the underperforming

May 13

Aug 13 - its peers its share issuance share , o rising industry standard industry rising o Nov 13 - and has already been approved by CSRC in Jan. 2017. GAC targets to to targets GAC 2017. Jan. in CSRC by approved been already has and n share placemen share s

88.0

Feb 14 consensus tional. recent recent around around 14.89% of the enlarged issued A “ future of GAC FCA and GAMC as we think both brands both think we as GAMC and FCAGAC of future

May 14 Accumulate

Aug 14 % since %

’ and

per share, placing to five specific target investor targetspecific five to placing share, per

weighted average PER average weighted

Nov 14

PE (historical low) PE (historical PE (2017F) mean) PE (historical and years Feb 15 we herefore, current see price accumulationshare as an opportunity.

May 15 Risk

201 Aug 15 self its

Jan. portfolios .

Nov 15 - ” t After the successfulAfter the 7 owned Trumpchi owned

to to be

Feb 16 rating, PER, as we GAC think deserve We believe We 2016 May 16 - owned 3) Key auto parts project project parts auto 3) Key projects model vehicle and 2) Plant energ 1) New mn RMB 15,000 share per RMB 20.23 shares 741,473,055 Details

Aug 16 complete mid around

Nov 16 s . and

which represents which Armed with

Feb 17 o genr n satr vehicles, smarter and greener for

brand

we think the valuation is valuation the think we

of of the

that y and prospective technology technology prospective yand Source: Figure since Sep. 2016, Sep. since

0 1 1 2 2 3 , the Company the , brand

performance in performance

Japanese brand

issuance

the Company the two

Feb 11 - 49 (X)

May 11 - and major JVs all JVs major and

(6% of total proceed) of total (6% : - of Japan of

Aug 11 proving shares PB(historical high) PB(historical PB(2018F) PB band GAC PBBand

Nov 11 - 2017.

11.4 ie te nraig ed n eerh and research in need increasing the Given Feb 12 of convertible bonds , -

Guotai Junan International. Guotai Junan

May 12

the last time time last the s (51% of total proceed) total of (51% is x/ and 10.31% of the enlarged issued shares

both brands brands both

’ 2016 can glimpse the potential of GAMC of potential the glimpse can 2016 Aug 12 a higher valua s

10.4 expected s largest

Nov 12 still still and - s

(43% of total proceed) of total (43% Feb 13 Approximate . x 2017/2018 PER and and PER 2017/2018 x

May 13 attractive. a

Aug 13 turning have decreasing market share. automaker automaker

GAC Nov 13 to that can

Feb 14 add established a strong brand strong a established tion

May 14

of RMB of inmillion 4,105.6 this profit into manufacture competitive manufacture announced Aug 14 O

profit in 2016 to 2018 to 2016 in profit due to ly ur 201 ur Nov 14

occu brands under under brands its belt 741.5 million shares million 741.5 PB(historical low) PB(historical PB (2017F) mean) PB (historical

Feb 15 GAC believe we , raise May 15

rred was rred the following: 7 -

Aug 15 making

PER is pricedis PER

RMB 15,000 15,000 RMB

Nov 15 A its 1.3 Page Page Feb 16

May 16 4 - x/1. shares shares 23 and during

Aug 16 Given of of Nov 16 29

27 2 1) ’

Feb 17 x s ) ,

Company Report Guangzhou Auto Group 广州汽车 (02238 HK) 16 February 2017 Se Weface think that GAC the followingkey will risks Note: Source: Figure d e

3) 2) 1) Weighted average PE band includes major PV OEM listed on H on OEM listed major PV band includes PE average Weighted e

the Company the las - 50 product. product. Any policy,2017 taxcut in purchase growth from benefit W 2016 halt a put and breakdown machinery pressure Excessive 2017. in capacity full above work will A breakdown our expectedrealize growth assumption. andTrumpchi GAMC Lower t

: pag

orsening demand demand orsening 10 12 14 16 18 20 GAC PEBand 0 2 4 6 8 e unfavorable unfavorable when fo - than r

, Feb 11 disclaimer Guotai Junan International. Guotai Junan

it May 11 - expected sales models.new of was in Aug 11

changes changes

manufacturingfacility. vs working working 140% utilization at rate thebefore operation of

Nov 11 .

in the in WABand PE the Feb 12 Compass from GAC FCA. GAC from Compass in policy will have have will policy in

automobile industry in China. China. in industry automobile May 12

Aug 12

WA PE band PE WA Nov 12 on

production, thus would slow down sales. This happened to GAMC in Aug. in GAMC to happened This sales. down slow would thus production, Feb 13

Based on the capacity plan of different brands, Toyota,different brands,capacityplan of the on Based GAMC Honda and : -

a May 13 shares (excl shares

GAC growth will weighon sales of new such models as significant impact to the market and would affect demand of GAC’s of demand affect would and market the to impact significant Aug 13 -

2018 will weigh will 2018 If sales If Nov 13 GAC band GAC PE uding BYD). uding Feb 14 within the within are After a recovery a After May 14

not as strong as expecte as strong as not Aug 14

in manufactur Nov 14 on any policy introduced by the government. the by introduced policy any on

the Feb 15 second production in line Guangz

in the in May 15 ing facility ing Aug 15

auto market in 2016 due to the to due 2016 in market auto Nov 15 d, the Company might not might Company the d,

may Feb 16

May 16 heighten the risk of risk the heighten

Aug 16

the Nov 16 Page Page GS8 from Feb 17 24 hou. of of

Company Report Guangzhou Auto Group 广州汽车 (02238 HK) 16 February 2017 Se S Average Weighted Global Average Simple Global Weighted Average Average Simple Ltd Tata Steel C Motors General Volvo Ab Renault Sa Man Se Daimler Ag Wk Bayer Motoren Ag Volkswagen Paccar Inc Intl Navistar Co Ford Motor Motor Hyundai Weighted Average Average Simple Isuzu Motors Ltd Hino Motors Suzuki Motor Indus Heavy Fuji Heavy Mitsubishi Mazda Motor Co Honda Motor Motor Toyota Co Motor Nissan Weighted Average Average Simple Bus Zhongtong Yax Yangzhou Jiangling Moto Lo Xiamen King Yut Zhengzhou T Cnhtc Jinan Anhui Jianghua Beiqi Foton Power Weichai Chan Chongqing Motor Saic CoLtd Faw Car Mo Great Wall Auto Dongfeng Weighted Average Average Simple Ltd Hk Sinotruk Power Weichai Motor Baic Auto Guangzhou Ltd Byd Co Motor Qingling Mot Great Wall Chi Brilliance Geely Automobile Motor Dongfeng Company Table d ource: Bloomberg, Guotai Junan Intern Guotai Junan ource: Bloomberg,

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INTATA USGM VOLVB SS RNO FP MAN GR DAI GR GR BMW GR VOW US PCAR NAV US F US 005380 KS 7202 JP 7205 JP 7269 JP 7270 JP 7011 JT 7261 7267 JP 7203 JP 7201 JP 000957 C 600213 CH 000550 CH 600686 CH 600066 CH 000951 600418 CH 600166 CH 000338 CH 000625 CH 600104 CH 000800 CH 601633 CH 600006 CH 3808 HK 2338 HK 1958 HK 2238 HK 1211 HK 1122 HK 2333 HK 1114 HK HK175 HK489 Code Stock disclaimer

INR USD SEK EUR EUR EUR EUR EUR USD USD USD KRW JP JPY JPY JPY JPY JPY JPY JPY JPY CNY CNY CNY CNY CNY CNY CNY CNY CNY CNY CNY CNY CNY CNY HKD HKD HKD HKD HKD HKD HKD HKD HKD HKD Currency

ational.

149,500.00 149,500.00

Last price 1,560.00 1,350.00 4,473.00 4,383.00 1,610.50 3,631.00 6,491.00 1,127.00 460.10 149.19 450.10 118.80 12.50 37.08 88.85 96.87 68.15 85.99 69.80 27.60 12.63 14.50 14.95 14.92 19.56 15.41 12.08 15.65 24.87 12.25 14.62 12.90 44.25 11.08 28.11 11.56 11.58 8.70 3.49 7.04 6.03 9.12 2.64 8.95

166.4 503.7 13.5 14.2 29.3 17.4 21.9 10.7 90.9 10.1 10.5 13.0 13.8 13.2 20.9 20.1 13.8 12.2 42.0 69.9 15.5 19.8 14.1 27.4 24.7 48.7 20.5 51.5 15.4 16.3 36.7 20.5 14.8 31.3 10.6 11.7 11.6 11.5 11.9 11.2 15A n.a. 6.5 6.6 8.9 9.9 8.4 7.3 6.2 9.2 8.8 6.7 7.9 8.6 8.9 8.6

15.4 22.1 13.0 59.0 10.8 23.8 18.1 39.7 21.5 30.6 14.2 15.5 30.3 23.1 10.3 20.9 15.5 19.2 17.7 10.7 15.5 18.4 66.6 17.9 10.7 10.9 10.3 17.0 15.1 12.0 11.2 11.0 11.7 11.0 16F n.a. n.a. n.a. n.a. 7.3 6.5 8.7 7.3 5.4 6.1 7.2 7.6 8.4 9.2 7.1 6.6 9.8 8.3 6.0 8.7 8.5 PE

143.0 14.8 18.2 10.0 17.9 19.3 14.9 23.3 17.2 57.9 10.6 22.2 12.0 12.6 20.2 18.5 19.3 12.6 13.0 18.5 10.6 24.7 25.7 16.4 41.4 19.7 12.1 12.4 16.4 13.4 10.9 16.0 11.2 11.7 11.2 11.2 11.8 11.1 1 n.a. 6.5 6.3 7.8 9.0 8.9 7.2 5.4 6.1 6.4 8.0 8.5 6.9 7.8 6.5 9.6 7.8 7F

12.9 15.4 14.2 17.2 12.5 17.7 16.0 48.3 16.6 10.6 17.4 17.2 16.4 10.4 10.8 12.8 10.5 14.7 30.9 17.1 18.6 10.4 10.4 13.5 14.9 12.3 10.7 11.2 11.1 11.7 18F n.a. 5.9 9.0 9.7 6.4 7.4 9.9 8.3 8.1 7.2 5.3 9.7 9.0 6.2 6.1 8.0 8.3 6.2 7.4 6.1 9.8 8.5 7.1 9.6 7.0

50.0 15A n.a. 2.5 5.8 3.4 1.6 3.0 3.9 1.7 2.5 1.1 0.9 1.9 1.3 3.1 1.8 2 1.6 1.4 0.4 0.9 1.4 1.0 3.0 0.7 1.8 2.1 1.6 0.9 1.5 2.9 1.4 1.5 1.0 1.3 1.9 1.0 2.5 1.5 1.5 0.8 2.4 2.0 0.5 1.5 1.7 1.8 2.3 1.4 3.0 1.2 1.7 1.0 1.6 1.1 .8 .8

16F n.a. n.a. n.a. 2.0 2.0 1.9 2.2 3.0 2.1 1.8 1.2 1.4 1.7 1.4 2.4 2.5 2.1 1.9 1.7 0.7 1.6 1.6 1.7 2.1 0.8 1.6 2.4 3.7 0.7 1.4 1.8 1.4 1.6 1.6 1.2 2.7 0.8 2.7 1.3 1.2 0.8 3.5 1.6 0.6 1.2 1.4 1.6 1.7 1.8 2.6 0.8 1.0 0.9 1.1 0.9 PB

17F n.a. n.a. n.a. 1.8 1.8 1.6 2.0 2.7 1.9 1.7 1.2 1.3 1.5 1.3 2.3 2.1 1.9 1.7 1.5 0.7 1.5 1.4 1.4 1.9 0.7 1.4 2.1 3.0 0.6 1.3 1.6 1.3 1.5 1.6 1.1 2.3 0.7 2.5 1.1 1.1 0.8 3.5 1.5 0.6 1.2 1.3 1.5 1.7 1.8 2. 0.9 0.9 0.9 1.1 1.0 3

18F n.a. n.a. n.a. n.a. 1.6 1.6 1.5 1.6 2.4 1.8 1.5 1.1 1.2 1.3 1.2 2.2 1.8 1.7 1.5 1.3 0.7 1.4 1.2 1.3 1.8 0.7 1.2 1.8 2.4 0.6 1.2 1.4 1.1 1.3 1.4 1.0 2.1 0.7 1.0 1.0 0.7 3.1 1.3 0.5 1.1 1.2 1.4 1.6 1.6 1.9 0.8 0.8 0.9 1.0 0.9

ROE(%)

16F (1.4) 16.8 13.5 16.8 25.8 10.2 24.5 17.4 21.2 15.9 13.7 15.7 17.3 10.8 20.5 17.8 24.6 12.1 13.6 13.4 14.7 13.1 20.4 15.8 12.3 15.4 13.6 20.2 21.6 12.7 10.8 14.1 22.1 10.2 10.1 12.2 11.5 11.3 11.1 11.8 n.a. n.a. n.a. 9.4 5.6 8.0 4.0 7.9 3.7 7.9 6.5 6.7 8.6 5.7 8.1

D/Y(%)

16F n.a. n.a. n.a. Page Page 3.1 2.9 3.2 1.6 5.9 1.2 2.1 1.4 2.4 5.0 6.6 0.1 2.7 2.5 2.8 1.5 2.0 3.8 3.3 1.4 6.8 4.3 1.0 1.1 2.9 3.3 2.9 3.6 3.1 1.8 4.1 2.9 3.8 3.2 5.0 4.1 1.5 2.5 0.0 5.1 3.1 3.1 2.5 2.1 1.8 0.8 3.3 2.7 2.2 2.5 3.2 4.4

EV/EBITD 25

16F

A of of

14.7 14.9 10.5 12.5 14.1 16.8 10.8 23.9 19.4 11.9

n.a. n.a. n.a. n.a. n.a. n.a. 27 7.3 8.2 4.4 6.7 8.7 2.8 7.1 3.5 2.8 2.4 1.7 3.0 8.5 9.8 7.2 6.5 7.8 5.7 4.9 6.4 4.4 8.0 8.5 7.3 8.7 3.3 7.2 6.4 4.8 7.3 6.3 9.2 4.7 4.6 4.5 9.8 1.5 6.6 7.7

Company Report Guangzhou Auto Group 广州汽车 (02238 HK) 16 February 2017 Se of the endyear at the Cash flow year of beginning at Cash the ch Effect FX of rate flow of cash Net change fo Cash flow Others Shares issued paid Dividends of liabilities Repayment bank loans of Increase forCash investing flow Others asso and JV of injection and Acquisition cash deposit, restricted inChange of go Receipt Dividend received Net investment capital operation forCash flow paid Net interest activities Operating Cash from Capital working in Changes Interest income costs Financial (net) and Associates ofprofit JV of Share adjustment Other & Amortization Depreciation Net profits m) (RMB Dec endYear (RMB) share per Dividend (RMB) EPS Basic of the holders Equity Non year Profit the for expense tax Income before taxation Profit associates and ofprofit JV of Share Interest income F Operating (losses)/profit Other (losses)/gains Interest income expenses Administrative expenses Selling pr Gross Cost sales of Turnover m) (RMB Dec endYear Table d Source: the Company, Company, the Source: costs inancial

e - controlling interests controlling th e ofit - 21 las r financing r

v grants v : t

Financial Financial Statements and pag

anges

e Company

disclaimer

Guotai Junan International. Guotai Junan

Cash Flow Statement Cash Flow

Income Statement Income

(19,831) (12,785)

(3,815) (1,172) (3,254) (3,319) (3,391) (4,183) (1,882) (1,841) 10,274 14,091 12,814 22,383 2014 2014 4,247 1,224 2,935 3,194 2,935 3,066 4,181 2,552 (909) (623) (288) (302) (439) (226) (259) (131) (745) (491) 0.16 0.50 235 121 348 650 593 745 121 363 318 (2) A A 0

(25,975) (12,260)

(3,372) (1,068) (2,109) (4,183) (4,726) (2,037) (1,867) 29,418 11,548 10,274 2015 2015 Ratios 1,260 9,790 3,419 4,154 3,891 4,158 3,115 1,660 3,986 4,212 3,986 4,386 4,720 3,444 (769) (267) (540) (188) (226) (400) (849) 0.20 0.65

165 742 230 849 128 387 435 412

14 A A 0

(12,618) (41,413)

(2,217) (2,692) (1,880) (1,946) (1,536) (5,748) (5,490) (3,382) (3,099) 11,548 11,806 48,839 2016F 2016F 9,332 5,957 2,421 2,601 1,973 5,813 6,265 5,813 6,472 5,490 1,580 7,426 (744) (104) (840) (540) (452) (659) (720)

0.29 0.97 230 383 720 401 123 217 417 0 0 0

(54,230) (12,507)

(2,224) (4,208) (6,974) (4,403) (4,670) 24,632 15,300 11,738 15,000 11,470 63,580 2017F 2017F 9,332 1,187 6,177 2,374 2,447 2,206 6,902 7,414 6,902 7,435 6,974 9,350 (914) (606) (612) (512) (533) (685) 0.33 1.09 (52) (47) 230 485 685 288 193 953 256 419 0 0

(57,937) (12,382)

(7,984) (4,693) (4,977) (3,924) (2,564) (1,598) 67,767 26,73 24,632 11,022 2018F 2018F 2,249 7,991 8,547 7,991 8,548 7,984 9,830 2,103 3,833 6,366 2,193 2,0 (556) (557) (603) (829) (310) (442) (718) 0.36 1.19 (26) 241 289 879 289 430 230 252 603 78 78 4 0 0 0

Reserves and retains profits and Reservesretains Share capital Non Net Assets Non Other long grants Government Borrowing Current Liabilities tax liabilities Current income Borrowing payables Trade Non Others Investments assets tax Deferred assets Intangible Land use rights PPE Current assets Others Time deposit receivables other andTrade Inventories Cash m) (RMB Dec endYear Payable turnover days Payable turnover days turnover Receivable Inve Analysis Efficiency ratio Quick Cash ratio (x) Interest cover ratio(%) Gearing solvency and Liquidity BPS(%) EPS(%) growth (%) Net profit OP growth(%) growth(%) Rev Growth ROA(%) ROE(%) Net profit margin(%) OP Margin(%) EBITDA profit margin(%) Gross Analysis Profitability (RMB) BPS equity Shareholders'

- - - n

controlling interest controlling liabilities current Assets current

tory

R(%)

Analysis

Turnover days Turnover

term liabilities

Financial Ratios Financial Net cash Balance Sheet Balance

29,018 36,249 20,232 10,651 35,577 19,142 26,886 10,274 35,453 2014 2014 (42.2) 6,435 5,981 4,769 9,541 1,863 4,046 1,501 8,544 1,012 7,422 5,516 2,661 5.509 (2.2) 20.4 20.4 18.9 14.3 11.4 796 222 990 482 177 1.2 0.5 5.1 0.2 5.2 9.2 6.6 41 83 43 A A

Net cash

(178.8) 32,211 39,491 18,656 14,077 39,322 18,902 10,581 27,898 11,548 38,64 2015 2015 6,435 9,072 1,077 7,649 4,279 2,751 4,827 1,820 1,609 4,087 8,727 1,927 6.006

31.9 31.9 31.4 11.4 14.3 11.7 845 347 300 441 174

1.4 0.6 6.2 9.0 6.5 1.3 9.8 88 32 A A 7

Net cash

36,597 43,425 24,117 19,855 43,557 18,439 14,273 32,824 10,972 43,032 2016F 2016F 6,435 8,839 1,148 7,133 3,990 3,708 4,620 2,122 1,584 5,831 5,106 9,3 308.2 6.687 10.0 11.3 48.8 48.8 66.0 15.3 12.8 15.2 393 558 272 396 175 1.1 0.4 8.7 3.2 8.7 32 32 82 45

Net cash

56,046 63,102 29,142 25,258 47,546 19,209 16,002 53,073 13,935 24,632 63,222 Page Page 2017F 2017F (39.7) 7,176 8,374 1,210 6,439 3,602 4,955 4,609 2,4 1,786 5,885 6,834 9.289 (120) 11.9 38.9 11.9 18.3 30.2 14.0 11.7 14.7 724 282 353 170 1.6 0.8 8.4 1.5 6.0 18 18 80 46

Net cash

69,205 62,029 68,52 30,603 27,249 49,303 20,815 15,037 5 14,977 26,734 of of 2018F 2018F 9.643 7,176 7,553 1,265 5,508 3,081 5,789 4,646 2,706 7,382 2,081 6,130 7,460 (676) (7.7) 15.2 15.3 12.9 12.6 14.5 172 779 272 310 27 1.6 0.9 3.8 9.3 6.6 8.2 1.3 5.5 81 47 9

Company Report Guangzhou Auto Group 广州汽车 (02238 HK) 16 February 2017 Se Website:www.gtja.com.hk Tel.:(852) 2509 27/F.,Low Block, GrandMillennium Plaza, 181 201 © regu or subjectGuotai law Junan and groupits applicablecompanies any to registration or to licensingrequirement within such contraryjurisdiction. be would use or availability publication, distribution, such where jurisdiction any in Research This unpred andwhere necessary consult their own inherently financial advisers prior to any investment decision. with conditions economic and political r its andobjectivesinvestment future comprehend the understandand shouldInvestors contain. uncertainty may so the situation, mutable of assumptions the from derived forecasts and estimates n Thoughbest effort has been ensuremade to the accuracy of the information and data containedin this ResearchReport, Guotai becontr reportthis professionalopinionsexpressedcompanies.in otherdealersAnyandexecutivesGuotai Junan of persons,group of Any opinions expressed in this report 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 TheBenchmark: Hong KongHang Seng Index Sector Horizon: Time to6 18 months TheBenchmark: Hong KongHang Seng Index Company d ot guarantee the accuracy and completeness of the information and data herein. This Research Report may contain some forwardsome contain may ReportResearch This herein. dataand information the ofcompleteness and accuracy the guarantee ot e Underperform Neutral Outperform Rating Sell Reduce Neutral Accumulate Buy Rating

th Report. There isnoofficer of the issuer mentionedin thisResearch Report associated with Guotai Junan employed not havecompanies group its and Junan Guotai Report. companies group its and Junan Guotai withinprecedingthe 12 months. Guotai Junan and its group co morethan1% (02886 Limited Company for Except The Analystsand their associates The Analystsand their associates 7 e

Guotai JunanSecurities (Hong Kong) Limited. AllRights Reserved. RatingD las aryto opinions orinvestment decisions madeby assetthe managementand investment banking groups of Guotai Junan.

t RatingDefinition pag

e Reportisnot directed at,or intended distributionfor to orby,use any person orentity who isa orcitizenresident or of -

18 Fax:(852) 2509 9118 fo M Hlig Gop iie (09 HK), (00198 Limited Group Holdings SMI efinition r

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( Goa Jnn) Goa Jnn n is ru cmais may companies group its and Junan Guotai Junan"). "Guotai oes not constitute an invitation or offer to acquire, purchase or subscribe for securiti for subscribe or purchase acquire, to offer or invitation an constitute not oes

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Company Report Guangzhou Auto Group 广州汽车 (02238 HK) 16 February 2017