31 DECEMBER 2014

EQUITIES RESEARCH

CHINA INDUSTRIALS

Rail juggernaut: CSR-CNR merger announced

CSR to acquire CNR by offering 1.1 A/H new shares for every 1 A/H share of CNR
CSR (1766 HK; BUY; CP: HKD7.89; TP: HKD8.1) and China CNR Corp (6199 HK;
BUY; CP: HKD7.66; TP: HKD9.95) formally announced on 30 December that the
Board of Directors of both companies have approved CSR’s acquisition of CNR by
offering 1.1 A/H new shares for every 1 A/H existing share of CNR. The new shares
will be listed in the A/H markets, pending related authorities’ approval. After
consolidation, the new company will be named CRRC Corporation. Both CSR and
CNR will resume trading on 31 December.

Terms of acquisition appear more favourable to CSR than CNR at first glance
Prior to the announcement, CSR was trading at a 36% premium to CNR on 2015E
P/E (H-share). Under the terms of the deal, CNR shareholders get only 10% more
shares. In effect, CSR shareholders get 51% of the combined company by
contributing only 44% of the combined earnings, while CNR shareholders get 49%
after contributing 56% of the earnings (pre-synergies). Hence, on our 2015
earnings estimates, the deal is accretive to CSR shareholders by 15% while it is
dilutive to CNR shareholders by 12%.

35% cost savings on selling expenses or a change of merger ratio to 1.4x could
make the deal win-win for both parties, with significant upside potential
On our conservative base case, the earnings dilution to CNR shareholders could
be eliminated through cost savings of 35% on selling expenses alone. Of course,
the merger ratio could also be changed during the approval process and a ratio of
1.4x would achieve the same result. If synergies rise to RMB5b post tax (feasible
on a combined COGS of RMB210b and SG&A of RMB27b), the deal would be 19%
accretive to CNR and over 50% accretive to CSR shareholders, on our
calculations.

Zhuzhou CSR may purchase the competing business of CNR from the new CRRC
To solve the potential competition between Zhuzhou CSR (3898 HK; BUY) and the
new CRRC’s drive control systems, which currently belong to CNR, Zhuzhou will
have first refusal to buy the competing business from CRRC, and require CRRC to
sell it that business. We think this indicates the drive control system sales/orders
CNR has and will have before the deal completes may not automatically transfer to
Zhuzhou CSR. In the long term, Zhuzhou’s revenue and earnings could double,
depending on how it acquires the competing business of CNR.

Victoria Li
Victoria.li@asia.bnpparibas.com
+852 2825 1135

Our research is available on Thomson One, Bloomberg, TheMarkets.com, Factset and on http://eqresearch.bnpparibas.com/index. Please contact your salesperson for
authorisation. Please see the important notice on the back page.

PREPARED AND PUBLISHED BY NON-US BROKER-DEALER(S): BNP PARIBAS SECURITIES (ASIA) LTD
THIS MATERIAL HAS BEEN APPROVED FOR U.S. DISTRIBUTION. ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES CAN BE FOUND AT APPENDIX ON PAGE 5
CHINA INDUSTRIALS Victoria Li

EXHIBIT 1: CSR/CNR merger accretion analysis

Share numbers ------ Net earnings -----

2014E 2015E

Before the deal

CSR 13,803 5,307 6,386

CNR 12,260 6,658 8,134

CSR shareholders - CRRC shares 13,803 6,052 7,344

CNR shareholders - CRRC shares 13,486 5,913 7,175

Total no: of CRRC shares 27,289 11,965 14,519

% of CRRC CSR shareholders 51 44 44

% of CRRC CNR shareholders 49 56 56

Base case

Accretion for CSR share holders 14 15

Accretion for CNR share holders (11) (12)

Accretion if synergies of 35% on selling expenses

CRRC 16,532

Accretion for CSR shareholders (%) 31

Accretion for CNR shareholders (%) 0

Accretion if synergies of RMB5b post tax

CRRC 19,519

Accretion for CSR shareholders (%) 55

Accretion for CNR shareholders (%) 19

Source: BNP Paribas estimates

2 BNP PARIBAS 31 DECEMBER 2014

CHINA INDUSTRIALS Victoria Li

Background information
th
Potential overseas demand for MUs three times that of China’s 12 Five-Year
Plan
We believe the major reason for this merger is to eliminate the potential price
war between CSR and CNR, and increase Chinese train products’
competitiveness in the world. Moreover, in the Multiple Unit (MU) segment, the
new corporate could offer flexible products based on both EU and JP technologies,
to meet the demands of most other countries, which suggests more chance of
winning overseas orders. Also, the new corporate would have better capability on
financing for overseas orders, which is an important factor in securing big orders,
especially in developing countries.

EXHIBIT 2: CSR and CNR have the best margins among global peers
(%)

6
Operating margin for latest

4
fiscal year

0
Kawasaki - Rolling Stock Alstom - Transport Bombardier -Transportation CSR China CNR
Sources: Bloomberg; BNP Paribas

EXHIBIT 3: The new corporate would be the biggest rolling stock company in the world
(USD m)
32,000
Revenue for latest fiscal year

28,000

24,000

20,000

16,000

12,000

8,000

4,000

0
Kawasaki - Rolling Stock Alstom - Transport Bombardier -Transportation CSR + CNR

Sources: Bloomberg; BNP Paribas

Given recent developments in China breaking into the Russian and Indian high-
speed rail (HSR) markets, we expect overseas demand to be a new earnings driver
for Chinese rail equipment companies. Currently, only 8-10% of revenue comes from
overseas markets. In 2016-20, we estimate overseas demand for MUs will contribute
12% of China’s MU segment revenue, based on the Russia and India HSR projects.
On a longer-term view, potential MU demand from major overseas markets is about
342% of China’s MU demand in the 12th Five-Year Plan (FYP), or 421% of China’s
2015E demand for all rail equipment.

3 BNP PARIBAS 31 DECEMBER 2014

CHINA INDUSTRIALS Victoria Li

EXHIBIT 4: Potential overseas MU demand three times as big as in China’s 12th

FYP

China demand in
2011-15 US
22.6% 23.1%

Canada
2.5%

One Belt & One

road Europe
11.2% 17.3%

India
10.9% Russia
12.5%

Note: Blue represents the markets where Chinese companies will have orders; grey represents markets where
Chinese companies have no exposure as yet.
Source: BNP Paribas estimates

In the domestic market there are more positives than negatives

Positive effects 1) The new corporate would have better pricing power over CRC
(China Railway Corporation, Not listed), the sole client in China, which should
translate into better margins and higher earnings growth in the next few years. 2)
R&D costs should be lower, as currently CSR and CNR are both spending on
developing new models/tech for train products. 3) The new corporate may consider
giving up non-rail businesses that have weak profitability, as it would no longer be
necessary to expand revenue scope in order to compete.

Negative effect The new corporate may turn out to be less efficient and have less
incentive to develop technology upgrades, due to a lack of market competition.

4 BNP PARIBAS 31 DECEMBER 2014

CHINA INDUSTRIALS Victoria Li

Disclaimers and Disclosures

APPENDIX
DISCLAIMERS AND DISCLOSURES APPLICABLE TO NON-US BROKER-DEALER(S): BNP Paribas Securities (Asia) Ltd
ANALYST(S) CERTIFICATION
Victoria Li, BNP Paribas Securities (Asia) Ltd, +852 2825 1135, Victoria.li@asia.bnpparibas.com.

The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certify(ies) that (i) all views expressed in this report accurately
reflect the personal view of the analyst(s) with regard to any and all of the subject securities, companies or issuers mentioned in this report; and (ii) no part
of the compensation of the analyst(s) was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the research
analyst herein.
Analysts mentioned in this disclaimer are employed by a non-US affiliate of BNP Paribas Securities Corp., and are not registered/ qualified pursuant to NYSE
and/or FINRA regulations.

IMPORTANT DISCLOSURES REQUIRED IN THE UNITED STATES BY FINRA RULES AND OTHER JURISDICTIONS
"BNP Paribas’’ is the marketing name for the global banking and markets business of BNP Paribas Group. No portion of this report was prepared by BNP
Paribas Securities Corp (US) personnel, and it is considered Third-Party Affiliate research under NASD Rule 2711. The following disclosures relate to
relationships between companies covered in this research report and the BNP entity identified on the cover of this report, BNP Securities Corp., and other
entities within the BNP Paribas Group (collectively, "BNP Paribas").

The disclosure column in the following table lists the important disclosures applicable to each company that has been rated and/or recommended in this
report:

Company Ticker Disclosure (as applicable)

CSR 1766 HK 6

BNP Paribas represents that:

1. Within the past year, it has managed or co-managed a public offering for this company, for which it received fees.
2. It had an investment banking relationship with this company in the last 12 months.
3. It received compensation for investment banking services from this company in the last 12 months.
4. It expects to receive or intends to seek compensation for investment banking services from the subject company/ies in the next 3 months.
5. It beneficially owns 1% or more of any class of common equity securities of the subject company.
6. It makes a market in securities in respect of this company.
7. The analyst(s) or an individual who assisted in the preparation of this report (or a member of his/her household) has a financial interest position in
securities issued by this company. The financial interest is in the common stock of the subject company, unless otherwise noted.
8. The analyst (or a member of his/her household) is an officer, director, or advisory board member of this company or has received compensation from the
company.

IMPORTANT DISCLOSURES REQUIRED IN KOREA

The disclosure column in the following table lists the important disclosures applicable to each Korea listed company that has been rated and/or
recommended in this report:

Company Ticker Price (as of 30-Dec-2014 closing price) Interest

N/A N/A N/A NA

1. The performance of obligations of the Company is directly or indirectly guaranteed by BNP Paribas Securities Korea Co. Ltd (‘‘BNPPSK’’) by means of
payment guarantees, endorsements, and provision of collaterals and/or taking over the obligations.
2. BNPPSK owns 1/100 or more of the total outstanding shares issued by the Company.
3. The Company is an affiliate of BNPPSK as prescribed by Item 3, Article 2 of the Monopoly Regulation and Fair Trade Act.
4. BNPPSK is the financial advisory agent of the Company for the Merger and Acquisition transaction or of the Target Company whereby the size of the
transaction does not exceed 5/100 of the total asset of the Company or the total number of outstanding shares.
5. BNPPSK has taken financial advisory service regarding listing to the Company within the past 1 year.
6. With regards to the tender offer initiated by the Company based on Item 2, Article 133 of the Financial Investment Services and Capital Market Act,
BNPPSK acts in the capacity of the agent for the tender offer designated either by the Company or by the target company, provided that this provision
shall apply only where tender offer has not expired.
7. The listed company which issued the stocks in question in case where 40 days has not passed since the new shares were listed from the date of entering
into arrangement for public offering or underwriting-related agreement for issuance of stocks
8. The Company that has signed a nominated advisor contract with BNPPSK as defined in Item 2 of Article 8 of the KONEX Market Listing Regulation.
9. The Company is recognized as having considerable interests with BNPPSK in relation to No.1 to No. 8.
10. The analyst or his/her spouse owns (including delivery claims of marketable securities based on legal regulations and trading and misc. contracts) the
following securities or rights (hereinafter referred to as ‘‘Securities, etc.’’ in this Article) regardless of whose name is used in the trading.
1) Stocks, bond with stock certificate, and certificate of pre-emptive rights issued by the Company whose securities dealings are being solicited.
2) Stock options of the Company whose securities dealings are being solicited.
3) Individual stock future, stock option, and warrants that use the stocks specified in Item 1) as underlying.

5 BNP PARIBAS 31 DECEMBER 2014

CHINA INDUSTRIALS Victoria Li

History of change in investment rating and/or target price

CSR (1766 HK)

Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Date Reco TP
29-Dec-11 BUY 8.30
8.71

7.71

6.71

5.71

4.71

3.71
(HKD) CSR Target Price
Victoria Li started covering this stock from 09-Sep-2014
Price and TP are in local currency
Valuation and risks: We have a P/E-based TP (14x 2015E P/E). Downside risks include 1) new orders and product delivery of MU and RTV are delayed vs company’s guidance;2)
central government stops supporting rail investment; 3) SOE reform is introduced to CRC, which might lead to short-term suspension of rail investment. If any of the above
happens, CSR’s earnings could surprise on the downside.
Sources: Bloomberg; BNP Paribas

China CNR Corp (6199 HK)

May-14 Nov-14 Date Reco TP
9-Sep-14 BUY 9.95
10.51

9.51

8.51

7.51

6.51

5.51

4.51
(HKD) China CNR Corp Target Price
Victoria Li started covering this stock from 09-Sep-2014
Price and TP are in local currency
Valuation and risks: We have a P/E-based TP (12x 2015E P/E). Downside risks include 1) new orders and product delivery of MU and RTV are delayed vs company’s guidance;2)
central government stops supporting rail investment; 3) SOE reform is introduced to CRC, which might lead to short-term suspension of rail investment; and 4) slower than
expected introduction of CNR’s self-supply converters. If any of the above happens, CNR’s earnings could surprise on the downside.
Sources: Bloomberg; BNP Paribas

GENERAL DISCLAIMER
This report was produced by BNP Paribas Securities (Asia) Ltd, member company(ies) of the BNP Paribas Group.
This report is for the use of intended recipients only and may not be reproduced (in whole or in part) or delivered or transmitted to any other person without
our prior written consent. By accepting this report, the recipient agrees to be bound by the terms and limitations set forth herein.
This report does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of
individual clients. Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging in any
trading activity. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or other
investments. This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this report.
Information and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without the
recipient’s own independent verification, or taken in substitution for the exercise of judgment by the recipient. Additionally, the products mentioned in this
report may not be available for sale in certain jurisdictions.
As an investment bank with a wide range of activities, BNP Paribas may face conflicts of interest, which are resolved under applicable legal provisions and
internal guidelines. You should be aware, however, that BNP Paribas may engage in transactions in a manner inconsistent with the views expressed in this
document, either for its own account or for the account of its clients.
Australia: This report is being distributed in Australia by BNP Paribas Sydney Branch, registered in Australia as ABN 23 000 000 117 at 60 Castlereagh Street
Sydney NSW 2000. BNP Paribas Sydney Branch is licensed under the Banking Act 1959 and the holder of Australian Financial Services Licence no. 238043 and
therefore subject to regulation by the Australian Securities & Investments Commission in relation to delivery of financial services. By accepting this document
you agree to be bound by the foregoing limitations, and acknowledge that information and opinions in this document relate to financial products or financial
services which are delivered solely to wholesale clients (in terms of the Corporations Act 2001, sections 761G and 761GA; Corporations Regulations 2001,
division 2, reg. 7.1.18 & 7.1.19) and/or professional investors (as defined in section 9 of the Corporations Act 2001).
Canada: The information contained herein is not, and under no circumstances is to be construed as, a prospectus, an advertisement, a public offering, an
offer to sell securities described herein, or solicitation of an offer to buy securities described herein, in Canada or any province or territory thereof. Any offer
or sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevant
Canadian securities regulators and only by a dealer properly registered under applicable securities laws or, alternatively, pursuant to an exemption from the
dealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made. The information contained herein is under

6 BNP PARIBAS 31 DECEMBER 2014

CHINA INDUSTRIALS Victoria Li

no circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient. To the extent
that the information contained herein references securities of an issuer incorporated, formed or created under the laws of Canada or a province or territory
of Canada, any trades in such securities must be conducted through a dealer registered in Canada. No securities commission or similar regulatory authority in
Canada has reviewed or in any way passed judgment upon these materials, the information contained herein or the merits of the securities described herein,
and any representation to the contrary is an offence.
Hong Kong: This report is prepared for professional investors and is being distributed in Hong Kong by BNP Paribas Securities (Asia) Limited to persons whose
business involves the acquisition, disposal or holding of securities, whether as principal or agent. BNP Paribas Securities (Asia) Limited, a subsidiary of BNP
Paribas, is regulated by the Securities and Futures Commission for the conduct of dealing in securities, advising on securities, providing automated trading
services, dealing in futures contacts and advising on corporate finance. For professional investors in Hong Kong, please contact BNP Paribas Securities (Asia)
Limited for all matters and queries relating to this report.
India: In India, this document is being distributed by BNP Paribas Securities India Pvt. Ltd. ("BNPPSIPL"), having its registered office at 5th floor, BNP Paribas
House, 1 North Avenue, Maker Maxity, Bandra Kurla Complex, Bandra (East), Mumbai 400 051 (Tel. no. +91 22 3370 4000 / 6196 4000 / Fax no. +91 22 3370
4363). BNPPSIPL is registered with the Securities and Exchange Board of India (‘‘SEBI’’) as a stockbroker in the Equities and the Futures & Options segments of
National Stock Exchange of India Ltd. and Bombay Stock Exchange Ltd. (SEBI Regn. Nos.: INB/INF231474835, INB/INF011474831; CIN:
U74920MH2008FTC182807; Website: www.bnpparibas.co.in).
Indonesia: This report is being distributed by PT BNP Paribas Securities Indonesia and is delivered by its licensed employee(s), including marketing/sales
person, to its client. PT BNP Paribas Securities Indonesia, having its registered office at Menara BCA, 35th floor, Grand Indonesia, JL. M.H. Thamrin No.1,
Jakarta 10310, Indonesia, is a subsidiary company of BNP Paribas SA and licensed under Capital Market Law no. 8 year 1995, a holder of broker-dealer and
underwriter licenses issued by the Capital Market and Financial Institution Supervisory Agency (now Otoritas Jasa Keuangan/OJK). PT BNP Paribas Securities
Indonesia is also a member of Indonesia Stock Exchange and supervised by Otoritas Jasa Keuangan (OJK). Neither this report nor any copy hereof may be
distributed in Indonesia or to any Indonesian citizens except in compliance with applicable Indonesian capital market laws and regulations. This report is not
an offer of securities in Indonesia and may not be distributed within the territory of the Republic of Indonesia or to Indonesian citizens in circumstance which
constitutes an offering within the meaning of Indonesian capital market laws and regulations.
Japan: This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary or affiliate of BNP Paribas not
registered as a financial instruments firm in Japan, to certain financial institutions defined by article 17-3, item 1 of the Financial Instruments and Exchange
Law Enforcement Order. BNP Paribas Securities (Japan) Limited is a financial instruments firm registered according to the Financial Instruments and
Exchange Law of Japan and a member of the Japan Securities Dealers Association, the Financial Futures Association of Japan and the Type II Financial
Instruments Firms Association. BNP Paribas Securities (Japan) Limited accepts responsibility for the content of a report prepared by another non-Japan
affiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited. Some of the foreign securities stated on this report are not
disclosed according to the Financial Instruments and Exchange Law of Japan.
Malaysia: This report is issued and distributed by BNP Paribas Capital (Malaysia) Sdn Bhd. The views and opinions in this research report are our own as of
the date hereof and are subject to change. BNP Paribas Capital (Malaysia) Sdn Bhd has no obligation to update its opinion or the information in this research
report. This publication is strictly confidential and is for private circulation only to clients of BNP Paribas Capital (Malaysia) Sdn Bhd. This publication is
being provided to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or
reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose
without the prior written consent of BNP Paribas Capital (Malaysia) Sdn Bhd.
Philippines: This report is being distributed in the Philippines by BNP Paribas Manila Branch, an Offshore Banking Unit (OBU) of BNP Paribas whose head
office is in Paris, France. BNP Paribas Manila OBU is registered as an offshore banking unit under Presidential Decree No. 1034 (PD 1034), and regulated by
the Bangko Sentral ng Pilipinas. This report is being distributed in the Philippines to qualified clients of OBUs as allowed under PD 1034, and is qualified in its
entirety to the products and services allowed under PD 1034.
Singapore: This report is distributed in Singapore by BNP Paribas Securities (Singapore) Pte Ltd ("BNPPSSL") and may be distributed in Singapore only to an
Accredited or Institutional Investor, each as defined under the Financial Advisers Regulations ("FAR") and the Securities and Futures Act (Chapter 289) of
Singapore, as amended from time to time. In relation to the distribution to such categories of investors, BNPPSSL and its representatives are exempted under
Regulation 35 of the FAR from the requirements in Section 36 of the Financial Advisers Act of Singapore, regarding the disclosure of certain interests in, or
certain interests in the acquisition or disposal of, securities referred to in this report. For Institutional and Accredited Investors in Singapore, please contact
BNP Paribas Securities (Singapore) Ptd Ltd (company registration number: 199801966C; address: 10 Collyer Quay, 34/F Ocean Financial Centre, Singapore
049315; tel: (65) 6210 1288; fax: (65) 6210 1980) for all matters and queries relating to this report.
South Africa: In South Africa, BNP Paribas Cadiz Securities (Pty) Ltd and BNP Paribas Cadiz Stock Broking (Pty) Ltd (hereinafter referred to as ‘‘BNPP Cadiz’’)
are licensed members of Johannesburg Stock Exchange and are authorised Financial Services Providers and subject to regulation by the Financial Services
Board. BNPP Cadiz does not expressly or by implication represent, recommend or propose that the financial products referred to in this report are
appropriate to the particular investment objectives, financial situation or particular needs of the recipient.
South Korea: BNP Paribas Securities Korea is registered as a Licensed Financial Investment Business Entity under the FINANCIAL INVESTMENT SERVICES AND
CAPITAL MARKETS ACT and regulated by the Financial Supervisory Service and Financial Services Commission. This document does not constitute an offer to
sell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in South Korea.
Switzerland: This report is intended solely for customers who are ‘‘Qualified Investors’’ as defined in article 10 paragraphs 3 and 4 of the Swiss Federal Act on
Collective Investment Schemes of 23 June 2006 (CISA) and the relevant provisions of the Swiss Federal Ordinance on Collective Investment Schemes of 22
November 2006 (CISO). ‘‘Qualified Investors’’ includes, among others, regulated financial intermediaries such as banks, securities dealers, fund management
companies and asset managers of collective investment schemes, regulated insurance companies as well as pension funds and companies with professional
treasury operations. This document may not be suitable for customers who are not Qualified Investors and should only be used and passed on to Qualified
Investors. For specification purposes, a ‘‘Swiss Corporate Customer’’ is a Client which is a corporate entity, incorporated and existing under the laws of
Switzerland and which qualifies as ‘‘Qualified Investor’’ as defined above." BNP Paribas (Suisse) SA is authorised as bank and as securities dealer by the Swiss
Federal Market Supervisory Authority FINMA. BNP Paribas (Suisse) SA is registered at the Geneva commercial register under No. CH-270-3000542-1. BNP
Paribas (Suisse) SA is incorporated in Switzerland with limited liability. Registered Office: 2 place de Hollande, CH-1204 Geneva.
Taiwan: Information on securities that trade in Taiwan is distributed by BNP Paribas Securities (Taiwan) Co., Ltd. Such information is for your reference only.
The reader should independently evaluate the investment risks and is solely responsible for their investment decision. Information on securities that do not
trade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securities. BNP Paribas
Securities (Taiwan) Co., Ltd. may not execute transactions for clients in these securities. This publication may not be distributed to the public media or
quoted or used by the public media without the express written consent of BNP Paribas.
Thailand: Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (‘‘BNPP’’) and Finansia
Syrus Securities Public Company Limited (‘‘FSS’’). FSS International Investment Advisory Securities Co Ltd (‘‘FSSIA’’) prepares and distributes research under
the brand name ‘‘BNP PARIBAS/FSS’’. BNPP is not an affiliate of FSSIA or FSS. FSS also publishes a different research product under the brand name ‘‘FINANSIA
SYRUS,’’ which is prepared by research analysts who are not part of FSSIA and who may cover the same securities, issuers, or industries that are the subject
of this report. The ratings, recommendations, and views expressed in this report may differ from the ratings, recommendations, and views expressed by
other research analysts or research teams employed by FSS. This report is being distributed outside Thailand by members of BNP Paribas.
Turkey: This report is being distributed in Turkey by TEB Investment (TEB YATIRIM MENKUL DEGERLER A.S., Teb Kampus D Blok Saray Mah. Kucuksu Cad.
Sokullu Sok., No:7 34768 Umraniye, Istanbul, Turkey, Trade register number: 358354, www.tebyatirim.com.tr) and outside Turkey jointly by TEB Investment

’
and BNP Paribas. Information, comments and suggestions on investment given in this material are not within the scope of investment consulting. The
investment consulting services are rendered tailor made for individuals by competent authorities considering the individuals risk and return preferences.
However the comments and recommendations herein are based on general principles. These opinions may not be consistent with your financial status as
well as your risk and return preferences. Therefore, making an investment decision only based on the information provided herein may not bear
consequences in parallel with your expectations. This material issued by TEB Yatırım Menkul Değerler A.Ş. for information purposes only and may be
changed without any prior notification. All rights reserved. No part of this material may be copied or reproduced in any manner without the written consent

7 BNP PARIBAS 31 DECEMBER 2014

CHINA INDUSTRIALS Victoria Li

of TEB Yatırım Menkul Değerler A.Ş. Although TEB Yatırım Menkul Değerler A.Ş. gathers the presented material that is current as possible, it does not
undertake that all the information is accurate or complete, nor should it be relied upon as such. TEB Yatırım Menkul Değerler A.Ş. assumes no responsibility
whatsoever in respect of or arising out or in connection with the content of this material to third parties. If any third party chooses to use the content of this
material as reference, he/she accepts and approves to do so entirely at his/her own risk.
United States: This report may be distributed in the United States only to U.S. Persons who are ‘‘major U.S. institutional investors’’ (as such term is defined in
Rule 15a-6 under the Securities Exchange Act of 1934, as amended) and is not intended for the use of any person or entity that is not a ‘‘major U.S.
institutional investor’’. U.S persons who wish to effect transactions in securities discussed herein must do so through BNP Paribas Securities Corp., a US-
registered broker dealer and member of FINRA, SIPC, NFA, NYSE and other principal exchanges.
Certain countries within the European Economic Area: This document may only be distributed in the United Kingdom to eligible counterparties and
professional clients and is not intended for, and should not be circulated to, retail clients (as such terms are defined in the Markets in Financial Instruments
Directive 2004/39/EC (‘‘MiFID’’)). This document will have been approved for publication and distribution in the United Kingdom by BNP Paribas London
Branch, a branch of BNP Paribas SA whose head office is in Paris, France. BNP Paribas SA is incorporated in France with limited liability with its registered
office at 16 boulevard des Italiens, 75009 Paris. BNP Paribas London Branch (registered office: 10 Harewood Avenue, London NW1 6AA; tel: [44 20] 7595 2000;
fax: [44 20] 7595 2555) is authorised by the Autorité de Contrôle Prudentiel and the Prudential Regulation Authority and subject to limited regulation by the
Financial Conduct Authority and Prudential Regulation Authority. Details about the extent of our authorisation and regulation by the Prudential Regulation
Authority, and regulation by the Financial Conduct Authority are available from us on request.This report has been approved for publication in France by BNP
Paribas, a credit institution licensed as an investment services provider by the Autorité de Contrôle Prudentiel whose head office is 16, Boulevard des Italiens
75009 Paris, France. This report is being distributed in Germany either by BNP Paribas London Branch or by BNP Paribas Niederlassung Frankfurt am Main,
regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin).
Other Jurisdictions: The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law, and persons into
whose possession this report comes should inform themselves about, and observe, any such restrictions. By accepting this report you agree to be bound by
the foregoing instructions. This report is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or
located in any locality, state, country, or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.
All research reports are disseminated and available to all clients simultaneously through our internal client websites. For all research available on a
particular stock, please contact the relevant BNP Paribas research team or the author(s) of this report.
Additional Disclosures
Target price history, stock price charts, valuation and risk details, and equity rating histories applicable to each company rated in this report is available in
our most recently published reports available on our website: http://eqresearch.bnpparibas.com, or you can contact the analyst named on the front of this
note or your BNP Paribas representative.
All share prices are as at market close on 30 December 2014 unless otherwise stated.
RECOMMENDATION STRUCTURE
Stock Ratings
Stock ratings are based on absolute upside or downside, which we define as (target price* - current price) / current price.
BUY (B). The upside is 10% or more.
HOLD (H). The upside or downside is less than 10%.
REDUCE (R). The downside is 10% or more.
Unless otherwise specified, these recommendations are set with a 12-month horizon. Thus, it is possible that future price volatility may cause a
temporary mismatch between upside/downside for a stock based on market price and the formal recommendation.
* In most cases, the target price will equal the analyst's assessment of the current fair value of the stock. However, if the analyst doesn't think the market will
reassess the stock over the specified time horizon due to a lack of events or catalysts, then the target price may differ from fair value. In most cases, therefore, our
recommendation is an assessment of the mismatch between current market price and our assessment of current fair value.
Industry Recommendations
Improving (é): The analyst expects the fundamental conditions of the sector to be positive over the next 12 months.
Stable (previously known as Neutral) (çè): The analyst expects the fundamental conditions of the sector to be maintained over the next 12
months.
Deteriorating (ê): The analyst expects the fundamental conditions of the sector to be negative over the next 12 months.
Country (Strategy) Recommendations
Overweight (O). Over the next 12 months, the analyst expects the market to score positively on two or more of the criteria used to determine
market recommendations: index returns relative to the regional benchmark, index sharpe ratio relative to the regional benchmark and index
returns relative to the market cost of equity.
Neutral (N). Over the next 12 months, the analyst expects the market to score positively on one of the criteria used to determine market
recommendations: index returns relative to the regional benchmark, index sharpe ratio relative to the regional benchmark and index returns
relative to the market cost of equity.
Underweight (U). Over the next 12 months, the analyst does not expect the market to score positively on any of the criteria used to determine
market recommendations: index returns relative to the regional benchmark, index sharpe ratio relative to the regional benchmark and index
returns relative to the market cost of equity.
RATING DISTRIBUTION (as at 30 December 2014)
Total BNP Paribas coverage universe 682 Investment Banking Relationship (%)

Buy 340 Buy 10.30

Hold 249 Hold 4.40

Reduce 93 Reduce 2.20

Should you require additional information concerning this report please contact the relevant BNP Paribas research team or the author(s) of this report.
© 2014 BNP Paribas Group

8 BNP PARIBAS 31 DECEMBER 2014