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研 [Table_Title] Van Liu 刘斐凡 Company Report: Evergrande (03333 HK)

究 (86755) 2397 6672 EquityResearch 公司报告： 中国恒大 (03333 HK) [email protected]

14 May 2018 Improving[Table_Summary Fundamental] s Leading to Decreasing Operating Risk, Maintain "Buy"

改善的基本面展望降低运营风险，维持“买入”

公  Contracted sales will maintain steady growth due to sufficient saleable [Table_Rank] 司 Rating: Buy

resources in wide geographic locations. During Jan.-Apr. 2018, contracted Maintained 报 sales amounted to RMB212.26 bn, increasing by 46.6% YoY, achieving 评级： 买入 (维持) 告 38.6% of its 2018 sales target. As at the end of 2017, the Company had 766

CompanyReport projects in 228 cities. Total GFA amounted to 312 mn sq.m.

 We expect a high gross margin level. The Company's unit land cost 6[Table_Price]-18m TP 目标价 : HK$30.17 amounted to RMB1,711 per sq.m., 16.5% of ASP during Jan.-Apr. 2018. Revised from 原目标价: HK$29.60

Gross margin is expected to remain at around 36.8% between 2018 and Share price 股价: HK$25.350

2020. 告

 Evergrande’s operating risks should gradually decrease alongside

证 balance sheet enhancement and profitability improvement. This is Stock performance 报

股价表现 券 favorable, especially when the credit environment is tightening up. We expect 究 stable contracted sales growth, an increase in profitability and scale growth [Table_QuotePic]

研

reduction of land reserves. Therefore, the net gearing ratio will gradually 研

究 decrease from 183.7% in 2017 to 81.6% in 2020. 券

报  2017 underlying net profit was in line with expectations. As we revise up

证 underlying net profit, we revise up target price from HK$29.60 to HK$30.17,

告 EquityResearch Report which represents a 32% discount to the Company’s revised 2018E NAV of

HK$44.36 per share, 9.2x underlying 2018 PER and 2.2x 2018 PBR. We

maintain "Buy". Risks: lower-than-expected house sales and listing failure for Evergrande’s property development business on the A-share market. [Tab  由于广阔地域下的充足可售资源，合约销售将维持稳定增长。在 2018 年 1-4 月，合约销 le_I 售达到人民币 2,122.6 亿元，同比增长 46.6%，达成其 2018 年销售目标的 38.6%。在 2017 nfo1 年末，公司在 228 个城市拥有 766 个项目。总建筑面积达到 3.12 亿平米。

]  我们预期高水准的毛利率。公司的单位土地成本达到人民币 1,711 元每平米，为 2018 年 房 1-4 月合约销售均价的 16.5%。其毛利率将在 2018 到 2020 年维持在 36.8%左右。 Change[Table_PriceChange] in Share Price 1 M 3 M 1 Y 地 股价变动 1 个月 3 个月 1 年 源于资产负债表的增强和盈利改善，中国恒大的运营风险将逐渐降低。这将是受欢迎的，  Abs. % 产 (7.3) 12.4 208.4 特别是信贷环境正在收紧。我们预计稳定的合约销售增长，盈利能力的提高和土储规模增 绝对变动 % 行 Rel. % to HS Index 速的减缓。因而，净资产负债率将逐渐从 2017 年末的 183.7%下降至 2020 年的 81.6%。 相对恒指变动 % (9.7) 9.1 183.0 业 Avg. Share price(HK$)

25.2 24.9 23.4 Property Sector  2017 年核心净利符合我们预期。由于我们上调了核心净利，我们将目标价从 29.60 港元上 平均股价（港元） 调至 30.17 港元，相当于较 44.36 港元的 2018 年每股净资产有 32%的折让，也分别相当 Source: Bloomberg, Guotai Junan International. 于 9.2 倍 2018 年核心市盈率和 2.2 倍 2018 年市净率。我们维持“买入”。风险：低于预期 的房屋销售和中国恒大的地产业务在 A 股上市失败。

[Tab [Table_ le_I Year End Turnover Net Profit EPS EPS PER BPS PBR DPS Yield ROE 年结Profit] 收入 股东净利 每股净利 每股净利变动 市盈率 每股净资产 市净率 每股股息 股息率 净资产收益率

nfo2 12/31 (RMB m) (RMB m) (RMB) (△ %) (x) (RMB) (x) (RMB) (%) (%)

] 2016A 211,444 5,091 0.372 (47.8) 61.0 3.233 7.0 0.000 0.0 10.7 2017A 311,022 24,372 1.833 392.7 11.2 8.632 2.4 0.000 0.0 30.7 中 2018F 435,899 38,987 2.871 56.6 7.2 11.322 1.8 1.430 7.0 29.0

国 (03333 HK) (03333

2019F 548,015 50,058 3.686 28.4 5.6 13.579 1.5 1.838 9.0 29.6 恒 2020F 657,796 59,923 4.413 19.7 4.7 16.153 1.3 2.202 10.7 29.7 大 Shares in issue (m) 总股数 (m) 13,178.2 Major shareholder 大股东 Hui Ka Yan 77.9% [Table_BaseData] Market cap. (HK$ m) 市值 (HK$ m) 334,067.3 Free float (%) 自由流通比率 (%) 22.1

3 month average vol. 3 个月平均成交股数 (‘000) 18,239.7 FY18 Net gearing (%) FY18 净负债/股东资金 (%) 129.1 Evergrande 52 Weeks high/low (HK$) 52 周高/低 (HK$) 32.500 / 8.060 FY18 Est. NAV (HK$) FY18 每股估值（港元） 44.4

Source: the Company, Guotai Junan International.

See the last page for disclaimer Page 1 of 8

[Table_PageHeader] Evergrande (03333 HK)

Housing sales growth decreased, but strong investments beat market expectations. During Jan.-Mar. 2018, the YoY

increase in commodity house sales decreased compared to that during Jan.-Feb. 2018. I] nvestment1 r a sM remainedt h g i strongR _ e andl beatb a T [

market expectations. GFA newly started rebounded during Jan.-Mar. 2018. In addition, saleable areas extended downside

momentum. Subsequently, we saw steady fundamentals for the property market.

Figure 1: Cumulative House Sales Amount in China Figure 2: Cumulative House Sales GFA in China

16,000 70.0% 1,800 50.0% 14 May2018 14,000 60.0% 1,600 40.0% 50.0% 1,400 12,000 30.0% 40.0% 1,200 10,000 30.0% 20.0% 1,000 8,000 20.0% 10.0% 800 6,000 10.0% 0.0% 0.0% 600 4,000 -10.0% -10.0% 400 2,000 -20.0% 200 -20.0%

0 -30.0% 0 -30.0%

15 17 18 16

14 15 16 17

14 15 16 17 17 15 16

14 16 15 17

15 17 18 16

15 16 14 17

15 16 17

15 17 18 16

14 15 16 17

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Jul Jul Jul Jul

Jul Jul Jul Jul

Oct Apr Oct Apr Oct Oct Apr

Jan Jan Jan Jan

Jan Jan Jan Jan

Mar Mar Mar Mar

Sep Nov Sep Sep Nov Nov Sep Nov

May May May Amount Sold of Commodity Houses (LHS)(RMB bn) GFA Sold of Commodity Houses (LHS)(sq.m. mn) Amount Sold of Residential Houses (LHS) (RMB bn) GFA Sold of Residential Houses (LHS) (sq.m. mn) Amount Sold YTD YoY of Commodity Houses (RHS) GFA Sold of Commodity Houses (RHS) Amount Sold YTD YoY of Residential Houses (RHS) GFA Sold of Residential Houses (RHS)

Source: National Bureau of Statistics of China, Guotai Junan International. Source: National Bureau of Statistics] of 2 China,r a GuotaiM t Junanh g i International.R _ e l b a T [

For the policy and monetary environment, the key note of healthy property market maintenance will not change. Currently, we expect a tightening up of monetary environment alongside gradual rate hikes in the US and the beginning of new asset management regulation in China. On 23 Apr. 2018, the Political Bureau Conference of the CPC Central Committee proposed expansion of demand and stability in the property market. Thus, targeted policies will be maintained to promote the steady and sound development of the property sector.

We think that commodity housing sales will only experience limited decline. Urbanization, demand from housing replacement and monetization of squatter settlement rebuilding will lead to sustainable housing demand in 2018-2020. Moreover, if the property market starts to slump, the policy and credit environment related to the property sector should ease again to

stabilize the property market as per the last round of policy easing which started on 30 Sep. 2014. (03333 HK)

Figure 3: Key Property Development and Sales Data

30.0% 中国恒大

20.0% 10.5% 7.7% 13.5% 8.1% 22.5% 15.8% 8.8% 6.5% 10.0% 19.8% 7.0% 8.9% 0.0% 2.0% 17.3% 1.0% 7.5%

0.0% Evergrande 2013 2014 2015 2016 2017 2018F -10.0% -10.7% -2.0% -14.0% -7.6% -14.0% -20.0% -7.0% -3.4% -30.0% -31.7% -40.0%

GFA Newly Started YTD YoY Land Area Sold YTD YoY Investment YTD YoY GFA Sold of Commodity Houses

Source: National Bureau of Statistics of China, Guotai Junan International.

We expect contracted sales to maintain steady growth due to sufficient saleable resources in wide geographic locations. During 2017, contracted sales amounted to RMB500.96 bn, increasing by 34.2% YoY, achieving its 2017 sales target. The Company's saleable resources fully covered all city tiers. However, policy tightening was only targeted towards cities with overheating property markets, especially higher-tier cities, and policies still support housing sales in lower-tier cities with high

amounts of stock. Therefore, the Company's contracted sales are likely to be supported by its sufficient resources in wide Report geographic locations. In addition, the Company’s quality brand and competitive ASP should support its contracted sales as well. During Jan.-Apr. 2018, Evergrande’s contracted sales reached RMB212.26 mn, up 46.6%, achieving 38.6% of its 2018 sales

target (RMB 550.00 bn, hinting 9.8% YoY increase). Company

See the last page for disclaimer Page 2 of 8 [Table_PageHeader] Evergrande (03333 HK)

Figure 4: Evergrande’s Sales Records

] 1 r a M t h g i R _ e l b a T [

70.00 12,000

60.00 10,000

50.00 8,000 40.00 6,000 30.00

4,000 14 May2018 20.00

10.00 2,000

0.00 0

14 16 17 15 18

14 15 17 13 16

13 15 16 14 17

13 14 16 17 15

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-

Feb Feb Feb Feb Feb

Aug Aug Aug Aug Aug

Nov Nov Nov Nov Nov

May May May May May

Contracted Sales(bn RMB) (LHS) ASP (RMB/sqm.) (RHS)

Source: the Company.

The Company’s other segment was well operated in 2017. Evergrande will continue to focus on financial, health care and cultural tourism industries as services business segments. Evergrande Finance Group provides integrated diversified financial

] 2 r a M t h g i R _ e l b a T [ services. It holds 17.28% equity interest in Shengjing Bank. The net profit of Shengjing Bank amounted to RMB7.67 bn, up 10.1% YoY in 2017. Meanwhile, the original premium income of Evergrande Life amounted to RMB28.1 bn, soaring by 710% YoY, representing 77% of total premium income. Premium income from new insurance policies amounted to RMB4.6 bn, an increase of 20 times YoY. Evergrande Tourism Group focuses on its flagship product "Evergrande Fairyland", with 11 cultural tourism projects. The GFA for tourism was 43.07 mn sq.m. During 2017, contracted sales from cultural tourism projects amounted to RMB22.68 bn. Evergrande Health Group is engaged in operations including new high-end international hospitals and community healthcare services.

The Company will slow down its pace of land replenishment activities to enhance its balance sheet. In 2017, the

Company acquired 226 parcels of land with a total GFA of 126 mn sq.m., up 23.5% YoY. The average land cost amounted to RMB1,889 per sq.m., 58% of all newly acquired projects were in tier-1 and tier-2 cities. The Company also has 41 projects in

Shenzhen with a planned GFA of 237.1 mn sq.m. Saleable GFA amounted to 11.71 mn sq.m. Potential GFA from redevelopment (03333 HK) projects amounted to 539.4 mn sq.m.

Enormous scale of land banks with proper unit land costs support the Company's contracted sales with stable gross 中国恒大 margins. As at the end of 2017, the Company had 766 projects in 228 cities. Total GFA amounted to 312 mn sq.m., up 36.2% YoY. Its unit land cost amounted to RMB1,711 per sq.m., 16.5% of ASP during Jan.-Apr. 2018. We estimate gross margins to

remain at around 36.1% in 2018-2020. Evergrande

Figure 5: Evergrande’s Land Bank Replenishment Figure 6: Evergrande’s Land Bank Breakdown by Original Breakdown by Original Value During 2017 Value at the end of 2017

Tier-3 and Tier- 4 Cities , 31.0%

Tier-3 and Tier- Tier-1 and Tier- Tier-1 and Tier-

4 Cities , 42.0% 2 Cities, 58.0% 2 Cities, 69.0%

Report

Source: the Company. Source: the Company.

Company

See the last page for disclaimer Page 3 of 8 [Table_PageHeader] Evergrande (03333 HK)

The Company will strive to decrease its net gearing ratio, which will decrease the Company’s operating risks. Costs of

borrowing and perpetual instruments dramatically squeezed the Company's profit in 2016] . In1 2017,r a wM itht sufficienth g i R cash_ e onl handb a , T [

capital increasing from strategic investors and projected increase in net profit, the Company will extend its deleveraging process,

thus, promoting the Company's profitability. The Company has transferred its strategy from "scale development" to "scale + efficiency development". We expect stable contracted sales growth, increase in profitability and scale growth reduction of land reserves. Therefore, the net gearing ratio will gradually decrease to a healthy level during 2018-2020. Balance sheet enhancement could decrease the Company’s operating risks. 14 May2018 2017 underlying net profit was in line with our expectation. Top line increased by 47.1% YoY to RMB311,022 mn in 2017 due to strong contracted sales growth and more GFA delivered. Gross profit amounted to RMB112,262 mn, soaring 88.9% YoY. Given less financial costs and net profit attributed to perpetual capital instruments, net profit jumped 378.7% YoY to RMB24,372 mn, in line with our expectation. Moreover, underlying net profit dramatically jumped by 3.67 times YoY to RMB23,638 mn, which was also in line with our expectation. The Company recorded improving gross margin with a gain of 8.0 ppts YoY. Underlying net profit margin increased 4.5 ppts YoY to 7.6%. Net gearing ratio sharply fell 106.2 ppts YoY riding on net profit soaring and capital increase from strategic investors during 2017.

Table 1: Comparison of the Company’s Balance Sheet and Income Statement in 2016 and 2017

RMB mn 2016A ] 2 r 2017Aa M t h g i R _ Changee l b a T [

Total revenue 211,444 311,022 47.1% Gross profit 59,422 112,262 88.9% GPM 28.1% 36.1% 8.0 ppts Net profit 5,091 24,372 378.7% Net profit (Ex. after-tax fair value gains on IP and exchange losses) 5,058 23,638 367.4% NPM 2.4% 7.8% 5.4 ppts NPM (Ex. after-tax fair value gains on IP and exchange losses) 2.4% 7.6% 4.5 ppts

DPS (RMB cent) 0.0 0.0 n.a.

EPS (RMB cent) 37.2 183.3 392.7% Land appreciation tax 8,359 18,811 125.0%

Cash and cash equivalents 304,329 287,722 -5.5% (03333 HK) Total asset 1,350,868 1,761,752 30.4% Stock of properties 658,627 953,521 44.8%

Advanced proceeds received from customers 194,961 267,555 37.2% 中国恒大 Trade and other payables 299,905 399,459 33.2% Total debt 535,070 732,625 36.9%

Shareholders' equity 44,240 114,772 159.4% Evergrande ROE 11.5% 21.2% 9.7 ppts Net gearing ratio 289.9% 183.7% -106.2 ppts Source: the Company, Guotai Junan International.

We revise up underlying profit estimations. Total revenue in 2017 was in line with our previous assumption. We expect that Evergrande's contracted sales will maintain steady growth due to sufficient saleable resources over a wide geographic location. Therefore, we have slightly adjusted 2018F and 2019F total revenue by -1.3% and 2.0% to RMB435,899 mn and RMB548,015 mn, respectively. With a quality land bank and proper unit land cost, we expect stable gross margins in 2018-2020. As the gross margin in 2017 was higher than our previous assumption, we have revised up gross margin. Overall, we revise up 2018F and 2019F underlying net profit by 9.5% and 9.0% to RMB35,923 mn and RMB46,734 mn, respectively. We expect lower net gearing ratio and stronger balance sheet to follow the Company’s strategy of "scale and efficiency development”. However, net gearing ratio in 2017 was higher than our previous expectation. Thus, we revise up net gearing ratio in 2018F and 2019F by 12.3 ppts and 14.4 ppts, respectively. Nevertheless, we still expect that net gearing ratios will gradually decrease to a healthy level during

2018-2020. Report

Company

See the last page for disclaimer Page 4 of 8 [Table_PageHeader] Evergrande (03333 HK)

Table 2: Revisions to 2018-2020 Profit Estimations

] 1 r a M t h g i R _ e l b a T [

RMB mn New estimations Old estimations Change 2018F 2019F 2020F 2018F 2019F 2020F 2018F 2019F 2020F

Total revenue 435,899 548,015 657,796 441,728 537,141 n.a. -1.3% 2.0% n.a. Gross profit 160,482 197,725 232,587 150,263 184,546 n.a. 6.8% 7.1% n.a. Operating profit 134,859 170,178 199,050 128,944 160,716 n.a. 4.6% 5.9% n.a.

Net profit 38,987 50,058 59,923 35,223 45,602 n.a. 10.7% 9.8% n.a. 14 May2018 Underlying profit 35,923 46,734 56,249 32,799 42,881 n.a. 9.5% 9.0% n.a. Gross margin 36.8% 36.1% 35.4% 34.0% 34.4% n.a. 2.8 ppts 1.7 ppts n.a. Operating profit margin 30.9% 31.1% 30.3% 29.2% 29.9% n.a. 1.7 ppts 1.1 ppts n.a. Net profit margin 8.9% 9.1% 9.1% 8.0% 8.5% n.a. 1.0 ppts 0.6 ppts n.a. Underlying net profit margin 8.2% 8.5% 8.6% 7.4% 8.0% n.a. 0.8 ppts 0.5 ppts n.a. ROE 29.0% 29.6% 29.7% 21.8% 24.3% n.a. 7.2 ppts 5.3 ppts n.a. ROCE 19.6% 24.2% 26.8% 20.5% 25.5% n.a. -0.9 ppts -1.2 ppts n.a. ROA 6.4% 7.2% 7.6% 7.5% 8.6% n.a. -1.0 ppts -1.5 ppts n.a. Net gearing ratio 129.1% 99.0% 81.6% 116.8% 84.6% n.a. 12.3 ppts 14.4 ppts n.a. Source: Guotai Junan International.

] 2 r a M t h g i R _ e l b a T [

Maintain "Buy". The Company will focus on its strategy of "scale + efficiency development". Contracted sales should maintain steady growth. The Company’s diversified business distribution operated well in 2017. Quality land bank with proper unit land cost stabilized gross margin. In addition, net gearing ratio is likely to gradually decrease to a healthy level. The Company’s fundamentals are likely to further improve alongside balance sheet enhancement and profitability improvement. Evergrande’s operating risks should gradually decrease. This is favorable, especially when monetary environment is tightening up. Overall, as we revise up underlying net profit, we revise up target price from HK$29.60 to HK$30.17, which represents a 32% discount to the Company’s revised 2018E NAV of HK$44.36 per share, 9.2x underlying 2018 PER and 2.2x 2018 PBR. We maintain Evergrande's investment rating as "Buy". Key risk factors include: lower-than-expected house sales and listing failure for

Evergrande’s property development business in the A-share market.

Table 3: Breakdown of Evergrande’s 2018 NAV (03333 HK) NAV/share (RMB m) (HK$ m) (HK$) % of NAV % of GAV

Development Properties 645,546 796,970 59.24 133.5% 88.4% 中国恒大 Investment Property 84,856 104,761 7.79 17.6% 11.6% Gross Asset Value 730,402 901,730 67.03 151.1% 100.0% (Net Debt)/ Net Cash -246,982 -304,917 -22.67 -51.1%

NAV 483,419 596,814 44.36 100.0% Evergrande NAV/Share 35.93 44.36 Source: the Company, Guotai Junan International.

Figure 7: Evergrande’s 3-Year Historical P/B Figure 8: Evergrande’s 3-Year Historical P/E

Report

Source: Bloomberg, Guotai Junan International. Source: Bloomberg, Guotai Junan International.

Company

See the last page for disclaimer Page 5 of 8 [Table_PageHeader] Evergrande (03333 HK)

Table 4: Peers Comparison

Company Stock Code Mkt Cap (HK$ m) Last Price HK$ PE PB] 1 r a M t h g D/Y%i R _ ROEe l EV/EBITDAb a T [

2018F 2019F 2020F 2018F 2019F 2020F 2018F 2018F 2018F

HK listed large developers with major revenue from mainland

China Overseas Land & 00688 HK 302,391.2 27.600 7.5 6.3 5.5 1.0 0.9 0.8 3.4 14.5 5.8 Evergrande Real Estate 03333 HK 334,067.3 25.350 6.9 5.7 4.7 2.0 1.7 1.3 8.4 33.7 5.4 Invest Ltd 01109 HK 210,007.5 30.300 8.6 7.3 6.3 1.3 1.2 1.0 4.0 16.3 5.5 Group Bbmg Corporation-H 02009 HK 50,929.0 3.490 7.8 6.8 6.6 0.6 0.5 0.5 2.2 7.0 9.3 Holdings 02007 HK 354,812.0 16.320 8.4 6.2 5.1 2.3 1.8 1.5 4.1 29.3 4.2 14 May2018 Longfor Properties 00960 HK 142,406.6 24.050 9.1 7.2 5.8 1.4 1.3 1.1 4.3 17.4 8.2 Co Holdings Ltd 03383 HK 64,082.9 16.360 7.0 5.7 4.6 1.2 1.0 0.9 6.6 17.2 3.6 Soho China Ltd 00410 HK 20,746.1 3.990 37.0 28.8 24.2 0.5 0.5 0.5 4.0 1.5 26.9 Holdings 00813 HK 75,530.6 22.300 6.6 5.4 4.3 0.9 0.8 0.7 5.8 14.8 7.0 Guangzhou R&F 02777 HK 61,998.3 19.240 5.0 4.1 3.3 0.8 0.7 0.6 8.1 15.5 6.3 Ltd Sino-Ocean Land Holdings 03377 HK 42,882.4 5.650 7.0 5.8 4.6 0.7 0.6 0.6 6.2 9.9 6.4 Properties - H Franshion Properties 00817 HK 54,757.7 4.730 8.8 6.8 4.8 1.1 1.0 0.8 4.6 13.1 10.7 Ltd 00272 HK 17,494.3 2.170 9.2 8.4 7.3 0.3 0.3 0.3 2.7 4.1 9.0 Kwg Property Holding Ltd 01813 HK 36,789.1 11.660 6.3 4.8 3.9 0.9 0.8 0.7 5.5 15.6 11.7 Co Ltd 00123 HK 22,322.4 1.800 7.2 5.8 4.9 0.5 0.5 0.5 5.5 7.4 9.0 Shenzhen Investment Ltd 00604 HK 26,351.7 3.270 8.7 7.4 7.7 0.6 0.5 0.5 5.6 7.1 6.6 00754 HK 18,116.1 8.140 12.9 12.7 n.a. n.a. n.a. n.a. 2.3 n.a. n.a.

] 2 r a M t h g i R _ e l b a T [ Yuzhou Properties Co 01628 HK 24,147.6 5.770 5.2 3.9 3.3 1.1 0.9 0.7 6.9 22.2 3.3 Holdings Holdings 03900 HK 25,145.1 11.600 9.6 8.6 7.8 0.7 0.7 0.6 2.1 6.6 11.2 China Aoyuan Property 03883 HK 18,020.2 6.720 6.1 4.5 3.4 1.2 1.0 0.8 5.5 22.0 6.4 Kaisa Group Holdings Ltd 01638 HK 26,801.7 4.420 2.5 1.9 n.a. n.a. n.a. n.a. n.a. 38.5 n.a. Group China Co Ltd-H 02202 HK 378,645.5 32.000 8.2 6.7 6.1 1.8 1.6 1.4 4.5 22.9 3.6 Median 7.7 6.3 5.0 1.0 0.9 0.7 4.6 15.5 6.5

Simple Average 8.9 7.3 6.2 1.1 0.9 0.8 4.9 16.0 8.0

Weighted Average 8.0 6.5 5.5 1.5 1.3 1.1 5.0 21.2 5.8

HK listed mid-small developers with major revenue from mainland

China Overseas Grand 00081 HK 12,529.5 3.660 5.5 4.2 3.8 0.6 0.5 0.4 1.4 11.4 4.4

Poly Property Group Co 00119 HK 13,694.1 3.740 6.9 7.1 3.7 0.5 0.5 n.a. 4.0 6.6 7.4 Oceans ShInd Urban 00563 HK 8,467.3 1.760 13.5 11.7 11.0 0.6 0.6 0.6 2.2 4.6 n.a. Ltd

Modern Land China Co Ltd 01107 HK 4,056.1 1.460 5.1 3.6 3.2 0.6 0.5 0.5 4.3 14.6 n.a. (03333 HK)

Powerlong Real Estate 01238 HK 17,348.3 4.340 4.4 3.5 2.9 0.5 0.4 0.3 7.3 15.6 n.a. Holdings Ltd 01224 HK 6,988.2 1.800 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Holdin Group 01777 HK 8,702.0 1.510 5.1 3.9 3.1 0.4 0.3 0.3 6.0 7.5 n.a.

Yuexiu Real Estate 00405 HK 16,013.5 5.290 14.2 17.1 17.1 0.9 0.9 0.9 7.1 6.5 21.1 中国恒大 Co Central China Real Estate 00832 HK 9,282.7 3.790 6.8 4.7 4.4 0.9 0.8 0.7 4.0 13.3 4.1 Investmen China Sce Property 01966 HK 15,792.5 4.130 4.9 3.7 2.6 0.9 0.8 0.6 6.5 18.9 2.5 Top Spring International 03688 HK 4,346.2 3.140 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Holdings

Beijing Capital Land Ltd-H 02868 HK 12,959.7 4.280 n.a. n.a. n.a. n.a. n.a. n.a. 7.8 n.a. n.a. Evergrande Hld Zhong An Real Estate Ltd 00672 HK 2,967.0 0.510 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Beijing North Star Co Ltd-H 00588 HK 15,560.4 2.900 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. China South City Holdings 01668 HK 13,776.5 1.720 8.3 7.3 5.7 0.5 0.4 0.4 3.9 10.5 14.4 Glorious Property Holdings 00845 HK 5,143.1 0.660 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Median 6.2 4.5 3.8 0.6 0.5 0.5 4.3 10.9 5.9

Simple Average 7.5 6.7 5.7 0.6 0.6 0.5 5.0 11.0 9.0

Weighted Average 7.5 7.0 6.0 0.6 0.6 0.5 5.2 11.2 9.5 Source: the Company, Guotai Junan International.

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Company

See the last page for disclaimer Page 6 of 8 [Table_PageHeader] Evergrande (03333 HK)

Financial Statements and Ratios

[Table_IncomeStatement] [Table_BalanceSheet] ] 1 r a M t h g i R _ e l b a T [

Income Statement Balance Sheet

Year end 31 Dec (RMB m) 2016A 2017A 2018F 2019F 2020F Year end 31 Dec (RMB m) 2016A 2017A 2018F 2019F 2020F

Total Revenue 211,444 311,022 435,899 548,015 657,796 PPE 20,833 32,898 39,478 43,425 47,768

- Sales of Properties 203,890 302,384 425,756 536,378 644,530 Land Use Rights 5,401 7,935 8,729 9,601 10,561

- Other Income 7,554 8,638 10,143 11,637 13,266 Investment Property 132,045 151,950 167,145 183,860 202,245

Cost of Sales (152,022) (198,760) (275,416) (350,291) (425,209) Other Non-current Assets 78,954 46,022 37,527 37,383 37,215

Gross Profit 59,422 112,262 160,482 197,725 232,587 Total Non-current Assets 237,233 238,805 252,878 274,269 297,790 14 May2018

- Change in Fair Value of IPs 5,124 8,513 9,364 10,301 11,331 Cash & Cash Equivalents 198,420 152,008 248,596 319,192 366,408

- SG&A (25,581) (29,456) (34,022) (37,115) (44,537) Properties under Development 577,851 851,363 976,030 1,092,547 1,208,642

- Other Gains, Net 9,260 (6,074) (966) (732) (330) Completed Properties 80,776 102,158 117,482 135,104 155,370 Operating Profit 48,225 85,245 134,859 170,178 199,050 Restricted Cash 105,909 135,714 149,285 164,214 180,635 - Others (62) 145 1,448 889 1,034 Trade and Other Receivables 76,434 120,782 169,277 212,816 255,448

- Finance income/(costs), net (11,301) (7,917) (10,726) (12,117) (13,219) Other Current Assets 74,245 160,922 186,477 172,780 168,357

Profit before Tax 36,862 77,473 125,581 158,951 186,865 Total Current Assets 1,113,635 1,522,947 1,847,147 2,096,653 2,334,860

Income Tax (19,245) (40,424) (66,315) (82,856) (95,773) Total Assets 1,350,868 1,761,752 2,100,025 2,370,923 2,632,650

Profit after Tax 17,617 37,049 59,266 76,095 91,092

Non-controlling Interest (12,526) (12,677) (20,279) (26,037) (31,169) Advanced Proceeds Received 194,961 267,555 355,950 432,848 513,672

Shareholders' Profit / Loss 5,091 24,372 38,987 50,058 59,923 Trade and Other Payables 299,905 399,459 506,193 573,944 620,704

Adjusted Net Profit 5,058 23,638 35,923 46,734 56,249 Bank Borrowings 202,906 356,381 392,019 431,221 474,343

] 2 r a M t h g i R _ e l b a T [ Basic EPS 0.372 1.833 2.871 3.686 4.413 Other Current Liabilities 35,622 61,460 77,882 88,306 95,500

Underlying EPS (RMB) 0.364 1.741 2.645 3.441 4.142 Total Current Liabilities 733,394 1,084,855 1,332,045 1,526,319 1,704,218 Long-term Borrowings 332,164 376,244 395,056 406,908 419,115

[Table_CashFlowStatement] Cash Flow Statement Deferred Income Tax Liabilities 38,424 51,556 65,332 74,076 80,111

Year end 31 Dec (RMB m) 2016A 2017A 2018F 2019F 2020F Other Long-term Liabilities 54,354 6,889 6,119 5,472 4,926

Operating Activities Total Non-current Liabilities 424,942 434,689 466,506 486,455 504,152

Profit before Taxation 17,617 37,049 59,266 76,095 91,092 Total Liabilities 1,158,336 1,519,544 1,798,551 2,012,774 2,208,370

Income Tax Expenses 19,245 40,424 66,315 82,856 95,773

D&A 1,964 1,994 3,317 3,648 4,013 Total Shareholders' Equity 44,240 114,772 153,759 184,396 219,359

Others (3,924) 1,918 (2,444) (1,972) (1,870) Minority Interest 148,292 127,436 147,715 173,752 204,921

Changes in Working Capital: (49,530) (161,287) (1,731) (1,218) (27,201) Total Equity 192,532 242,208 301,474 358,149 424,280

Net Cash from Operations (14,628) (79,902) 124,722 159,409 161,807 [Table_FinancialRatio] Tax Paid (13,106) (16,999) (66,315) (82,856) (95,773) Financial Ratios

2016A 2017A 2018F 2019F 2020F (03333 HK) Interest Paid (30,876) (54,072) (67,700) (74,572) (80,248)

Cash from Operating Activities (58,610) (150,973) (9,293) 1,981 (14,214) Revenue Growth (%) 19.5 58.8 47.1 40.2 25.7

Investing Activities Gross Profit Growth (%) 17.7 58.8 88.9 43.0 23.2

Additions to PPE and IPs (15,927) (14,369) (21,775) (20,662) (22,728) Reported Net Profit Growth (%) 0.0 0.0 0.0 0.0 0.0 中国恒大

Other Investing Cash Flow (103,632) (33,113) 13,094 5,075 5,072 Underlying Net Profit Growth (%) 10.3 10.7 34.2 34.2 34.2

Cash from Investing Activities (119,559) (47,482) (8,681) (15,587) (17,656)

Financing Activities Gross Margin (%) 28.1 36.1 36.8 36.1 35.4 Evergrande Debt Raised/(Repaid) 202,356 193,209 54,450 51,054 55,329 Operating Profit Margin (%) 22.8 27.4 30.9 31.1 30.3 Dividends Paid (5,481) (241) 0 (19,420) (24,960) Adjusted Net Margin (%) 2.4 7.6 8.2 8.5 8.6

Repayment of Perputuity 59,754 0 0 0 0 ROE (%) 10.7 30.7 29.0 29.6 29.7

Other Financing Cash Flow 16,450 (40,055) 60,547 52,786 48,825 ROCE (%) 13.8 15.4 19.6 24.2 26.8

Cash from Financing Activities 273,079 152,913 114,997 84,419 79,194 ROA (%) 3.6 4.8 6.4 7.2 7.6

Net Changes in Cash 94,910 (45,542) 97,023 70,814 47,324

Cash at Beg of Year 103,090 198,420 152,008 248,596 319,192 Net Gearing Ratio 289.9 183.7 129.1 99.0 81.6

Exchange Losses 420 (870) (435) (218) (109) Debt to Equity Ratio 1,209.5 638.3 511.9 454.5 407.3

Cash at End of Year 198,420 152,008 248,596 319,192 366,408 Underlying P/E (x) 62.4 11.8 7.8 6.0 5.0

P/E (Basic) (x) 61.0 11.2 7.2 5.6 4.7

P/E (Diluted) (x) 62.0 11.4 7.2 5.6 4.7

P/B (x) 7.0 2.4 1.8 1.5 1.3

Dividend Yield (%) 0.0 0.0 7.0 9.0 10.7

Source: the Company, Guotai Junan International.

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Company

See the last page for disclaimer Page 7 of 8 [Table_PageHeader] Evergrande (03333 HK)

Company[Table_CompanyRatingDefinition] Rating Definition

The Benchmark: Hong Kong Hang Seng Index ] 1 r a M t h g i R _ e l b a T [

Time Horizon: 6 to 18 months

Rating Definition

Buy 买入 Relative Performance>15%; or the fundamental outlook of the company or sector is favorable. Accumulate 收集 Relative Performance is 5% to 15%;

or the fundamental outlook of the company or sector is favorable. 14 May2018 Neutral 中性 Relative Performance is -5% to 5%; or the fundamental outlook of the company or sector is neutral. Reduce 减持 Relative Performance is -5% to -15%; or the fundamental outlook of the company or sector is unfavorable.

Sell 卖出 Relative Performance <-15%; or the fundamental outlook of the company or sector is unfavorable.

Sector[Table_ RatingIndustry DefinitionRatingDefinition] The Benchmark: Hong Kong Hang Seng Index Time Horizon: 6 to 18 months Rating Definition Outperform 跑赢大市 Relative Performance>5%;

] 2 r a M t h g i R _ e l b a T [ or the fundamental outlook of the sector is favorable. Neutral 中性 Relative Performance is -5% to 5%; or the fundamental outlook of the sector is neutral. Underperform 跑输大市 Relative Performance<-5%; Or the fundamental outlook of the sector is unfavorable.

[DISCLOSURETable_DISCLOSUREOFINTERESTS OF INTERESTS ] (1) The Analysts and their associates do not serve as an officer of the issuer mentioned in this Research Report. (2) The Analysts and their associates do not have any financial interests in relation to the issuer mentioned in this Research Report.

(3) Except for GREENLAND BROAD (01253 HK),KAISA GROUP (01638 HK),GUOTAI JUNAN I (01788 HK),BINHAI INVESTMENT (02886

HK),GFI MSCI A I (03156 HK),CAM SCSMALLCAP (03157 HK),ZHENRO PPT (06158 HK),LINK HOLDINGS (08237 HK),GFI MSCI A I-R (CNY) (83156 HK),Guotai Junan and its group companies do not hold equal to or more than 1% of the market capitalization of the issuer mentioned in this Research Report.

(4) Guotai Junan and its group companies have not had investment banking relationships with the issuer mentioned in this Research Report (03333 HK)

within the preceding 12 months. (5) Guotai Junan and its group companies are not making a market in the securities in respect of the issuer mentioned in this Research Report. (6) Guotai Junan and its group companies have not employed an individual serving as an officer of the issuer mentioned in this Research Report. There is no officer of the issuer mentioned in this Research Report associated with Guotai Junan and its group companies. 中国恒大

Evergrande DISCLAIMER

This Research Report does not constitute an invitation or offer to acquire, purchase or subscribe for securities by Guotai Junan Securities (Hong Kong) Limited ("Guotai Junan"). Guotai Junan and its group companies may do business that relates to companies covered in research reports, including investment banking, investment services, etc. (for example, the placing agent, lead manager, sponsor, underwriter or invest proprietarily).

Any opinions expressed in this report may differ or be contrary to opinions or investment strategies expressed orally or in written form by sales persons, dealers and other professional executives of Guotai Junan group of companies. Any opinions expressed in this report may differ or be contrary to opinions or investment decisions made by the asset management and investment banking groups of Guotai Junan.

Though best effort has been made to ensure the accuracy of the information and data contained in this Research Report, Guotai Junan does not guarantee the accuracy and completeness of the information and data herein. This Research Report may contain some forward-looking estimates and forecasts derived from the assumptions of the future political and economic conditions with inherently unpredictable and mutable situation, so uncertainty may contain. Investors should understand and comprehend the investment objectives and its related risks, and where necessary consult their own financial advisers prior to any investment decision.

This Research Report is not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in

any jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation or which would subject

Guotai Junan and its group companies to any registration or licensing requirement within such jurisdiction.

Report

© 2018 Guotai Junan Securities (Hong Kong) Limited. All Rights Reserved. 27/F., Low Block, Grand Millennium Plaza, 181 Queen’s Road Central, Hong Kong. Tel.: (852) 2509-9118 Fax: (852) 2509-7793

Website: www.gtja.com.hk

Company

See the last page for disclaimer Page 8 of 8