Sector Note Alpha series Consumer Staples Consumer … · Sector Note Alpha series Consumer Staples China May 24, 2018 IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS,

Sector Note │ Alpha series Consumer Staples│China│May 24, 2018

IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. IF THIS REPORT IS DISTRIBUTED IN THE UNITED STATES IT IS DISTRIBUTED BY CIMB SECURITIES (USA), INC. AND IS CONSIDERED THIRD-PARTY AFFILIATED RESEARCH.

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Consumer Staples - Overall Prices take a hike ■ We carried out a channel check to analyse price points of 431 staple products in the

past six quarters, and conclude that F&B players are key beneficiaries of price hikes. ■ Beverage price hikes were focused on classic RTD tea products, which have seen

strong sales growth momentum since 2H17. ■ We expect noodle prices to rise in 2H18F, benefiting Tingyi and UPC. ■ Dairy demand was strong in 1Q18 but promotions probably did not reduce, which

could imply some margin pressure on downstream dairy players including Mengniu. ■ Stay sector Overweight. Top picks: Tingyi, Uni-President China.

Price hikes a key theme for consumer staple plays this year “Price hikes” is a key theme for consumer staple sector in 2018F, as many producers began to raise ex-factory prices since 4Q17/1Q18 after years of stagnant prices. Our channel check analysed price points of 431 staple products in the past six quarters. The products spanned six key segments – noodle, beverages, dairy, beer, tissue paper and sanitary napkin. We conclude Tingyi and Uni-President China as key beneficiaries. Want Want will also benefit from price hike in FY19F as it raised selling prices in Apr-May.

Classic beverages lead price hike; watch out for noodles in 2H18F Price hikes in beverages mainly came from classic tea and juice products, including Tingyi and UPC’s iced red tea and green tea. These products have sold well since 2H17; Tingyi and UPC increased selling prices by c.3-5% for beverages in 1Q18. Within noodle segment, despite Tingyi’s ex-factory price hike in 4Q17, we have yet to observe changes in retail price. We believe distributors are absorbing the hikes for now, and expect noodle retail prices to gradually rise in 2H18F as UPC revises its pricing up.

Promotional level likely remained high for dairy Dairy products’ selling prices remained weak through YTD due to discounting for room temperature yoghurt products. We think promotional level likely remained high as domestic raw milk prices remained low YTD. Dairy demand was strong in 1Q18, with cumulative dairy output growing 6.4% yoy, which should benefit Mengniu and Want Want. We believe downstream dairy players are focusing on product mix upgrades to raise ASP, and the high promotions may impact their margins in 1H18.

Vinda is leading industry price hike for tissue paper segment Our checks found that Vinda increased ASP by 12.7% from 4Q17 to 2Q18. C&S and APP raised prices by 4.6%/3.6%, while Hengan’s prices were stable. Price hikes are skewed towards mass-market products, as Vinda is willing to sacrifice some market share to focus on higher margin products. Hengan’s tissue paper market share improved by c.2% pts yoy in 1Q18, while sanitary napkin and diaper market shares remained yoy stable. But tissue players will continue to suffer from the rising wood pulp prices in FY18.

Maintain Overweight on consumer staple sector We stay Overweight on consumer staples sector as we expect further recovery momentum riding on 1) continuous product mix upgrade, 2) further price hikes, 3) easing raw material price pressure, and 4) positive impact from the distribution channel reforms. Our top picks under the price hike theme are Tingyi and Uni-President China; we also like Want Want. Key risks include higher raw material prices and ineffective channel reforms.

Figure 1: MSCI China vs. MSCI China Consumer Staples Index relative performance

SOURCES: CGS-CIMB RESEARCH, BLOOMBERG

China

Overweight (no change)

Highlighted companies

Tingyi (Cayman Islands) ADD, TP HK$18.10, HK$16.08 close

We like Tingyi as we expect improvements in Tingyi’s noodle and beverage earnings and continued disposal of idle capacity in FY18F. Potential catalysts include strong noodle sales in 1Q18F and stronger margin expansion.

Uni-President China ADD, TP HK$9.50, HK$8.55 close

We like UPC as we are confident of further topline and margin recovery for the company in FY18F and FY19F. Potential share price catalysts include product price hikes and stronger margin expansion.

Want Want China ADD, TP HK$8.00, HK$7.10 close

We like Want Want as we expect earnings recovery from topline reacceleration and easing GPM pressure. Potential share price catalyst include better than expected dairy segment sales recovery.

Summary valuation metrics

Insert

Analyst(s)

Lei YANG, CFA

T (86) 21 5047 1771 x108 E [email protected]

ONG Khang Chuen T (852) 2539 1326 E [email protected]

P/E (x) Dec-18F Dec-19F Dec-20F

Tingyi (Cayman Islands) 32.57 28.67 25.67

Uni-President China 28.32 25.27 22.67

Want Want China 21.74 20.47

P/BV (x) Dec-18F Dec-19F Dec-20F

Tingyi (Cayman Islands) 3.74 3.48 3.24

Uni-President China 2.29 2.22 2.14

Want Want China 4.68 4.11

Dividend Yield Dec-18F Dec-19F Dec-20F

Tingyi (Cayman Islands) 1.54% 1.74% 1.95%

Uni-President China 2.88% 3.23% 3.60%

Want Want China 1.74% 1.95%

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MSCI China MSCI China Consumer Staples Index

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Consumer Staples│China

Consumer Staples - Overall│May 24, 2018

Prices take a hike

Food & Beverage

Expect noodle segment to hike prices in 2H18

Based on our channel check, noodle retail prices have been relatively stable, although Tingyi raised noodle selling price in 4Q17. On a yoy basis, the two largest companies – Tingyi’s and UPC’s noodle average selling prices (ASPs) have fluctuated -1.4%/+0.6% yoy. Meanwhile, other noodle producers have increased some selling prices, though more for individual products. Jinmailang was the only producer which raised selling prices of multiple products; we observe that its ASP increased by 4.9% yoy in 2Q18.

According to management, Tingyi raised its ex-factory price by c.3% in 4Q17. Uni-President China has not adjusted its pricing, but we expect it to revise the pricing of selected noodle products upwards in 2Q18 through lowering distributors’ discounts. So far, based on our observation that retail pricing of both Tingyi and UPC’s products remained stable, we believe the price hike by Tingyi has been absorbed by distributors for the time being. We expect the noodle retail prices to hike in 2H18 as UPC revises its pricing.

Instant noodle industry saw a rising trend in 2017, with sales volume and value growth of 0.3% and 3.6% respectively, according to AC Nielsen. High-end noodle is the fastest growing segment at +39.0% yoy sales volume growth in 2017. Both Tingyi and UPC are focused on grabbing market shares in high-end noodle segment (ASP >Rmb5/bowl) through continuous product mix upgrades.

Tingyi has been winning market share in high-end noodles (i.e. ASP >Rmb5/bowl, segment sales contribution 7.3%), with segment sales volume growth of 64.3% yoy outpacing the industry’s 39.0% in 2017. We expect the strong momentum to continue into FY18F. Boosted by ex-factory price hike of c.3% beginning 4Q17, we forecast Tingyi’s noodle segment to record sales growth of 7.3% yoy in FY18.

UPC’s high-end noodle segment is also growing well. It contributed c.21% of noodle sales in FY17 (FY16: 13%), and continues to record double-digit sales growth in 1Q18. Soup Daren, a key high-end noodle product of UPC, recorded c.70% yoy sales growth in FY17. In FY18, UPC introduced self-heating food Lazy Time and fresh cold noodle product Q-Fresh. It will also begin promoting its Teng Jiao noodle brand nationwide in 2018; we expect UPC’s noodle segment sales to rise 6.6% yoy in FY18.

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Figure 2: Noodle channel check

SOURCES: CGS-CIMB RESEARCH, JD.COM

Tingyi1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 qoq yoy

1 康师傅方便面（KSF）熬制高汤黑胡椒牛排面泡面五连包 Tingyi black pepper beef noodle 5 bags 14.9 14.9 14.9 14.9 14.9 14.9 0.0% 0.0%

2 康师傅方便面（KSF）熬制高汤金汤五花肉面袋装泡面五连包 Tingyi pork belly noodle 5 bags na na na na na 12.9 na na

3 康师傅方便面（KSF）熬制高汤酸酸辣辣豚骨袋面泡面五连包 Tingyi hot and sour pork noodle 5 bags 14.9 14.9 14.9 14.9 14.9 14.9 0.0% 0.0%

4 康师傅方便面（KSF）经典系列香辣牛肉泡面五连包 Tingyi spicy beef noodle 5 bags 12.5 12.5 12.5 12.5 11.3 12.5 10.6% 0.0%

5 康师傅方便面（KSF）大食袋香辣牛肉袋面泡面五连包 Tingyi spicy beef noodle (large) 5 bags 14.9 14.9 14.9 14.9 12.9 14.9 15.5% 0.0%

6 康师傅方便面（KSF）经典系列老坛酸菜牛肉面泡面五连包 Tingyi pickled cabbage beef noodle 5 bags 9.9 12.5 11.5 12.5 10.5 11.3 7.6% -9.6%

7 康师傅方便面（KSF）大食袋老坛酸菜牛肉袋面泡面五连包 Tingyi pickled cabbage beef noodle (large) 5 bags na na na 14.9 12.9 14.9 15.5% na

8 康师傅方便面（KSF）熬制高汤白胡椒肉骨面 12杯泡面整箱装 Tingyi w hite pepper beef noodle 12 cups na na na na na 47.8 na na

9 康师傅方便面（KSF）熬制高汤酸酸辣辣豚骨杯面 12杯泡面整箱装 Tingyi hot and sour pork noodle 12 cups 47.8 47.8 47.8 47.8 47.8 47.8 0.0% 0.0%

10 康师傅方便面（KSF）熬制高汤金汤肥牛面 12杯泡面整箱装 Tingyi fatty beef noodle 12 cups na na na na na 47.8 na na

11 康师傅方便面（KSF）干拌面老坛酸菜牛肉12碗整箱装 Tingyi pickled cabbage beef dry noodle 12 cups 59.9 59.9 59.9 59.9 59.9 59.9 0.0% 0.0%

12 康师傅方便面（KSF）爱鲜大餐秘制辣牛肉面味 12桶泡面整箱装 Tingyi spicy beef noodle 12 cups na na na na na 84.0 na na

13 康师傅方便面（KSF）红烧味匠汤牛腩杯面泡面整箱装 Tingyi beef brisket noodle 12 cups na na na na 59.8 59.8 0.0% na

14 康师傅方便面（KSF）随心杯红烧牛肉面 12杯杯装泡面整箱装 Tingyi braised beef noodle 12 cups na na na 35.9 35.9 35.9 0.0% na

15 康师傅方便面（ksf）DIY面醇香排骨面煮面袋装四入盒 Tingyi DIY pork ribs noodle 4 bags na na na na na 13.9 na na

Average selling price increase 4.9% -1.4%

Uni-President China

1 统一方便面汤达人日式豚骨味方便面五连包 UPC Soup Daren (Japanese style pork) 5 bags 19.9 20.5 21.6 21.6 21.6 21.6 0.0% 5.4%

2 统一方便面汤达人日式豚骨拉面 12杯整箱装 UPC Soup Daren (Japanese style pork) 12 cups 58.0 58.0 54.9 58.0 54.9 54.9 0.0% -5.3%

3 统一方便面汤达人日式豚骨味拉面 12碗整箱装 UPC Soup Daren (Japanese style pork) 12 bow ls 87.0 87.0 87.0 87.0 87.0 87.0 0.0% 0.0%

4 统一满汉大餐半筋半肉牛肉面 180克 6碗装 UPC Imperial Big Meal 6 bow ls 119.9 119.9 119.9 119.9 119.9 119.9 0.0% 0.0%

5 统一方便面冠军榜兰州牛肉面碗装 UPC Lanzhou beef noodle bow l 11.9 11.9 11.9 11.9 11.9 11.9 0.0% 0.0%

6 统一方便面来一桶卤肉面卤香牛肉味 12桶整箱装 UPC braised pork noodle 12 cups 46.5 46.5 46.5 46.5 46.5 46.5 0.0% 0.0%

7 统一方便面来一桶红烧牛肉味 12桶整箱装 UPC braised beef noodle 12 cups 46.6 46.6 46.6 46.6 46.6 43.9 -5.8% -5.8%

8 统一方便面来一桶老坛酸菜牛肉面（辣味） 12桶整箱装 UPC pickled cabbage beef noodle 12 cups 42.9 42.9 42.9 42.9 42.9 42.9 0.0% 0.0%

9 统一方便面红烧牛肉味五连包 UPC braised beef noodle 5 bags 10.5 10.5 11.9 11.9 11.9 11.9 0.0% 13.3%

10 统一香辣牛肉面方便面五连包 UPC spicy beef noodle 5 bags 12.5 12.5 10.8 12.5 12.5 12.5 0.0% 0.0%

11 统一巧面馆方便面油泼辣子酸汤面 116g袋面*5袋五连包 UPC spicy sour soup 5 bags na na na na 12.5 12.8 2.4% na

12 统一巧面馆方便面油泼辣子酸汤面 122g桶面*12桶整箱装 UPC spicy sour soup 12 cups na na na 35.9 49.0 49.0 0.0% na

13 统一巧面馆方便面老成都担担面 120g碗面*12碗整箱装干拌面 UPC Chengdu dandan noodle 12 bow ls na na na 76.0 78.0 78.0 0.0% na

14 统一小浣熊销魂香辣蟹味干脆面 30包整箱装 UPC spicy crab dry noodle 30 bags 29.9 29.9 29.9 29.9 29.9 29.9 0.0% 0.0%

15 统一小当家蜜汁猪排味干脆面整箱装 UPC sw eet port dry noodle 30 bags 29.9 29.9 29.9 29.9 29.9 29.9 0.0% 0.0%

Average selling price increase -0.2% 0.6%

Jinmailang

1 今麦郎方便面大今野拉面老坛酸菜牛肉面 24袋泡面整箱装 Jinmailang pickled cabbage beef noodle 24 bags 36.0 36.0 36.0 36.0 36.0 36.0 0.0% 0.0%

2 今麦郎方便面大今野拉面葱香排骨面 24袋泡面整箱装 Jinmailang onion pork ribs noodle 24 bags 36.0 36.0 36.0 36.0 36.0 36.0 0.0% 0.0%

3 今麦郎方便面老爸厨房一菜一面番茄鸡蛋浇头面 12桶整箱泡面 Jinmailang tomato and egg noodle 12 cups 84.0 84.0 95.0 95.0 95.0 95.0 0.0% 13.1%

4 今麦郎方便面一袋半老坛酸菜牛肉面五连包 Jinmailang pickled cabbage beef noodle 5 bags 15.0 15.0 15.0 15.0 15.0 15.0 0.0% 0.0%

5 今麦郎方便面一袋半葱香排骨面五连包 Jinmailang onion pork ribs noodle 5 bags na na na na na 15.0 na na

6 今麦郎方便面老爸厨房一菜一面番茄鸡蛋浇头面 112g 泡面桶面 Jinmailang tomato and egg noodle 1 bow l 6.7 6.7 8.0 8.0 8.0 8.0 0.0% 19.4%

7 今麦郎粉丝粉丝馆够味酸辣粉五连包 Jinmailang hot and sour noodle 5 bags 17.9 17.9 17.9 17.9 17.9 17.9 0.0% 0.0%

8 今麦郎方便面骨汤弹面浓汤排骨面五连包 Jinmailang pork ribs noodle 5 bags 12.9 12.9 12.9 12.9 12.9 12.9 0.0% 0.0%

9 今麦郎方便面大今野红烧牛肉面泡面五连包 Jinmailang braised beef noodle 5 bags 8.0 7.5 7.5 8.0 8.0 8.0 0.0% 6.7%

10 今麦郎方便面糖醋排骨炒面 12桶整箱 Jinmailang sw eet & sour pork ribs noodle 12 cups na na na 57.6 62.0 62.0 0.0% na

Average selling price increase 0.0% 4.9%

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Figure 3: Noodle channel check (continued)


Figure 4: Instant noodle market share by sales volume (2017)

SOURCES: CGS-CIMB RESEARCH, AC NIELSEN

Baixiang 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 qoq yoy

1 白象方便面珍骨汤经典系列老母鸡汤面泡面五连包装 Baixiang chicken noodle 5 bags 9.9 9.9 9.9 9.9 9.9 9.9 0.0% 0.0%

2 白象方便面四川红烧牛肉味面牛面泡面干吃面75g*24袋整箱装 Baixiang braised beef noodle 24 bags 23.8 23.8 23.8 23.8 23.8 23.8 0.0% 0.0%

3 白象方便面经典系列大骨面泡面五连包装 Baixiang pork ribs noodle 5 bags 15.0 15.0 15.0 14.5 14.5 14.5 0.0% -3.3%

4 白象方便面珍骨汤经典系列菌菇原汁猪骨面泡面五连包装 Baixiang mushroom pork ribs noodle 5 bags 14.2 9.9 14.2 14.5 12.5 12.5 0.0% 26.3%

5 白象方便面大骨面泡面单桶装 Baixiang pork ribs noodle 1 cup 5.0 5.0 5.0 5.0 5.0 5.0 0.0% 0.0%

6 白象方便面大辣娇拌面韩式火鸡拌面五连包 Baixiang Korean style chicken noodle 5 bags na na na na na 15.0 na na

7 白象方便面拌面宜宾燃面风味碗面 Baixiang Yibin noodle 1 bow l na na na na na 6.0 na na

8 白象面条挂面原麦醇香鸡蛋面花色挂面 1000g/包 Baixiang egg noodle 1000g na na na 11.5 11.8 11.5 -2.5% na


Nissin

1 日清方便面合味道海鲜味方便面84g*12杯整箱装 Nissin seafood noodle 12 cups na na na 60.0 59.9 54.9 -8.3% na

2 日清方便面 UFO飞碟炒面铁板牛肉味 122g碗装 Nissin beef noodle 1 bow l 5.5 5.5 5.5 5.5 5.5 5.5 0.0% 0.0%

3 日清方便面 I意面意式肉酱风味 113g杯装 Nissin italian pasta 1 cup 6.8 6.8 6.8 6.8 6.8 6.8 0.0% 0.0%

4 日清方便面炒面大王八宝辣酱方便面 104g*5袋 Nissin spicy noodle 5 bags na na na na na 11.9 na na

5 日清方便面炒面大王黑椒牛柳口味 107g碗装 Nissin black pepper beef noodle 1 bow l 4.9 4.9 4.9 4.9 4.9 4.9 0.0% 0.0%

6 中国香港出前一丁（NISSIN）方便面麻油味 100g*5包 Nissin sesame oil noodle 5 bags 19.9 19.9 19.9 19.9 21.5 21.5 0.0% 8.0%

7 中国香港出前一丁（NISSIN）方便面九州猪骨汤味 100g*5包 Nissin Jiuzhou pork ribs noodle 5 bags 23.9 19.9 19.9 19.9 21.5 21.5 0.0% 8.0%


Nongsim

1 农心辛拉面（香菇牛肉）方便面袋装速食 120gx5连包*8袋 Nongsim mushroom beef noodle 5 bags*8 na 150.0 150.0 158.0 158.0 165.0 4.4% 10.0%

2 农心辛拉面（香菇牛肉）方便面味碗装大桶汤面114g*16碗 Nongsim mushroom beef noodle 16 cups 105.0 105.0 105.0 105.0 105.0 105.0 0.0% 0.0%


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Figure 5: Instant noodle market share by sales value (2017)


Beverage prices began to rise in 2018

We noticed retail price hikes in beverage segment in 2018. Based on our channel check, selling prices of both Tingyi and UPC’s products have trended upwards since 4Q17. We noticed that the price hikes are focused on classic tea products (both Tingyi and UPC raised prices of their iced red tea and green tea products) as well as selected juice products. Meanwhile, selling prices of Nongfu Spring, Wahaha and Tenwow have remained relatively stable.

According to Tingyi’s management, the company raised its ASP for tea, juice and water products by c.3%, 5% and 10% respectively in 1Q18. While we think the price hike of tea products can be well accepted by consumers, we remain cautious on the price hike of juice and water, given Tingyi’s declining market shares in these two segments in FY17. Other beverages including coffee, functional drinks and probiotics drinks sold well in the double-digits in FY17; we expect Tingyi’s beverage ASP to rise 3% yoy in FY18, and forecast beverage sales to increase 4.7% yoy in FY18F.

UPC lowered distributors’ discounts of some classic beverage products since Lunar New Year (indirectly increasing ex-factory price; currently the gap between actual and suggested ex-factory price is c.10%). We expect this to boost ASP come 2Q18, and forecast UPC’s beverage sales growth of 6.1% yoy in FY18. In 1Q18, classic products including milk tea, iced red tea and green tea saw strong growth momentum.

Management will stay focused on revitalising sales of major products, including Classmate Xiaoming, through consolidation of product series and brand-building promotional campaigns. For example, it introduced a new flavour (cold-brewed Oolong tea) for Classmate Xiaoming series, which was well received in the Shanghai market. At the same time, weaker performing flavours will be discontinued gradually.

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Figure 6: Beverage channel check


Tingyi1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 qoq yoy

1 康师傅饮料绿茶蜂蜜茉莉味500ml/550ml*15瓶 Tingyi honey jasmine green tea 500ml/550ml*15 na 34.9 33.9 32.9 32.9 36.9 12.2% 5.7%

2 康师傅饮料冰红茶500ml/550ml*15瓶整箱 Tingyi iced red tea 500/550ml*15 29.9 34.9 32.9 34.9 34.9 36.9 5.7% 5.7%

3 康师傅饮料茉莉清茶1L*12瓶整箱 Tingyi jasmine tea 1L*12 39.0 39.0 39.0 39.0 36.9 42.9 16.3% 10.0%

4 康师傅饮料果茶物语蜜桃乌龙茶500ml*15瓶整箱 Tingyi peach oolong tea 500ml*15 na na na 49.9 61.2 39.9 -34.8% na

5 康师傅冰红茶青苹果味550ml*15瓶整箱 Tingyi iced red tea (apple) 550ml*15 na na na 37.9 37.9 37.9 0.0% na

6 康师傅经典奶茶炼乳味500ml*15瓶整箱 Tingyi classic milk tea 500ml*15 na na na na na 59.0 na na

7 康师傅经典奶茶香浓味500ml*15瓶整箱 Tingyi classic milk tea 500ml*15 na na na 60.0 38.9 59.0 51.7% na

8 康师傅优悦纯净水560ml*24瓶 Tingyi Youyue mineral w ater 560ml*24 37.9 37.9 37.9 19.9 19.9 39.0 96.0% 2.9%

9 康师傅优悦纯净水380ml*24瓶 Tingyi Youyue mineral w ater 380ml*24 32.6 32.6 32.6 19.7 15.9 31.8 100.0% -2.5%

10 康师傅矿泉水包装饮用水550ml*24瓶整箱 Tingyi mineral w ater 550ml*24 na na 10.5 7.9 8.1 12.8 58.0% na

11 康师傅饮料蜂蜜柚子 500ml*15瓶箱装 Tingyi honey pomelo juice 500ml*15 39.9 39.9 39.9 39.9 29.9 49.9 66.9% 25.1%

12 康师傅饮料芒果小酪500ml*15瓶整箱 Tingyi mango juice 500ml*15 41.6 41.6 39.9 39.9 29.9 49.9 66.9% 20.0%

13 康师傅饮料冰糖雪梨500ml*15瓶整箱 Tingyi snow pear juice 500ml*15 37.9 37.9 37.9 37.9 32.9 36.9 12.2% -2.6%

14 康师傅饮料酸梅汤 500ML*15瓶整箱 Tingyi sour plum soup 500ml*15 45.9 45.9 45.9 38.9 34.9 49.9 43.0% 8.7%

15 康师傅饮料海晶柠檬500ml*15瓶整箱 Tingyi lemon juice 500ml*15 na 36.9 36.9 36.9 29.9 31.9 6.7% -13.6%

16 康师傅康果水蜜桃 450ml*15瓶整箱 Tingyi peach juice 450ml*15 na na na na 36.9 34.9 -5.4% na

17 康师傅贝纳颂咖啡饮料拿铁350ml*15瓶整箱 Tingyi Bernachon latte 350ml*15 na na na 69.9 68.9 68.9 0.0% na

18 康师傅贝纳颂咖啡饮料经典曼特宁280ml*15瓶整箱 Tingyi Bernachon mandheling 280ml*15 na na na 85.9 69.9 68.9 -1.4% na

19 味全乳酸菌饮料(草莓味)420ml*15瓶整箱 Tingyi dairy drink (straw berry) 420ml*15 na na na 62.9 55.0 58.0 5.5% na

20 味全乳酸菌饮料(原味)420ml*15瓶整箱 Tingyi dairy drink (original) 420ml*15 90.0 90.0 90.0 65.0 55.0 58.0 5.5% -35.6%


Uni-President China

1 统一冰红茶(柠檬味红茶饮料) 500ml*15瓶整箱装 UPC iced red tea (lemon) 500ml*15 36.9 36.9 36.9 33.9 35.9 44.9 25.1% 21.7%

2 统一绿茶 250ml*24盒/箱茶饮料整箱装 UPC green tea 250ml*24 23.9 23.9 25.9 24.9 28.8 28.8 0.0% 20.5%

3 统一冰红茶 1升*8瓶整箱装柠檬调味茶饮料 UPC iced red tea (lemon) 1L*8 32.0 32.0 32.0 32.0 32.0 39.9 24.7% 24.7%

4 统一绿茶 2L*6瓶大包装茶饮料整箱装 UPC green tea 2L*6 39.7 39.7 35.9 35.9 35.9 35.9 0.0% na

5 统一小茗同学冷泡茶青柠红茶 480ml*15瓶整箱 UPC Classmate Xiaoming (lemon red tea) 480ml*15 75.9 75.9 72.9 72.8 72.8 72.8 0.0% na

6 统一阿萨姆奶茶500ml*15瓶整箱 UPC Assam milk tea 500ml*155 59.9 59.9 56.9 55.8 52.8 55.9 na na

7 统一阿萨姆岩盐芝士精选芝士风味奶茶 450ML*15瓶奶茶饮料 UPC Assam milk tea (cheese) 450ml*15 59.9 59.9 59.9 59.5 59.5 59.5 0.0% na

8 统一 ALKAQUA 爱夸 i.t 联合定制款饮用天然矿泉水 570mlX15瓶/箱整箱 UPC Alkaqua mineral w ater 570ml*15 59.9 59.9 59.9 49.9 43.9 54.9 25.1% -8.3%

9 统一水趣多乳酸菌发酵风味饮料 500毫升*15瓶整箱装 UPC Aquamore 500ml*15 75.0 75.0 75.0 75.0 75.0 75.0 0.0% 0.0%

10 统一 ALKAQUA 爱夸饮用天然矿泉水 360mlX15瓶/箱整箱 UPC Alkaqua mineral w ater 360ml*15 na na na 46.9 39.9 28.9 -27.6% na

11 统一鲜橙多 2L*6瓶整箱装橙汁饮料 UPC Orange Juice 2L*6 54.9 54.9 42.9 54.9 54.9 54.9 0.0% 0.0%

12 统一鲜橙多 450ml*15瓶整箱装橙汁饮料 UPC Orange Juice 450ml*15 39.9 39.9 39.9 39.9 39.9 44.9 12.5% 12.5%

13 统一海之言 (海盐柠檬水果饮料) 柠檬口味 500ml*15瓶/箱整箱装 UPC Sea Salt Juice (lemon) 500ml*15 58.8 58.8 58.8 58.8 59.9 59.9 0.0% 1.9%

14 统一番茄汁（无添加糖、盐）180ml*24罐 UPC Tomato juice 180ml*24 na na na 103.0 108.0 108.0 0.0% na

15 统一蜜桃多 250ml*24盒/箱整箱装果味饮料 UPC Peach 250ml*24 28.9 28.9 24.9 24.9 28.9 28.5 -1.4% -1.4%

16 统一雅哈意式醇香拿铁咖啡280ml*15瓶/箱整箱 UPC AHA latte 280ml*15 na na na na 90.8 88.5 -2.5% na

17 统一雅哈 Hey Smooth 咖啡 450毫升*15瓶整箱装 UPC AHA coffee 450ml*15 na na na 129.0 129.0 129.0 0.0% na


Nongfu Spring

1 农夫山泉东方树叶绿茶500ml*24瓶茶饮料整箱 Nongfu Spring Oriental Leaves green tea 500ml*24 na na na na 120.0 120.0 0.0% na

2 农夫山泉东方树叶红茶500ml*24瓶茶饮料整箱 Nongfu Spring Oriental Leaves red tea 500ml*24 na na na na 120.0 120.0 0.0% na

3 农夫山泉东方树叶乌龙茶500ml*24瓶茶饮料整箱 Nongfu Spring Oriental Leaves oolong tea 500ml*24 na na na na 120.0 120.0 0.0% na

4 农夫山泉茶π(茶派) 茶饮料柚子绿茶500ml*24瓶整箱 Nongfu Spring Chapai pomelo green tea 500ml*24 na na na na 120.0 120.0 0.0% na

5 农夫山泉茶π(茶派) 茶饮料柠檬红茶500ml*24瓶整箱 Nongfu Spring Chapai lemon red tea 500ml*24 na na na na 120.0 120.0 0.0% na

6 农夫山泉茶π(茶派) 茶饮料蜜桃乌龙茶500ml*24瓶整箱 Nongfu Spring Chapai peach oolong tea 500ml*24 na na na na 120.0 120.0 0.0% na

7 农夫山泉茶π(茶派) 茶饮料柚子绿茶500ml*24瓶整箱 Nongfu Spring Chapai pomelo green tea 500ml*24 na na na na 120.0 120.0 0.0% na

8 农夫山泉饮用天然水550ml普通装1*24瓶整箱 Nongfu Spring natural mineral w ater 550ml*24 36.9 36.9 33.9 31.9 33.9 33.9 0.0% -8.1%

9 农夫山泉饮用天然水1.5L 1*12瓶整箱 Nongfu Spring natural mineral w ater 1.5L*12 32.9 33.9 31.9 33.9 33.9 33.9 0.0% 0.0%

10 农夫山泉饮用天然水750ml运动盖 1*15瓶整箱 Nongfu Spring natural mineral w ater 750ml*15 36.0 36.0 36.0 36.0 37.0 37.0 0.0% 2.8%

11 农夫山泉NFC果汁 100%NFC芒果混合汁300ml*24瓶整箱 Nongfu Spring NFC mango juice 300ml*24 na na na 168.0 156.0 168.0 7.7% na

12 农夫山泉NFC果汁 100%NFC苹果香蕉汁300ml*10瓶礼盒 Nongfu Spring NFC apple banana juice 300ml*10 na na na 70.0 65.9 70.0 6.2% na

13 农夫山泉NFC果汁 100%NFC橙汁300ml*24瓶整箱 Nongfu Spring NFC orange juice 300ml*24 156.0 156.0 156.0 156.0 156.0 156.0 0.0% 0.0%

14 农夫山泉 17.5°橙汁NFC鲜榨果汁礼盒装330ml*4瓶 Nongfu Spring NFC orange juice 330ml*4 55.0 55.0 55.0 55.0 55.6 55.6 0.0% 1.1%

15 农夫山泉NFC果汁 17.5° 100%鲜榨橙汁 330ml/瓶 (2件起售) Nongfu Spring NFC 100% orange juice 330ml*2 13.9 13.9 13.9 13.9 13.9 13.9 0.0% 0.0%

16 农夫山泉水溶C100柠檬味复合果汁饮料445ml*24瓶整箱 Nongfu Spring C100 (lemon) 445ml*24 na na na na 120.0 120.0 0.0% na

17 农夫山泉水溶C100西柚味复合果汁饮料445ml*24瓶整箱 Nongfu Spring C100 (pomelo) 445ml*24 na na na na 120.0 120.0 0.0% na

18 农夫山泉力量帝维他命水石榴蓝莓风味功能饮料 500ml*24瓶整箱 Nongfu Spring vitamin w ater (guava blueberry) 500ml*24 na na na na 108.0 108.0 0.0% na

19 农夫山泉力量帝维他命水热带水果风味功能饮料 500ml*24瓶整箱 Nongfu Spring vitamin w ater (tropical mix) 500ml*24 na na na na 108.0 108.0 0.0% na

20 农夫山泉尖叫运动饮料多肽型550ml*24瓶整箱 Nongfu Spring isotonic drink 550ml*24 na na na na na 96.0 na na


7



Figure 7: Beverage channel check (continued)


Figure 8: 2017 beverage industry growth


Wahaha 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 qoq yoy

1 娃哈哈含乳饮料营养酸奶饮品锌多多200g*16瓶 Wahaha dairy drink 200ml*16 na na na na na 58.0 na na

2 娃哈哈含乳饮料乳酸菌饮品 100ml*40/箱 Wahaha dairy drink 100ml*40 55.0 55.0 55.0 55.0 55.0 55.0 0.0% 0.0%

3 娃哈哈 AD钙奶220ml*24瓶整箱 Wahaha AD milk 220ml*24 40.8 40.8 40.8 40.8 40.8 40.8 0.0% 0.0%

4 娃哈哈 AD钙奶220g*24瓶京东定制整箱 Wahaha AD milk 220g*24 (collaboration w JD.com) 50.0 50.0 50.0 50.0 50.0 50.0 0.0% 0.0%

5 娃哈哈含乳饮料营养快线牛奶原味 500ml*15/箱 Wahaha nutrition express 500ml*15 na na na na 60.0 60.0 0.0% na

6 娃哈哈饮用纯净水550ml*24瓶/箱钻面设计纯净甘甜 Wahaha natural mineral water 550ml*24 na na na 49.8 49.8 49.8 0.0% na

7 娃哈哈饮用纯净水596ml*12瓶(裹膜)纯净甘甜爽口 Wahaha natural mineral water 596ml*12 na na na na na 15.0 na na

8 娃哈哈饮用纯净水4.5L*4 Wahaha natural mineral water 4.5L*4 40.0 40.0 40.0 36.0 36.0 29.8 -17.2% -25.5%

9 娃哈哈无汽苏打水饮品(薄荷柠檬味) 350ml*12/箱 Wahaha soda (pepermint +lemon) 350ml*12 na na na na 31.5 31.5 0.0% na

10 娃哈哈水无汽苏打水饮品 350ml*12/箱整箱装 Wahaha soda (original) 350ml*12 29.8 29.8 29.5 29.5 29.5 29.5 0.0% -1.0%

Average selling price increase -2.2% -5.3%

Tenwow

1 天喔茶庄蜂蜜柚子茶250ml*16整箱装 Tenwow honey citron tea 250ml*16 24.9 24.9 20.9 20.9 20.9 21.9 4.8% -12.0%

2 天喔茶庄蜂蜜菊花茶250ml*16盒整箱装 Tenwow honey chrysanthemum tea 250ml*16 na na na na 33.5 32.9 -1.8% na

3 天喔茶庄饮料酸梅汤250ml*16盒整箱装 Tenwow sour plum soup 250ml*16 35.6 35.6 32.5 32.5 32.5 32.5 0.0% -8.7%

4 天喔茶庄饮料蜂蜜柚子茶蜜柚白茶 500ml*15瓶整箱装 Tenwow honey citron pomelo tea 500ml*15 na 43.5 56.5 55.8 56.9 61.9 8.8% 42.3%

5 天喔茶庄饮料蜂蜜柚子茶陈柚普洱 500ml*15瓶整箱装 Tenwow honey citron puer tea 500ml*15 na 59.9 56.9 56.8 56.8 58.5 3.0% -2.3%

6 天喔茶庄 C满E(柠檬汁+西柚汁)500ml*15整箱装 Tenwow lemon + grapefruit juice 500ml*15 56.0 56.0 56.0 56.0 57.0 57.0 0.0% 1.8%

7 天喔茶庄 C满E(柠檬汁+水蜜桃汁)500ml*15整箱装 Tenwow lemon + peach juice 500ml*15 na na na 55.0 57.0 57.0 0.0% na


Title:

Source:


9.9%

22.5%

1.8%

5.6%

8.4%

17.1%

8.4%

4.0%

9.4%

16.5%

-1.6%

4.9%

7.6%

14.8%

4.7%

3.1%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%Beverage overall RTD tea Juice Milk tea Carbonated drink Bottled water Functional drink Asian traditional drink

Value Volume

8



Figure 9: RTD tea market share by volume Figure 10: RTD tea market share by value

SOURCES: CGS-CIMB RESEARCH, AC NIELSEN SOURCES: CGS-CIMB RESEARCH, AC NIELSEN

Figure 11: RTD tea (excluding milk tea) market share by volume Figure 12: RTD Tea (excluding milk tea) market share by value


Figure 13: Bottled water market share by volume Figure 14: Diluted juice drinks (below 39% juice content) market share by volume


Title:

Source:


49.8%

28.0%

7.7%

3.7%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

Tingyi Holding Uni-President China

Wahaha Farmer's Spring

Title:

Source:

Please fill in the values above to have them entered in your report38.6%

31.1%

11.8%

3.5%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%



Title:

Source:


54.8%

21.7%

8.7%

3.8%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%



Title:

Source:


23.5%

14.1%

3.6%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%



Title:

Source:


25.2%

21.0%

12.7%

1.2%

9.5%

7.1%7.3%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Tingyi Holding Farmer's Spring Yi Bao

Wahaha Coca Cola Ganten

Run Tian

Title:

Source:


19.1%

11.4%

4.0%

3.4%0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

Tingyi Holding Coca Cola Uni-President China

Wahaha Hui Yuan

9



Cost pressure to reduce in 2018

Key raw material prices such as wheat, palm oil and sugar appear to be on a downtrend in 2018, with YTD average prices slumping 1.7%, 16.5% and 11.6% yoy respectively. Meanwhile, Polyethylene Terephthalate (PET) price has tapered in recent months, but remains higher on a yoy basis, with YTD average price up 9.1% yoy.

We believe raw material cost pressure should ease in FY18 for both Tingyi and UPC. Together with ASP hike of selected products, we forecast GPM expansion of 0.0% pt/0.4% pt yoy for Tingyi and UPC respectively in FY18.

Figure 15: Domestic wheat price trend Figure 16: Palm oil price trend

SOURCES: CGS-CIMB RESEARCH, WIND SOURCES: CGS-CIMB RESEARCH, BLOOMBERG

Figure 17: Domestic sugar price trend Figure 18: PET price trend

SOURCES: CGS-CIMB RESEARCH, BLOOMBERG SOURCES: CGS-CIMB RESEARCH, BLOOMBERG

Tingyi (322 HK, Add): We maintain our Add call as we expect improvements in Tingyi’s noodle and beverage earnings and continued disposal of idle capacity in FY18F. Potential catalysts include strong noodle sales in 1Q18 and stronger than expected margin expansion.

Uni-President China (220 HK, Add): Maintain Add. We remain confident of further topline and margin recovery for UPC in FY18F and FY19F, driven by 1) ASP hikes, 2) introduction of new products, and 3) easing raw material cost pressure.

Title:

Source:


2,200

2,250

2,300

2,350

2,400

2,450

2,500

2,550

2,600

Jan-1

3

Apr-

13

Jul-13

Oct-13

Jan-1

4

Apr-

14

Jul-14

Oct-14

Jan-1

5

Apr-

15

Jul-15

Oct-15

Jan-1

6

Apr-

16

Jul-16

Oct-16

Jan-1

7

Apr-

17

Jul-17

Oct-17

Jan-1

8

Apr-

18

(Rmb/tonne)

Title:

Source:


400

900

1,400

1,900

2,400

2,900

3,400

3,900

Apr-

13

Jul-13

Oct-13

Jan-1

4

Apr-

14

Jul-14

Oct-14

Jan-1

5

Apr-

15

Jul-15

Oct-15

Jan-1

6

Apr-

16

Jul-16

Oct-16

Jan-1

7

Apr-

17

Jul-17

Oct-17

Jan-1

8

Apr-

18

(MYR/tonne)

Title:

Source:


2,000

3,000

4,000

5,000

6,000

7,000

8,000

Jan-1

3

Apr-

13

Jul-13

Oct-13

Jan-1

4

Apr-

14

Jul-14

Oct-14

Jan-1

5

Apr-

15

Jul-15

Oct-15

Jan-1

6

Apr-

16

Jul-16

Oct-16

Jan-1

7

Apr-

17

Jul-17

Oct-17

Jan-1

8

Apr-

18

(Rmb/tonne)

Title:

Source:


3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

Jan-1

3

Apr-

13

Jul-13

Oct-13

Jan-1

4

Apr-

14

Jul-14

Oct-14

Jan-1

5

Apr-

15

Jul-15

Oct-15

Jan-1

6

Apr-

16

Jul-16

Oct-16

Jan-1

7

Apr-

17

Jul-17

Oct-17

Jan-1

8

Apr-

18

(Rmb/tonne)

10



Dairy products

Promotional level to stay high?

We notice that pricing of dairy products remained weak. Based on our channel check, average selling prices of Mengniu and Yili declined 11.5%/6.9% yoy respectively in 2Q18. We observe that yoghurt product segment’s selling price decline was steeper (industry average: -7.4% yoy) than domestic brands’ liquid milk (industry average: -3.5% yoy). This could imply that there were aggressive promotions in the dairy industry YTD in 2018, as domestic raw milk price has remained low YTD.

We understand that Mengniu has no plans to raise its selling prices, but prefers to launch high-end products to raise ASP. Mengniu has a strong track record of product mix upgrades; it launched Milk Deluxe M-PLUS high protein milk, Milk Deluxe Yoghurt and BB12 fermented milk yoghurt in 2017. In 2018, Mengniu plans to roll out c.40 new SKUs, including diet yoghurt, A2 milk and soymilk products.

The demand for dairy products in China has recovered significantly since 3Q17. As of 1Q18, cumulative dairy products output volume rose 6.4%, and we expect this trend to continue for the rest of 2018. Leveraging its status as an official 2018 FIFA World Cup sponsor, Mengniu will aggressively push for further penetration into lower-tier cities and Southeast Asian market this year. We expect Mengniu to achieve above-industry sales growth of 12.1% as it continues to gain market share.

Want Want will benefit from price hike

Want Want raised selling prices across its three business segments, i.e. rice cracker, dairy and snacks in Apr-May 2018. Management guided for average ASP to increase by mid-single digit yoy in FY3/19.

Want Want’s price hike is reaffirmed by our channel check whereby its Hot Kid milk selling price has increased by 15.8% yoy. We expect Want Want’s dairy segment sales to grow 12.2% yoy in 2HFY3/18F, benefiting from dairy industry demand recovery, distribution channel optimisation and organisational restructuring.

Want Want is focusing more on new product development, with plans to 1) upgrade its rice cracker products, 2) launch alcoholic fruit drinks (3.5% alcohol) and 3) introduce a new popsicle product in CY18. The new high-protein milk launched in its online stores and selected regions in CY17 will be introduced nationwide in CY18 too. Management expects new products to collectively contribute 3% of total revenue in CY18 (CY17: c.2%).

Want Want is making progress with its distribution channel optimisation. In 2017, e-commerce sales doubled, helped by differentiated product packaging and active participation in Tmall’s and JD.com’s business to business (B2B) model. During the year, sales through maternity channels also doubled, while modern channels grew by double digits yoy. Management is considering setting up production lines in Southeast Asian markets in CY18 to boost overseas sales (c.7% revenue contribution). Want Want also plans to invest in vending machines as another method to distribute its products in CY18. We expect strong sales momentum to continue into FY3/19, and forecast sales growth of 6.7% yoy.

11



Figure 19: Dairy products channel check


Mengniu1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 qoq yoy

1 蒙牛特仑苏低脂牛奶 250ml*12 礼盒装 Mengniu Milk Deluxe low fat milk 250ml*12 na na na na 57.8 59.9 3.6% na

2 蒙牛特仑苏纯牛奶 250ml*12 礼盒装 Mengniu Milk Deluxe w hole milk 250ml*12 65.0 65.0 65.0 65.0 65.0 65.0 0.0% 0.0%

3 蒙牛特仑苏有机奶 250ml*12 礼盒装 Mengniu Milk Deluxe organic milk 250ml*12 89.0 80.0 66.0 68.4 65.0 65.0 0.0% -18.8%

4 蒙牛纯牛奶 PURE MILK 250ml*16盒礼盒装 Mengniu Pure Milk 250ml*16 39.9 39.9 39.9 36.9 35.1 36.9 5.1% -7.5%

5 蒙牛宿迁牧场纯牛奶 330ml*12盒礼盒装 3.6g蛋白质/100ml Mengniu Pure Milk (3.6g protein/100ml) 250ml*16 na na 79.9 79.9 79.9 79.9 0.0% na

6 蒙牛纯甄常温酸牛奶 200g*12 礼盒装 Just Yoghurt room temp yoghurt 200g*12 66.0 59.4 59.4 59.4 56.1 56.1 0.0% -5.6%

7 蒙牛纯甄常温酸牛奶 200g*24 礼盒装 Just Yoghurt room temp yoghurt 200g*24 119.0 109.9 99.0 89.9 89.9 89.9 0.0% -18.2%

8 蒙牛纯甄高端轻酪乳风味酸奶230g*10 礼盒装 Just Yoghurt high end room temp yoghurt 230g*10 na na na na na 78.0 na na

9 蒙牛早餐奶核桃味利乐包 250ml×16盒礼盒装 Mengniu Breakfast Milk (w alnut) 250ml*16 41.9 41.9 39.9 39.9 38.1 39.9 4.7% -4.8%

10 蒙牛早餐奶麦香味利乐包 250ml×16盒礼盒装 Mengniu Breakfast Milk (barley) 250ml*16 53.0 48.0 39.9 39.9 38.1 39.9 4.7% -16.9%

11 蒙牛真果粒牛奶饮品(草莓)250g*12 礼盒装 Mengniu Fruit Milk Drink (straw berry) 250g*12 na na na na 35.7 35.7 0.0% na

12 蒙牛真果粒牛奶饮品(黄桃)250g*12 礼盒装 Mengniu Fruit Milk Drink (peach) 250g*12 50.9 45.0 37.8 36.9 36.9 36.9 0.0% -18.0%

13 蒙牛甜小嗨甜牛奶 250ml*12盒（男版）礼盒装 Mengniu Sw eet Milk 250ml*12 51.0 51.0 39.9 39.9 51.0 36.9 -27.6% -27.6%

14 蒙牛未来星儿童营养酸牛奶(香蕉草莓燕麦) 200g*12 礼盒装 Mengniu Future Star (yoghurt for children) 200g*12 na na na na 56.1 56.1 0.0% na

15 Silk 美式豆奶低糖原味利乐钻245ml*15包礼盒装植朴磨坊植物优选 Silk Americano Soymilk low sugar 245ml*15 na na na na 54.9 54.9 0.0% na

16 蒙牛奶特香草牛奶 243ml*12 礼盒装 Mengniu Vanilla Milk 243ml*12 58.8 58.8 49.9 44.1 42.8 59.9 40.0% 1.9%


Yili

1 伊利金典纯牛奶250ml*16盒/礼盒装 Yili Satine pure milk 250ml*16 69.4 69.6 69.6 69.6 65.0 69.6 7.1% 0.0%

2 伊利金典低脂纯牛奶250ml*12盒/礼盒装 Yili Satine low fat milk 250ml*12 na na na na 68.0 68.0 0.0% na

3 伊利金典有机纯牛奶250ml*12盒/礼盒装 Yili Satine organic milk 250ml*12 68.4 61.2 64.6 64.6 64.6 66.0 2.2% 7.8%

4 伊利舒化无乳糖牛奶全脂型220ml*12盒 Yili Shuhua w hole milk 220ml*12 na na na na 49.8 42.3 -15.1% na

5 伊利纯牛奶250ml*24盒 Yili Pure Milk 250ml*24 64.8 64.8 62.8 64.8 61.2 64.8 5.9% 0.0%

6 伊利安慕希高端颗粒酸奶草莓燕麦口味200g*10瓶 Ambposial high-end yoghurt 200g*10 na na na na na 68.0 na na

7 伊利安慕希希腊风味常温酸奶原味205g*16盒/礼盒装 Ambposial room temp yoghurt (original) 205g*16 70.4 70.4 66.0 66.0 66.0 66.0 0.0% -6.3%

8 伊利安慕希希腊风味酸奶草莓味205g×12盒 Ambposial room temp yoghurt (straw berry) 205g*12 na na na na 69.9 69.6 -0.4% na

9 伊利谷粒多红谷牛奶饮品250ml*12盒/礼盒装(红豆+红米+花生早餐奶) Yili Breakfast Milk 250ml*12 32.4 32.4 29.0 30.6 28.8 28.8 0.0% -11.1%

10 伊利谷粒多早餐颗粒燕麦牛奶200mL*12盒/礼盒装 Yili Breakfast Milk (oatmeal) 200ml*12 43.2 48.0 40.8 36.0 43.2 38.4 -11.1% -20.0%

11 伊利优酸乳果粒酸奶饮品芒果味245g*12盒/礼盒装 Yili yoghurt drink (mango) 245g*12 na na na na 32.4 32.0 -1.2% na

12 伊利优酸乳爆趣珠乳饮料苹果味250g*24盒/礼盒装 Yili yoghurt drink (apple) 250g*24 na na na na 60.0 60.0 0.0% na

13 伊利 QQ星儿童成长牛奶(全聪型)125ml*20盒 Yili QQ Star milk 125ml*20 49.0 49.0 49.0 41.7 41.7 39.2 -6.0% -20.0%

14 伊利 QQ星儿童风味酸奶205g*12盒/礼盒装 Yili QQ Star yoghurt 205g*12 na na na na 56.1 52.8 -5.9% na

15 伊利植选浓香豆乳(原味)250mL*12盒 Yili soymilk 250ml*12 na na na na 48.0 48.0 0.0% na

16 伊利味可滋香蕉牛奶240ml*12盒/礼盒装 Yili banana milk 240ml*12 54.0 51.0 48.0 45.0 42.0 48.0 14.3% -5.9%


Bright Dairy

1 光明优+纯牛奶250ml*12盒/礼盒装 Bright Dairy You+ pure milk 250ml*12 na na na na 45.0 45.0 0.0% na

2 光明纯牛奶250ml*24盒/箱 Bright Dairy pure milk 250ml*24 na na na 59.0 56.0 56.0 0.0% na

3 光明优+纯牛奶250ml*16盒 Bright Dairy You+ pure milk 250ml*16 na na na na na 56.0 na na

4 光明有机纯牛奶200mL*12盒钻石装/礼盒装 Bright Dairy organic pure milk 200ml*12 na na na na 66.0 66.0 0.0% na

5 光明优倍巴氏杀菌乳高品质鲜牛奶 950ml*1 Bright Dairy pasteurized pure milk 950ml 21.1 21.1 21.1 21.1 21.1 21.1 0.0% 0.0%

6 光明莫斯利安常温酸奶酸牛奶(原味)350g*8盒/礼盒装 Momchilovtsi room temp yoghurt 350ml*8 46.9 46.9 42.9 42.9 42.9 44.9 4.7% -4.3%

7 光明莫斯利安常温酸奶酸牛奶(原味)110g*18杯 Momchilovtsi room temp yoghurt 110ml*18 na na na na 59.9 59.9 0.0% na

8 光明莫斯利安果粒酸牛奶(香橙、柠檬味)195g*10盒 Momchilovtsi room temp yoghurt (fruity) 195ml*10 na na na na na 69.0 na na

9 光明莫斯利安(FLOWER SECRETS)常温酸奶(玫瑰花风味)200g*12盒钻石装 Momchilovtsi room temp yoghurt (rose) 200ml*12 na na na na 69.0 69.0 0.0% na

10 光明莫斯利安(Yogurtail)双发酵特调饮品（甜橙苹果）330mL*4瓶 Momchilovtsi Yogurtail (orange+apple) 330ml*4 na na na na 31.6 31.6 0.0% na

11 光明莫斯利安(Yogurtail)双发酵特调饮品（桑葚石榴）330mL*4瓶 Momchilovtsi Yogurtail (guava) 330ml*4 na na na na 31.6 31.6 0.0% na

12 光明莫斯利安 2果3蔬(绿果)常温酸奶135g*18盒钻石装 Momchilovtsi 2fruit3veg (green) 135g*18 57.0 54.0 56.0 56.0 56.0 56.0 0.0% 3.7%

13 光明莫斯利安 2果3蔬(红果)常温酸奶135g*18盒钻石装 Momchilovtsi 2fruit3veg (red) 135g*18 59.0 56.0 56.0 56.0 56.0 56.0 0.0% 0.0%

14 光明萌小团巧克力牛奶饮品 200ml*12盒/礼盒装 Bright Dairy chocolate milk 200ml*12 na na na na 49.9 39.9 -20.0% na

15 光明酸奶酸牛奶饮品(原味)190ml*24盒 Bright Dairy yoghurt drink 190ml*24 na na na na 49.9 49.9 0.0% na

16 光明巧风巧克力味含乳饮料250ml*24盒 Bright Dairy chocolate milk 250ml*24 na na na na 52.9 52.9 0.0% na


12



Figure 20: Dairy products channel check (continued)


Sanyuan1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 qoq yoy

1 三元小方白纯牛奶 250ml*24礼盒装 Sanyuan pure milk 250ml*24 54.5 54.5 53.9 56.0 56.0 53.9 -3.8% -1.1%

2 三元纯牛奶227ml*16袋/箱 Sanyuan pure milk 227ml*16 27.9 27.9 27.9 27.9 29.9 26.9 na na

3 三元特选60年纯牛奶250ml*12 礼盒装 Sanyuan pure milk (special selection) 250ml*12 na na na na 59.0 59.0 0.0% na

4 三元舒释奶品致低乳糖(全脂型)250ml*12 礼盒装 Sanyuan high quality milk low lactose 250ml*12 na na na 42.0 39.0 39.0 0.0% na

5 三元极致高品质纯牛奶(全脂型)250ml*12 礼盒装 Sanyuan high quality milk (w hole milk) 250ml*12 49.0 49.0 49.0 49.0 50.9 54.8 7.7% 11.8%

6 三元极致有机纯牛奶250ml*12 礼盒装 Sanyuan organic milk 250ml*12 na na na na 60.9 60.9 0.0% na

7 三元极致A2-β酪蛋白纯牛奶 250ml*12 礼盒装 Sanyuan A2 milk 250ml*12 na na na 118.0 118.0 118.0 0.0% na

8 三元冰岛式常温酸牛奶200g*24盒 Sanyuan room temp yoghurt 200g*24 79.0 79.0 79.0 69.9 69.9 69.9 0.0% -11.5%

9 三元冰岛式常温酸牛奶200g*12礼盒装 Sanyuan room temp yoghurt 200g*12 49.0 56.0 56.0 56.0 51.0 51.0 0.0% -8.9%

10 三元冰岛式酸奶200g*6盒/箱 Sanyuan room temp yoghurt 200g*6 19.9 19.9 19.9 19.9 19.9 19.9 0.0% 0.0%

11 三元黄小蕉香蕉牛奶饮品200ml*12礼盒装 Sanyuan banana milk 200ml*12 29.9 29.9 29.9 29.9 32.0 32.0 0.0% 7.0%

12 三元巧克力奶 250ml*24盒/箱 Sanyuan chocolate milk 250ml*24 79.0 79.0 59.0 59.0 62.0 62.0 0.0% -21.5%

13 三元哈酸乳原味 250ml*20盒 Sanyuan dairy drink 250ml*20 49.0 49.0 39.0 29.0 35.0 29.0 -17.1% -40.8%

14 三元酸味牛奶饮品250ml*20礼盒装 Sanyuan dairy drink 250ml*20 35.0 35.0 37.0 37.0 37.0 37.0 0.0% 5.7%


Want Want

1 旺旺旺仔牛奶儿童牛奶早餐奶纯牛奶营养健康美味原味 250ml*24 Hot Kid Milk pure milk (250ml*24) 38.0 38.0 38.0 38.0 38.0 44.0 15.8% 15.8%

2 旺旺旺仔牛奶儿童牛奶早餐奶125ml*16包+旺旺乳酸菌125ml*4包 Hot Kid Milk milk (125ml*16) + yoghurt 125ml*4 46.5 46.5 46.5 46.5 49.9 48.0 -3.8% 3.2%

3 旺旺旺仔特浓纯牛奶儿童牛奶早餐奶(家庭装) 125ml*20 Hot Kid Milk high protein pure milk (125ml*20) 60.0 60.0 55.0 54.0 60.0 54.0 -10.0% -10.0%


Shengmu

1 圣牧全程有机全脂纯牛奶实惠装 200ml*24盒/箱 Shengmu organic w hole milk 200ml*24 95.0 95.0 79.0 79.0 59.9 69.0 15.2% -27.4%

2 圣牧全程有机全脂纯牛奶 250ml*12盒/礼盒装 Shengmu organic w hole milk 250ml*12 na na na na 58.0 58.0 na na

3 圣牧全程有机低脂纯牛奶实惠装 200ml*24盒/礼盒装 Shengmu organic low fat milk 200ml*24 na na na na 99.0 99.0 0.0% na

4 圣牧巴氏杀菌常温有机酸牛奶205g*12钻石装/礼盒装 Shengmu organic room temp past. yoghurt 205g*12 65.0 65.0 60.0 49.9 49.9 49.9 0.0% -23.2%

5 圣牧全程沙漠有机沙棘味常温酸牛奶 205g*12 礼盒装 Shengmu organic room temp yoghurt 205g*12 na na na na 59.9 52.0 -13.2% na

6 圣牧全程有机儿童奶实惠装 200ml*24盒/礼盒装 Shengmu organic milk for kids 200ml*24 na na na 99.0 99.0 99.0 0.0% na


China Modern Dairy

1 现代牧业(MODERN FARMING)尊贵装纯牛奶 250ml×12包尊享礼盒 Modern Farming Deluxe pure milk 250ml*12 na na na na 51.0 51.0 0.0% na

2 现代牧业(MODERN FARMING)十连包 250ml×10包实惠装 Modern Farming Pure milk 250ml*10 na na na na 33.7 33.7 0.0% na

3 现代牧业(MODERN FARMING)鲜语纯牛奶250ml×12盒/礼盒装 Modern Farming Xianyu pure milk 250ml*12 na na 72.0 65.0 65.0 65.0 0.0% na

4 现代牧业(MODERN FARMING)常温酸风味酸牛奶 200ml×12包礼盒装 Modern Farming room temp yoghurt 200ml*12 na na na na 41.9 41.9 0.0% na

Average selling price increase 0.0% na

Others

1 澳大利亚进口牛奶德运（Devondale）全脂牛奶 1L*10 整箱装 Devondale w hole milk 1L*10 109.0 109.0 99.0 99.0 99.0 99.0 0.0% -9.2%

2 澳大利亚进口牛奶德运（Devondale ）全脂牛奶200ml*24整箱装 Devondale w hole milk 200ml*24 79.0 79.0 79.0 79.0 89.0 79.0 -11.2% 0.0%

3 新西兰原装进口牛奶安佳Anchor全脂牛奶UHT纯牛奶250ml*24 整箱装 Anchor w hole milk 250ml*24 109.0 109.0 109.0 99.0 99.0 89.0 -10.1% -18.3%

4 德国DMK进口牛奶欧德堡(Oldenburger)超高温处理全脂纯牛奶200ml*24盒 Oldenburger w hole milk 200ml*24 89.0 69.0 69.0 89.0 79.0 69.0 -12.7% 0.0%

5 德国DMK进口牛奶欧德堡(Oldenburger)超高温处理全脂纯牛奶1L*12盒 Oldenburger w hole milk 1L*12 119.0 109.0 119.0 139.0 129.0 129.0 0.0% 18.3%

6 德国进口牛奶 Arla爱氏晨曦全脂牛奶 200ml*24 整箱装 Arla w hole milk 200ml*24 65.0 69.0 69.0 69.0 59.0 59.0 0.0% -14.5%

7 德国进口牛奶 Arla爱氏晨曦全脂牛奶 1L*12 整箱装 Arla w hole milk 1L*12 109.0 109.0 109.0 109.0 109.0 99.0 -9.2% -9.2%

8 德国进口牛奶德亚 (Weidendorf)全脂 200ml*30 整箱装 Weidendorf w hole milk 200ml*30 79.0 89.0 79.0 79.0 79.0 79.0 0.0% -11.2%

9 法国原装进口荷兰乳牛全脂纯牛奶1L*6 整箱 3.5g/100ml乳蛋白 DutCow w hole milk (3.5g protein/100ml) 1L*6 49.9 49.9 59.0 59.0 59.0 59.0 0.0% 18.2%

10 新西兰进口牛奶纽仕兰(Theland)3.5g蛋白质全脂牛奶 250ml*24家庭装 Theland w hole milk (3.5g protein/100ml) 250ml*24 79.0 79.0 79.0 79.0 79.0 79.0 0.0% 0.0%


13



Figure 21: YTD cumulative dairy product output volume growth (%)

SOURCES: CGS-CIMB RESEARCH, WIND

Figure 22: Cumulative industry sales-output ratio for dairy products

SOURCES: CGS-CIMB RESEARCH, NATIONAL BUREAU OF STATISTICS OF CHINA

Domestic raw milk price remained weak, with YTD average price declining 1.6% yoy. Meanwhile, international whole milk prices were also flattish, with YTD average price increasing 2.2% yoy.

We forecast Mengniu GPM to expand 1.3% pts yoy to 36.5% in FY18F, helped by 1) stable domestic raw milk prices, 2) product mix upgrade, and 3) cost savings through centralised raw milk procurement and enhanced cooperation with China Modern Dairy; offset partially by weaker like-for-like selling prices.

Title:

Source:


-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Mar-

13

Jun-1

3

Sep-1

3

Dec-

13

Mar-

14

Jun-1

4

Sep-1

4

Dec-

14

Mar-

15

Jun-1

5

Sep-1

5

Dec-

15

Mar-

16

Jun-1

6

Sep-1

6

Dec-

16

Mar-

17

Jun-1

7

Sep-1

7

Dec-

17

Mar-

18

Title:

Source:


93%

94%

95%

96%

97%

98%

99%

100%

101%

102%

Mar-

13

Jun-1

3

Sep-1

3

Dec-

13

Mar-

14

Jun-1

4

Sep-1

4

Dec-

14

Mar-

15

Jun-1

5

Sep-1

5

Dec-

15

Mar-

16

Jun-1

6

Sep-1

6

Dec-

16

Mar-

17

Jun-1

7

Sep-1

7

Dec-

17

Mar-

18

14



Figure 23: Domestic raw milk price trend


Figure 24: International whole milk powder price trend

SOURCES: CGS-CIMB RESEARCH, GLOBAL DAIRY TRADE

Mengniu (2319 HK, Add): We keep our Add call as we expect Mengniu to achieve strong earnings growth in FY18, supported by strong sales growth momentum, margin expansion and return to profitability for CMD and Yashili.

Want Want (151 HK, Add): Our Add call is intact as we expect Want Want to see an earnings recovery from topline reacceleration and easing raw material cost pressure. We expect topline growth to improve to 11.2% yoy in 4QFY3/18 and 8.3% in 2HFY3/18, and earnings growth to recover to 6.9% and 1.3% yoy (1H18: -9.9% yoy), respectively.

Title:

Source:


2.50

3.00

3.50

4.00

4.50

Jan-1

3

Apr-

13

Jul-13

Oct-13

Jan-1

4

Apr-

14

Jul-14

Oct-14

Jan-1

5

Apr-

15

Jul-15

Oct-15

Jan-1

6

Apr-

16

Jul-16

Oct-16

Jan-1

7

Apr-

17

Jul-17

Oct-17

Jan-1

8

Apr-

18

Title:

Source:


0

1,000

2,000

3,000

4,000

5,000

6,000

Jan-1

3

Apr-

13

Jul-13

Oct-13

Jan-1

4

Apr-

14

Jul-14

Oct-14

Jan-1

5

Apr-

15

Jul-15

Oct-15

Jan-1

6

Apr-

16

Jul-16

Oct-16

Jan-1

7

Apr-

17

Jul-17

Oct-17

Jan-1

8

Apr-

18

15



Beer

2018 a year of price increases

We observed some price increases in the beer sector so far in 2018. Based on our channel checks in 2Q18, Yanjing Beer and Snow Beer (China Resources Beer) saw the most notable price increases, up 7.9% and 4.6% respectively vs. 4Q17, while Tsingtao and Carlsberg’s price hikes were relatively muted at 2.1%/2.0% yoy over the same period.

Figure 25: Beer channel check


Tsingtao 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 qoq yoy

1 青岛啤酒（Tsingtao）经典11度330ml*24听德国进口工艺整箱装 Tsingtao Classic 330ml*24 89.0 96.0 96.0 88.0 96.0 96.0 0.0% 0.0%

2 青岛啤酒（Tsingtao）经典10度500ml*12听德国进口工艺大罐整箱装 Tsingtao Classic 500ml*12 69.0 69.0 58.0 58.0 58.0 58.0 0.0% -15.9%

3 青岛啤酒（TsingTao）青岛啤酒经典10度 500ml*24听 Tsingtao Classic 500ml*24 119.0 119.0 120.0 120.0 120.0 120.0 0.0% 0.8%

4 青岛啤酒（Tsingtao）奥古特12度500ml*12听德国进口工艺大罐整箱装 Tsingtao Augerta 500ml*12 105.0 105.0 105.0 105.0 105.0 105.0 0.0% 0.0%

5 青岛啤酒（Tsingtao）纯生8度500ml*12听德国进口工艺大罐整箱装 Tsingtao Pure 500ml*12 84.0 84.0 68.0 68.0 68.0 68.0 0.0% -19.0%

6 青岛啤酒经典1903 10度 500ml*12听 Tsingtao Classic 1903 500ml*12 76.0 75.0 78.0 78.0 78.0 78.0 0.0% 4.0%

8 青岛啤酒（TsingTao）奥古特 12度 330ml*24听整箱装 Tsingtao Augerta 330ml*24 na na na 139.0 139.0 139.0 0.0% na

9 青岛啤酒（TsingTao）经典1903 10度 500ml*12听整箱装 Tsingtao Classic 1903 500ml*12 na na na 99.0 79.0 99.0 25.3% na

11 青岛啤酒全麦白啤11度 500ml*12听 Tsingtao w hite 500ml*12 79.0 79.0 78.0 78.0 78.0 78.0 0.0% -1.3%

12 青岛啤酒（Tsingtao）黑啤500ml*12听德国进口工艺大罐整箱装 Tsingtao stout 500ml*12 na na na na na 118.8 na na

13 青岛啤酒（TsingTao）崂山劲爽8度330ml*24听劲爽罐啤整箱装 Tsingtao Laoshan 330ml*24 na na na na na 59.0 na na

14 青岛啤酒（Tsingtao）冰纯10度330ml*24听德国进口工艺整箱装 Tsingtao ice cool 330ml*24 80.0 80.0 80.0 80.0 80.0 79.0 -1.3% -1.3%

15 青岛啤酒（TsingTao）青岛啤酒千禧临门10度 500ml*12听 2箱 Tsingtao happiness 500ml*12 na 109.0 109.0 109.0 109.0 109.0 0.0% 0.0%


China Resources Beer

1 雪花啤酒（Snow beer）冰酷 330ml*24听整箱装 Snow beer ice cool 330ml*24 43.9 43.5 43.5 44.9 49.0 49.9 1.8% 14.7%

2 雪花啤酒（Snow beer）8度清爽 330ml*24听整箱装 Snow beer fresh 330ml*24 49.0 54.0 54.0 49.9 51.0 56.9 11.6% 5.4%

3 雪花啤酒（Snow beer）8度清爽 500ml*12听整箱装 Snow beer fresh 500ml*12 44.9 43.0 38.9 38.9 41.0 42.9 4.6% -0.2%

4 雪花啤酒（Snow beer）8度勇闯天涯 500ml*12听整箱装 Snow beer Explore 500ml*12 65.0 65.0 54.0 54.0 58.0 56.9 -1.9% -12.5%

5 雪花啤酒（Snow beer）【新品】9度勇闯天涯（概念系列）500ml*12听整箱装 Snow beer Explore 500ml*12 na na na 72.0 72.0 72.0 0.0% na

6 雪花啤酒（Snow beer）8度纯生 330ml*24听整箱装 Snow beer Pure 330ml*24 na na na na 130.0 130.0 0.0% na

7 雪花啤酒（Snow beer）8度纯生 500ml*12听整箱装 Snow beer Pure 500ml*12 86.0 86.0 86.4 87.0 87.0 87.0 0.0% 1.2%

8 雪花啤酒（Snow beer）8度勇闯天涯 330ml*6听 Snow beer Explore 330ml*6 24.9 24.9 24.9 21.9 24.9 23.9 -4.0% -4.0%

9 雪花啤酒（Snow beer）【新品】10度纯生（概念系列）500ml*12听整箱装 Snow beer Pure 500ml*12 na na na 120.0 120.0 120.0 0.0% na

10 雪花啤酒（Snow beer）13.5度黑啤 500ml*12听整箱装 Snow beer Stout 500ml*12 na na na 129.0 129.0 129.0 na na

11 雪花啤酒清爽8度纸箱装 330ml*24听 Snow beer fresh 330ml*24 58.0 49.9 49.9 49.9 49.9 54.0 na na

12 雪花啤酒冰酷9度330ml*24听整箱装 Snow beer ice cool 330ml*24 49.9 43.5 44.9 44.9 44.9 45.9 2.2% 5.5%

13 雪花啤酒（Snow beer）【新品】11.5度脸谱花脸（概念系列）500ml*12听整箱装 Snow beer Mask 500ml*12 na na na 180.0 180.0 180.0 0.0% na


Yanjing Beer

1 燕京啤酒 11度蓝听啤酒 330ml*24听整箱装 Yanjing Blue 330ml*24 49.9 49.0 46.0 49.9 55.0 55.0 0.0% 12.2%

2 燕京啤酒 11度纯生啤酒 330ml*24听整箱装 Yanjing Pure 330ml*24 na na na na 69.0 69.0 0.0% na

3 燕京啤酒 11度精品啤酒 500ml*12听大罐整箱装 Yanjing Deluxe 500ml*12 na na na na 41.0 52.0 26.8% na

4 燕京啤酒 10度鲜啤 330ml*24听整箱装 Yanjing Fresh 330ml*24 99.0 69.0 69.0 69.0 69.0 72.0 4.3% 4.3%

5 燕京啤酒 8度 party啤酒 330ml*24听整箱装 Yanjing Party 330ml*24 51.0 48.0 49.0 46.0 46.0 49.9 8.5% 4.0%

6 燕京啤酒 330ml*24罐特制白罐整箱 Yanjing White 330ml*24 65.0 68.0 78.0 78.0 78.0 78.0 0.0% 14.7%

7 燕京啤酒 12度原浆白啤 500ml*12听大罐整箱装 Yanjing White 500ml*12 109.0 109.0 119.0 119.0 119.0 119.0 0.0% 9.2%

8 燕京啤酒精制9.5° 酒精度≥3.3% 原箱(330mlx24听) Yanjing Deluxe 330ml*24 na na na 58.0 58.0 58.0 0.0% na

9 燕京啤酒无醇啤酒 330ml*24听整箱装低度酒 Yanjing Beer 330ml*24 na na na na na 75.0 na na

10 燕京特制啤酒白瓶 330ml*24听整箱罐装 Yanjing Special Brew 330ml824 69.9 69.9 72.0 72.0 75.0 75.0 0.0% 7.3%

11 燕京啤酒 10度精酿啤酒进口麦芽啤酒330ml*6罐 Yanjing Deluxe 330ml*6 na na na 12.8 13.8 12.8 -7.2% na

12 燕京啤酒瓶装鲜啤零氧化 500ml*12瓶整箱 Yanjing Fresh 500ml*12 na na na 64.0 68.0 75.0 10.3% na


16



Figure 26: Beer channel check (continued)


We understand from Tsingtao's management that the company raised ASP of selected low- and mid-ranged products beginning 1Q18. The demand for beer products in China has began to warm in 1Q18. As of 3M18, cumulative beer product output volume grew 1.3% yoy. Overall, we expect Tsingtao Beer to record revenue growth of 3.6% yoy in FY18F.

Figure 27: YTD cumulative beer product output volume growth (%)


Among our consumer staple coverage, we expect Tsingtao to be harder hit by rising raw material prices in FY18F, as Australian malt barley price has surged in recent months, with 4M18 average price up 55.3% yoy. Prices of packaging materials aluminium, glass and paper have also seen YTD average prices increase 3.5%, 14.4% and 16.4% yoy, respectively.

Carlsberg1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 qoq yoy

1 嘉士伯啤酒冰纯连包 500ml*24听整箱装 Carlsberg ice cool 500ml*24 na na na 244.5 244.5 244.5 0.0% na

2 嘉士伯（Carlsberg）冰纯啤酒 330ml*24听 Carlsberg Ice cool 330ml*24 188.0 139.0 139.0 135.0 145.0 145.0 0.0% 4.3%

3 嘉士伯（Carlsberg）冰纯啤酒 500ml*12听 Carlsberg ice cool 500ml*12 na na na na 89.0 89.0 0.0% na

4 嘉士伯（Carlsberg）特醇啤酒 500ml*12听 Carlsberg special brew 500ml*12 na na na na na 89.9 na na

5 Tuborg 乐堡啤酒多彩拉环嘉士伯旗下品牌 330ml*24支整 Tuborg 330ml*24 na na na 118.0 118.0 128.0 8.5% na

6 冰纯嘉士伯啤酒小瓶330ml啤酒丹麦Carlsberg瓶装整箱12瓶 Carlsberg Ice cool 330ml*12 79.0 79.0 69.0 79.0 89.0 89.0 0.0% 12.7%

7 怡乐仙地（Jolly Shandy）嘉士伯出品果味柠檬味低醇啤酒柠檬混酒 330ml装 24支装 Jolly Shandy 330ml*6 na na na 189.0 189.0 189.0 0.0% na

8 Carlsberg 嘉士伯冰纯啤酒丹麦品牌 330ml瓶装 6支 Carlsberg Ice cool 330ml*6 na na na 59.0 59.0 59.0 0.0% na

9 嘉士伯Somersby自然泡进口苹果味配制酒水果啤酒瓶装330ml整箱24瓶 Somersby 330ml*24 na na na 268.0 268.0 268.0 0.0% na

10 Tuborg 乐堡啤酒拉环开瓶嘉士伯旗下品牌 330ml 6支 Tuborg 330ml*6 na na na 58.0 58.0 58.0 0.0% na


Ab-Inbev

1 百威（Budw eiser）啤酒大瓶装 460ml*12瓶 Budw eiser 460ml*12 99.0 79.0 79.0 69.0 69.9 79.0 13.0% na

2 Budw eiser 百威啤酒330ml*24听 Budw eiser 330ml*24 129.0 129.0 129.0 129.0 139.0 139.0 0.0% 7.8%

3 百威（Budw eiser）啤酒 355ml*6瓶 Eason限量版铝瓶 Budw eiser 355ml*6 na na na 79.0 69.0 79.0 14.5% na

4 百威（BUDWEISER）百威啤酒500ml*18听装整箱清啤黄啤 Budw eiser 500ml*18 na na na 109.0 119.0 109.0 na na

5 墨西哥进口科罗娜（Corona）啤酒 330ml*24瓶整箱 Corona 330ml*24 216.0 216.0 199.0 175.0 178.0 199.0 11.8% -7.9%

6 墨西哥进口科罗娜（Corona）啤酒 330ml*6瓶整箱装 Corona 330ml*6 na na 49.9 47.0 49.0 49.9 1.8% na

7 墨西哥进口科罗娜（Corona）啤酒 330ml*12瓶整箱 Corona 330ml*12 109.0 109.0 99.0 99.0 89.0 99.0 11.2% -9.2%

8 比利时进口时代啤酒（Stella Artois）330ml*12瓶整箱装 Stella Artois (Era) 330ml*12 na na na 99.0 89.0 99.0 11.2% na

9 比利时进口精酿啤酒 Stella Artois时代啤酒整箱啤酒时代啤酒 330ml*12瓶 Stella Artois (Special Brew ) 330ml*12 na na na 149.0 149.0 149.0 0.0% na

10 24瓶时代/斯特拉啤酒 Stella Artois 进口啤酒 330ml Stella Artois (Era) 330ml*24 na na na 198.0 198.0 198.0 0.0% na

11 比利时进口精酿啤酒 Stella Artois时代啤酒整箱啤酒时代啤酒 330ml*3瓶装 Stella Artois (Era) 330ml*3 na na na 59.0 59.0 59.0 0.0% na


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Figure 28: International barley price trend (A$/tonne)


Tsingtao Brewery (168 HK, Reduce): Despite the price hikes, industry volume growth has been lacklustre, in our view. We maintain our Reduce rating on the back of weak topline growth and further GPM pressure.

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18



Household products

Vinda leading the price hikes in tissue paper industry

Vinda started implementing selling price hikes of c.5% for its tissue paper products to offset cost pressure in 4Q17, and focused on promoting high-margin categories and products to cope with higher wood pulp prices. Management has also guided for another round of price increases in 2Q18 which should take full effect by May/Jun. Findings from our online channel checks indicate that Vinda has been the most aggressive tissue paper player in terms of price increases. APP and C&S have likewise increased prices, though to a lower extent. Hengan, on the other hand, has not raised selling prices since 4Q17.

According to our channel check findings, between 4Q17 and 2Q18, Vinda increased ASPs for 20 of its products on JD.com by an average of 12.7%. APP’s products saw average ASP increase of 3.6% over the same period while C&S tissue paper products saw ASP hikes of 4.6%. Hengan did not raise ex-factory prices; retail prices of its products only saw an average 0.8% increase between 4Q17 and 2Q18. We notice that the price increases are more skewed towards mass-market products (2-ply box tissue paper products and toilet paper roll with lower paper content).

We forecast a 5.6% yoy ASP increase in FY18F for Vinda and expect continued product mix upgrade. These, coupled with the improving competitive landscape, lead us to project topline growth of 14.6% yoy for FY18F. For Hengan, we understand from management that Hengan has gained c.2% market share in offline tissue paper sale to c.22% in 1Q18. We forecast tissue paper segment revenue growth of 9.5% yoy in FY18F for Hengan, mainly driven by volume growth. While Hengan’s sanitary napkin and diaper market shares remained stable yoy in 1Q18.

19



Figure 29: Tissue paper channel check


Vinda 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 qoq yoy

1 维达(Vinda) 无芯卷纸超韧3层100g卫生纸*40卷 Vinda tissue roll 3 ply 100g*40 49.9 49.9 49.9 49.9 55.9 61.9 10.7% 24.0%

2 维达(Vinda) 卷纸蓝色经典3层140g卫生纸*10卷 Vinda tissue roll 3 ply 140g*10 19.9 19.9 19.9 19.9 20.9 20.9 0.0% 5.0%






8 维达(Vinda) 抽纸倍韧2层150抽软抽*8包(中规格) Vinda box tissue 2 ply 150 sheets*8 (mid size) 28.9 28.9 28.9 28.9 38.0 44.0 15.8% 52.2%

9 维达(Vinda) 抽纸倍韧2层180抽软抽*24包(小规格) Vinda box tissue 2 ply 180 sheets*24 (small size) 58.0 58.0 58.0 58.0 58.0 65.8 13.4% 13.4%

10 维达(Vinda) 抽纸超韧3层130抽软抽*6包(小规格) Vinda box tissue 3 ply 130 sheets*6 (small size) 14.9 14.9 14.9 14.9 14.9 15.9 6.7% 6.7%

11 维达(Vinda) 抽纸超韧3层130抽软抽*18包(中规格) Vinda box tissue 3 ply 130 sheets*18 (mid size) 49.9 49.9 49.9 49.9 53.9 57.9 7.4% 16.0%

12 维达(Vinda) 抽纸细韧3层140抽压花软抽*24包 ( 小规格 ) Vinda box tissue 3 ply 140 sheets*24 (small size) 59.0 59.0 59.0 59.0 59.9 64.9 8.3% 10.0%

13 维达(Vinda) 抽纸超韧3层150抽软抽*24包(小规格) Vinda box tissue 3 ply 150 sheets*24 (small size) 69.0 69.0 69.0 69.0 73.9 76.9 4.1% 11.4%

14 维达(Vinda) 抽纸超韧3层150抽软抽*24包(中规格) Vinda box tissue 3 ply 150 sheets*24 (mid size) 76.9 76.9 76.9 76.9 79.9 88.9 11.3% 15.6%

15 维达(Vinda) 抽纸超韧3层150抽软抽*18包(大规格) Vinda box tissue 3 ply 150 sheets*18 (large size) 116.0 119.0 119.0 119.0 129.0 149.0 15.5% 25.2%

16 维达(Vinda)手帕纸倍韧3层*48包(Bobo香薰) Vinda handkerchief tissue 3 ply*48 na na na na 39.0 45.0 15.4% na

17 维达(Vinda) 手帕纸超韧4层纸巾*36包(无香) Vinda handkerchief tissue 4 ply*36 17.9 17.9 17.9 17.9 19.9 20.9 5.0% 16.8%

18 维达(Vinda) 手帕纸 Feel系列 4层印花纸巾*24包(幸福小印花) Vinda handkerchief tissue 4 ply*24 13.9 13.9 13.9 13.9 13.9 14.9 7.2% 7.2%

19 维达(Vinda) 厨房湿巾 40片装 Vinda kitchen w et tissue 40pcs 17.9 17.9 17.9 17.9 17.9 17.9 0.0% 0.0%

20 维达(Vinda) 厨房湿巾 26片装*5包 Vinda kitchen w et tissue 26pcs*5 59.9 59.9 59.9 59.9 59.9 54.9 -8.3% -8.3%


Hengan

1 心相印无芯卷纸心柔系列卷纸3层100g*40卷 Hengan tissue roll 3 ply 100g*40 49.9 49.9 49.9 49.9 49.9 52.9 6.0% 6.0%

2 心相印卫生纸心柔系列 3层140g卷纸*10粒 Hengan tissue roll 3 ply 140g*10 19.9 19.9 19.9 19.9 20.9 20.9 0.0% 5.0%

3 竹π本色纸无漂白竹浆 3层150克*24粒 Hengan tissue roll 3 ply 150g*24 79.9 79.9 79.9 79.9 79.9 79.9 0.0% 0.0%

4 心相印卫生纸卷筒纸心柔系列卷纸3层160g*27卷 Hengan tissue roll 3 ply 160g*27 59.9 59.9 59.9 59.9 59.9 59.9 0.0% 0.0%

5 心相印卫生纸柔肤系列 3层180g卷纸*10粒 Hengan tissue roll 3 ply 180g*10 49.8 49.8 49.8 49.8 49.8 49.8 0.0% 0.0%

6 心相印卫生纸卷筒纸心柔系列卷纸3层180g*27卷 Hengan tissue roll 3 ply 180g*27 66.9 66.9 66.9 66.9 66.9 66.9 0.0% 0.0%

7 心相印卫生纸有芯卷筒纸高克重心柔系列卷纸3层200g*27卷 Hengan tissue roll 3 ply 200g*27 72.9 72.9 72.9 72.9 75.9 75.9 0.0% 4.1%

8 心相印抽纸经典系列 2层180抽面巾纸*18包 Hengan box tissue 2 ply 180 sheets*18 44.9 44.9 44.9 45.9 45.9 45.9 0.0% 2.2%

9 心相印抽纸经典系列 2层200抽面巾纸*20包 Hengan box tissue 2 ply 200 sheets*20 65.9 65.9 65.9 65.9 65.9 65.9 0.0% 0.0%

10 心相印抽纸茶语丝享系列3层120软抽*18包 Hengan box tissue 3 ply 120 sheets*18 43.9 43.9 43.9 43.9 43.9 43.9 0.0% 0.0%

11 竹π本色纸无漂白竹浆 3层120抽软抽*15包 Hengan box tissue 3 ply 120 sheets*15 59.9 59.9 59.9 59.9 59.9 59.9 0.0% 0.0%

12 心相印抽纸面巾纸茶语系列软抽3层130抽*24包（小规格） Hengan box tissue 3 ply 130 sheets*24 (small size) 55.9 55.9 55.9 59.9 59.9 59.9 0.0% 7.2%

13 心相印纸面巾小黄人系列 130抽三层塑装（中规格） Hengan box tissue 3 ply 130 sheets*24 (mid size) 75.9 75.9 75.9 75.9 75.9 75.9 0.0% 0.0%

14 心相印抽纸面巾纸茶语系列软抽3层150抽*24包（中规格） Hengan box tissue 3 ply 150 sheets*24 (mid size) 75.9 75.9 75.9 76.9 76.9 76.9 0.0% 1.3%

15 心相印茶语手帕纸经典系列 4层纸手帕*36包 Hengan handkerchief tissue 4 ply*36 29.8 29.8 29.8 29.8 29.8 29.8 0.0% 0.0%

16 竹π本色纸无漂白竹浆 4层12包*6条超值装 Hengan handkerchief tissue 4 ply*72 55.9 55.9 55.9 55.9 55.9 55.9 0.0% 0.0%

17 心相印手帕纸品诺系列 4层*5片*20包 Hengan handkerchief tissue 4 ply*20 na na na na na 15.8 na na

18 心相印纸手帕小黄人系列 36包装四层 Hengan handkerchief tissue 4 ply*36 15.9 15.9 15.9 15.9 15.9 15.9 0.0% 0.0%

19 心相印厨房湿巾40片*1包 Hengan kitchen w et tissue 40pcs 16.9 16.9 16.9 16.9 16.9 16.9 0.0% 0.0%

20 心相印婴儿湿巾优选洁肤系列 80片*3包 Hengan baby w et tissue 80pcs*3 29.9 29.9 29.9 29.9 29.9 29.9 0.0% 0.0%


20



Figure 30: Tissue paper channel check (continued)


We expect China's tissue paper industry to be catalysed by further industry consolidation in 2018F, as smaller players are facing increasing pressure from the stricter enforcement of environmental regulations in the country. The China Paper Association estimates that a total of 0.7m tonnes of tissue paper capacity were shut down by the government in 2017. With major tissue paper brands, including Hengan, rapidly ramping up ecommerce presence, we think the smaller players may face a steep decline in profitability due to intensified online competition and lack of pricing power to pass on higher pulp prices to consumers.

Qingfeng 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 qoq yoy

1 清风 (APP) 无芯卷纸原木纯品 3层90克卫生纸*40卷 APP tissue roll 3 ply 90g*40 45.9 45.9 45.9 46.9 49.9 49.9 0.0% 8.7%

2 清风 (APP) 卷纸原木纯品金装系列 4层140克卫生纸*10卷 APP tissue roll 4 ply 140g*10 39.9 39.9 39.9 39.9 39.9 41.9 5.0% 5.0%

3 清风 (APP) 卷纸原木纯品 3层140克27卷 APP tissue roll 3 ply 140g*27 49.9 49.9 49.9 52.9 54.9 54.9 0.0% 10.0%

4 清风 (APP) 卷纸原色纸 4层160克卫生纸*27卷 APP tissue roll 4 ply 160g*27 na na 69.9 72.9 79.9 89.0 11.4% 27.3%

5 清风 (APP) 卷纸原木纯品3层180克27卷 APP tissue roll 3 ply 180g*27 na na 138.9 138.9 138.9 138.9 0.0% 0.0%



8 清风 (APP) 抽纸原木纯品 2层150抽软抽*24包纸巾 APP box tissue 2 ply 150 sheets*24 49.9 49.9 49.9 49.9 49.9 49.9 0.0% 0.0%

9 清风 (APP) 抽纸柔韧2层200抽软抽*20包纸巾 APP box tissue 2 ply 200 sheets*20 39.9 39.9 39.9 42.9 42.9 42.9 0.0% 7.5%

10 清风 (APP) 抽纸原木纯品金装系列 3层120抽软抽*24包纸巾 APP box tissue 3 ply 120 sheets*24 54.9 57.9 53.8 54.9 53.9 55.9 3.7% -3.5%

11 清风 (APP) 抽纸原木纯品金装系列 3层130抽*16包纸巾 APP box tissue 3 ply 130 sheets*16 45.9 45.9 42.9 42.9 42.9 44.9 4.7% -2.2%

12 清风 (APP) 抽纸黑曜系列 3层130抽18包中规 APP box tissue 3 ply 130 sheets*18 na na na na 62.9 68.9 9.5% na

13 清风 (APP) 抽纸原木纯品3层150抽24包中规 APP box tissue 3 ply 150 sheets*24 na na na 69.9 65.9 69.9 6.1% na

14 清风 (APP) 抽纸原木纯品金装系列 3层150抽软抽*20包纸巾中规格 APP box tissue 3 ply 150 sheets*20 59.9 65.9 65.9 60.9 59.9 62.9 5.0% -4.6%

15 清风 (APP) 手帕纸原木纯品 3层10张*30包 APP handkerchief tissue 3 ply*30 11.9 11.9 11.9 11.9 11.9 12.6 5.9% 5.9%

16 清风 (APP) 手帕纸原木纯品金装系列加厚4层纸巾*60包 APP handkerchief tissue 4 ply*60 29.9 29.9 29.9 26.9 29.9 29.9 0.0% 0.0%

17 铂丽雅 EMPORIA （手帕纸）轻奢厚韧系列 4层8张24包 APP handkerchief tissue 4 ply*24 na 30.9 30.9 30.9 30.9 30.9 0.0% na

18 清风 (APP）手帕纸 3层10张纸巾*96包 APP handkerchief tissue 3 ply*96 39.9 36.9 36.9 36.9 37.9 39.9 5.3% 8.1%

19 清风 (APP) 厨房湿巾 40片*3包 APP kitchen w et tissue 40pcs*3 na na 43.9 43.9 44.9 44.9 0.0% na

20 清风 (APP) 湿巾御本草系列抽取式非独立80片家庭装 APP w et tissue 80pcs 12.9 12.9 12.9 13.9 13.9 13.0 -6.5% 0.8%


C&S

1 洁柔（C&S）卷纸蓝面子柔韧3层140g卫生纸*27卷 C&S tissue roll 3 ply 140g*27 59.9 59.9 47.9 49.9 55.9 55.9 0.0% -6.7%

2 洁柔（C&S）卷纸黑Face 加厚4层140g卫生纸*30卷 C&S tissue roll 4 ply 140g*30 na na na na 65.9 62.9 -4.6% na

3 洁柔（C&S）卷纸自然木黄色纸柔滑加厚4层150g卫生纸*32卷 C&S tissue roll 4 ply 150g*32 na na 89.9 85.9 85.9 85.9 0.0% na

4 洁柔（C&S）卷纸黑Face 加厚4层160g卫生纸*27卷 C&S tissue roll 4 ply 160g*27 65.9 63.9 62.9 59.9 65.9 65.9 0.0% 3.1%

5 洁柔（C&S）卷纸黑Face 加厚4层180g卫生纸*10卷 C&S tissue roll 4 ply 180g*10 25.9 25.9 26.9 26.0 28.9 28.0 -3.1% 8.1%

6 洁柔（C&S）卷纸黑Face 加厚4层180g卫生纸*23卷 C&S tissue roll 4 ply 180g*23 55.9 59.9 57.9 59.9 62.9 62.9 0.0% 5.0%

7 洁柔（C&S）卷纸加厚加重4层201.6g卫生纸*24卷 C&S tissue roll 4 ply 201.6g*24 59.9 59.9 65.9 63.0 69.9 69.9 0.0% 16.7%

8 洁柔（C&S）抽纸纯韧倍柔2层180抽面巾纸*24包无香 C&S box tissue 2 ply 180 sheets*24 55.9 59.9 59.9 55.0 62.9 62.9 0.0% 5.0%

9 洁柔（C&S）抽纸粉Face 柔韧3层120抽面巾纸*18包无香 C&S box tissue 3 ply 120 sheets*18 59.9 59.9 45.9 50.9 50.9 50.9 0.0% -15.0%

10 洁柔（C&S）抽纸粉Face 柔韧3层120抽面巾纸*20包无香 C&S box tissue 3 ply 120 sheets*20 55.9 55.9 52.9 52.9 53.9 54.9 1.9% -1.8%

11 洁柔（C&S）抽纸金尊3层130抽面巾纸*24包无香 C&S box tissue 3 ply 130 sheets*24 69.9 69.9 59.9 59.9 59.9 59.9 0.0% -14.3%

12 洁柔（C&S）抽纸黑Face 可湿水3层130抽面巾纸*18包无香 C&S box tissue 3 ply 130 sheets*18 65.9 65.9 62.9 62.9 65.9 65.9 0.0% 0.0%

13 洁柔（C&S）抽纸粉Face 强韧3层135抽面巾纸*3包百花香味 C&S box tissue 3 ply 135 sheets*3 18.9 18.9 18.9 10.0 10.9 10.9 0.0% -42.3%

14 洁柔（C&S）抽纸黑Face 可湿水3层150抽面巾纸*3包古龙香水味 C&S box tissue 3 ply 150 sheets*3 25.9 25.9 25.9 13.0 13.9 13.9 0.0% -46.3%

15 洁柔（C&S）手帕纸快乐记忆柔韧3层面巾纸*60包无香 C&S handkerchief tissue 3 ply*60 na 49.0 35.9 24.9 25.9 25.9 0.0% -47.1%

16 洁柔（C&S）抽纸自然木黄色纸亲肤3层28抽手帕纸*48包 C&S handkerchief tissue 3 ply*48 na na 149.0 69.9 69.9 69.9 0.0% na

17 洁柔（C&S）手帕纸粉Face 可湿水4层面巾纸*108包无香 C&S handkerchief tissue 3 ply*108 49.9 49.9 45.9 45.9 42.9 42.9 0.0% -14.0%

18 洁柔（C&S）手帕纸黑Face 可湿水4层面巾纸*108包古龙香水味 C&S handkerchief tissue 3 ply*108 65.9 65.9 56.9 54.9 52.9 52.9 0.0% -19.7%


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Figure 31: China’s annual tissue paper capacity closed by the government (m tonnes)

SOURCES: CGS-CIMB RESEARCH, CHINA PAPER ASSOCIATION

Sanitary napkin prices remain relatively stable

From our channel checks, we observed that sanitary napkin prices remained relatively stable during the record period. Neither Hengan nor Vinda increased the selling prices of their products during the record period. Other competitors have seen selling prices diverge -- Whisper and Sofy increased their selling prices by 4.2-7.9% yoy on average as of 2Q17, while ABC and Laurier saw selling prices lowered by 10.1-12.2% on average.

We expect stable development in the sanitary napkin market in 2018F, with premium personal hygiene products increasingly welcomed by Chinese women amid their rising education level, social status and consumption power.

We forecast Hengan to record sanitary napkin revenue growth of 7.5% in FY18F, riding on higher ASP driven by product upgrade (management has confirmed that Hengan did not raise the selling prices of its sanitary napkin products), and improved sales as a result of further roll-out of its “Amoeba” sales team business strategy.

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Figure 32: Sanitary napkin channel check


Hengan1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 qoq yoy

1 安尔乐卫生巾棉柔蓝芯纤巧日用姨妈巾245mm10片装新包装LJA8110 Anerle cotton day use 245mm*10pcs na na na na na 4.5 na na

2 安尔乐卫生巾蓝芯体验2代棉柔表层薄日用姨妈巾245mm10片/包LJC8110 Anerle thin cotton day use 245mm*10pcs na na na na 5.5 5.5 na na

3 安尔乐卫生巾蓝芯体验柔爽网面纤巧日用245mm姨妈巾10片装LJA9110 Anerle mesh day use 245mm*10pcs na na na na 4.8 4.8 0.0% na

4 安尔乐卫生巾蓝芯2代棉柔表层夜用纤巧姨妈巾275mm 10片LJA8210 Anerle thin cotton night use 275mm*10pcs na na na na 5.2 5.2 0.0% na

5 安尔乐卫生巾蓝芯体验棉柔表层薄型夜用姨妈巾275mm10片/包LJC8210 Anerle mesh night use 275mm*10pcs na na na na 5.8 5.6 -3.4% na

6 安尔乐卫生巾蓝芯体验2代柔柔爽网面夜用纤巧姨妈巾275mm10片/包LJA9210 Anerle 2nd gen mesh night use 275mm*10pcs na na na na 5.2 5.2 0.0% na

7 七度空间 (SPACE 7) 少女薄型日用夜用护垫姨妈巾组合套装优雅系列棉柔10包组合 Space 7 day+night use combo 10 packets 66.6 59.9 59.9 59.9 59.9 59.9 0.0% 0.0%

8 七度空间 (SPACE 7) 日用卫生巾棉柔表层透气薄组合套装棉柔夜用8片/包8包338mm Space 7 day+night use combo 8 packets 59.9 59.9 59.9 59.9 59.9 56.9 -5.0% -5.0%

9 新呼吸卫生巾日用夜用加长夜用护垫棉柔姨妈巾组合套装新呼吸日用夜用50片组合 Hegnan day+night use combo 8 packets na na na na 49.9 46.9 -6.0% na

10 新呼吸卫生巾棉柔系列透气薄新品姨妈巾组合装棉柔日用275mm6包组合XY13 Hengan day use 275mm 6packets na na na 52.9 52.9 52.9 0.0% na

11 新呼吸日用卫生巾有机棉系列透气薄新品姨妈巾棉柔加长夜用350mm4片XY14 Hengan night use 350mm*4pcs na na na 10.6 7.9 7.9 0.0% na

12 七度空间（SPACE 7）七度空间卫生巾棉柔加长夜用姨妈巾10包组合套装QSC6808 Space 7 night use 10 packets 73.9 73.9 73.9 73.9 73.9 73.9 0.0% 0.0%


Vinda

1 薇尔VIA 日用卫生巾绵柔超吸系列干爽透气 240mm*16片 VIA 240mm*16pcs na na na 10.9 10.9 10.9 0.0% na

2 薇尔VIA 迷你卫生巾轻盈超薄系列速干透气 190mm*18片 VIA 190mm*18pcs na na na 10.9 10.9 10.9 0.0% na

3 薇尔VIA 安心裤畅睡裤比基尼装裤型卫生巾贴合轻盈 M码420mm*10片 VIA safety pants M size 10pcs 39.9 39.9 39.9 39.9 39.9 39.9 0.0% 0.0%

4 薇尔VIA 卫生巾优惠装11包送定制收纳箱日用56片+夜用8片+超长夜用6片 VIA day+night use combo 11 packets na na na 49.9 49.9 49.9 0.0% na

5 薇尔VIA 安心裤畅睡裤比基尼装绵柔裤型卫生巾贴合轻盈彩色装M码2片 VIA safety pants M size 2pcs na na na 12.9 12.9 12.9 0.0% na

6 轻曲线（Libresse）卫生护垫150mm 32片超薄服贴棉柔透气无香型 Libresse 150mm*32pcs na na na 33.0 33.0 19.8 -40.0% na

7 轻曲线（Libresse）夜用卫生巾320mm 10片干爽瞬吸防漏塑形超熟睡 Libresse night use 320mm*10pcs na na na 24.9 24.9 24.9 0.0% na

8 轻曲线(Libresse) 日用卫生巾240mm 20片干爽瞬吸防漏塑形流量适中型敏感适用 Libresse day use 240mm*20pcs na na na 36.9 36.9 36.9 0.0% na

9 轻曲线（Libresse）日用卫生巾284mm 24片干爽瞬吸防漏塑形加长量多日用型 Libresse day use 284mm*24pcs na na na 49.9 49.9 49.9 0.0% na

10 轻曲线（Libresse）日用卫生巾240mm 28片干爽瞬吸防漏塑形流量适中型 Libresse day use 240mm*28pcs na na na 49.9 49.9 49.9 0.0% na


Kotex

1 高洁丝 Kotex HelloKitty限定装夜安裤M-L号12片夜用裤型卫生巾 Kotex Hello Kitty safety pants 12 pcs 39.9 39.9 39.9 39.9 39.9 39.9 0.0% 0.0%

2 高洁丝 Kotex 臻选卫生巾日夜用箱装10包66片 Kotex day+night use combo 10 packets 75.9 72.9 72.9 75.9 75.9 75.9 0.0% 4.1%

3 高洁丝 Kotex 亲亲棉卫生巾日夜用箱装12包98片 Kotex day+night use combo 12 packets 79.9 84.9 84.9 84.9 84.9 84.9 0.0% 0.0%

4 高洁丝 Kotex Air极薄卫生巾日夜用箱装12包81片 Kotex ultra thin day+night use combo 12 packets 79.9 79.9 79.9 79.9 79.9 75.9 -5.0% -5.0%

5 高洁丝 Kotex 亲亲棉卫生巾日用240mm6包108片(日用240 18片*6包) Kotex sensitive skin day use 240mm 6 packets 69.9 69.9 69.9 69.9 69.9 69.9 0.0% 0.0%


Whisper

1 护舒宝(Whisper)日夜组合未来感·极护液体卫生巾套装 3包 (日用20片+夜用10片) Whisper day+night use combo 3 packets 69.9 69.9 69.9 69.9 69.9 69.9 0.0% 0.0%

2 护舒宝(Alw ays)未来感·极护卫生巾日用 240mm 10片 Alw ays day use 240mm*10pcs 29.9 29.9 29.9 29.9 29.9 29.9 0.0% 0.0%

3 护舒宝纯棉卫生巾舒缓型日用240mm 10片 (进口有机棉表层姨妈巾敏感肌都适用) Whisper pure cotton day use 240mm*10pcs na na 18.3 18.9 18.9 18.9 0.0% na

4 丹碧丝导管式隐形卫生棉条优惠装（普通流量16支装+3*3支装送液体卫生巾3片装） Tampax 25pcs 79.9 79.9 79.9 89.9 89.9 89.9 0.0% 12.5%

5 护舒宝 (alw ays) 幻彩·极护卫生护垫48片(欧美原装进口，无感保护) Alw ays 48pcs na na na 64.9 64.9 64.9 0.0% na


Sofy

1 苏菲卫生巾少女成长彩箱礼盒装 Sofy teenager combo na 49.9 60.0 60.0 55.9 55.9 0.0% 12.0%

2 苏菲口袋魔法棉柔日夜组合箱装卫生巾（零味感×6包+森呼吸×2包+夜用290×2包） Sofy day+night use combo 10 packets 65.9 65.9 79.9 79.9 79.9 79.9 0.0% 21.2%

3 苏菲超熟睡超薄夜用安心裤L码 2片*10包 Sofy night use safety pants L size *2pcs na na na 69.9 79.9 79.9 0.0% na

4 苏菲卫生巾超熟睡柔棉感夜用290mm 5片*4包+超熟睡柔棉感夜用420mm 4片*6包 Sofy night use combo 10 packets 63.9 63.9 63.9 62.9 62.9 62.9 0.0% -1.6%

5 苏菲卫生巾裸感S棉柔日用230mm 7片*6包+超熟睡超薄夜用420mm 4片*4包 Sofy day+night use combo (S size) 10 packets 67.9 67.9 67.9 67.9 67.9 67.9 0.0% 0.0%


Purcotton

1 全棉时代（PurCotton）奈丝公主全棉亲肤超薄系列卫生巾 8包组合装 Purcotton ultra thin series 8 packets na na 115.2 115.2 115.2 115.2 0.0% na

2 全棉时代奈丝公主卫生巾亲肤平纹超薄日夜混合组合装加迷你巾 11包装 Purcotton ultrathin day+night use combo 11 packets na na na na 149.9 154.9 3.3% na

3 全棉时代奈丝公主卫生巾瞬吸棉网日夜混合组合装量多 8包装 Purcotton heavy f low day+night use combo 8 packets na na na na 104.0 113.2 8.8% na

4 全棉时代奈丝公主全棉亲肤护翼迷你卫生巾190mm 10片/包 Purcotton mini 190mm*10pcs na na na na na 12.9 na na

5 全棉时代奈丝公主卫生巾全棉棉爽超吸日用240mm 10片/包 Purcotton 240mm*10pcs na na na na na 16.9 na na

Average selling price increase 4.1% na

23



Figure 33: Sanitary napkin channel check (continued)


Wood pulp prices continued rising in Apr 2018 (4M18: +30.8% yoy; YTD: +8.4%). We expect wood pulp prices to stay high in the near term. Given the 4- to 5-month lead time for wood pulp purchases, we think tissue paper GPM for both Vinda and Hengan will stay under pressure in FY18F. In addition to the ASP hikes, Vinda is mitigating the margin pressure through continuous portfolio optimisation and cost-saving initiatives. We expect Vinda’s GPM to contract 0.3% pts to 29.4% in FY18F.

Propylene prices trended upwards in Apr 2018 post a correction in Mar (4M18: +9.0% yoy; YTD: -3.8%). We expect Hengan to be able to offset the increase in raw material prices through the upgrading of its sanitary napkin product portfolio. However, we forecast Hengan’s overall GPM to contract 0.4% pts yoy in FY18F mainly due to margin pressure on the tissue paper segment.

ABC1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 qoq yoy

1 ABC KMS棉柔系列卫生巾舒适日夜组合装10包60片 ABC KMS series day+night use combo 60pcs 59.9 59.9 59.9 59.9 59.9 59.9 0.0% 0.0%

2 ABC KMS棉柔系列卫生巾轻透薄日夜组合装9包57片 ABC KMS series day use 57pcs 61.9 59.9 59.9 59.9 59.9 53.9 -10.0% -10.0%

3 ABC KMS棉柔系列卫生巾纤薄夜用280mm*8片 ABC KMS series night use 280mm*8pcs na na na 8.9 9.5 8.5 -10.5% na

4 ABC KMS棉柔系列卫生巾 0.1cm轻透薄夜用323mm*3片 ABC KMS series night use 323mm*3pcs 4.9 4.9 4.9 4.9 4.9 3.9 -20.4% -20.4%

5 ABC 新肌感系列卫生巾 0.1cm超薄夜用棉柔表层285mm*10片 ABC new skin-touch series night use 285mm*10pcs na na 17.5 17.5 17.5 17.5 0.0% na


Laurier

1 花王乐而雅(laurier)量多日夜安心组合11包装卫生巾 Laurier heavy f low day+night use combo 11 packets 79.0 79.0 79.0 79.0 79.0 69.0 -12.7% -12.7%

2 花王乐而雅(laurier)零触感特薄日夜经典组合11包装卫生巾 Laurier ultra thin day+night use combo 11 packets 89.0 89.0 89.0 89.0 89.0 79.0 -11.2% -11.2%

3 花王乐而雅(laurier)零触感特薄迷你日用卫生巾17cm 16片 Laurier ultra thin day use 17cm*16pcs 10.9 10.9 10.9 10.9 15.5 15.5 0.0% na

4 花王乐而雅(laurier)零触感特薄特长日用护翼型卫生巾25cm 8片 Laurier ultra thin day use 25cm*8pcs 10.9 10.9 10.9 9.5 9.5 9.5 0.0% -12.8%

5 花王乐而雅(laurier)特薄夜用护翼型卫生巾30cm 12片 Laurier ultra thin night use 30cm*12pcs 16.0 16.0 16.0 16.0 13.9 13.9 0.0% na


Ladycare

1 洁婷卫生巾透气双U日夜组合4包 Ladycare day+night use combo 4 packets 16.9 16.9 16.9 16.9 16.9 16.9 0.0% 0.0%

2 洁婷(ladycare)卫生巾护垫日用棉柔145mm*20片(超薄透气） Ladycare day use 145mm*20pcs na na na 4.0 9.9 9.9 0.0% na

3 洁婷(ladycare)卫生巾日夜组合透气双U12包104片 Ladycare day+night use combo 104pcs 68.0 68.0 68.0 68.0 68.0 68.0 0.0% 0.0%

4 洁婷(ladycare)卫生巾透气超薄棉柔日夜组合12包48片 Ladycare day+night use combo 48pcs na na na na na 79.9 na na

5 洁婷(ladycare)迷你卫生巾日用迷你无护翼棉柔 180mm*40片 Ladycare day use 180mm*40pcs na na 11.8 11.8 11.8 11.8 0.0% na


Elis

1 怡丽(elis)卫生巾零敏感组合12包(日用72片+夜用12片) Elis day+night use combo 12 packets 59.0 59.0 59.0 59.0 59.0 59.0 0.0% 0.0%

2 怡丽新素肌感量多型日夜套组9包(72片) Elis heavy f low day+night use combo 9 packets na na na na 59.9 59.9 0.0% na

3 怡丽(elis)卫生巾零敏感日夜组合10片装(日8P+夜2P) Elis sensitive skin day+night use combo 10 packets na na na na 16.9 16.9 0.0% na

4 怡丽新素肌感敏感肌系列卫生巾棉柔丝薄日用(240mm*8片) Elis sensitive skin day use 240mm*8pcs na na na 12.9 14.5 14.5 na na

5 怡丽(elis)透氧肌极薄0.1护翼卫生巾日用240mm 8片装 Elis ultra thin day use 240mm*8pcs na na na 13.9 13.5 13.9 3.0% na


24



Figure 34: Wood pulp price trend


Figure 35: Propylene price trend


Vinda (3331 HK, Hold): Maintain Hold. Higher wood pulp prices are both a boon and bane for Vinda. While we believe Vinda will continue to enjoy strong topline growth in FY18F amid an improving competitive landscape, the higher wood pulp prices would put pressure on its near-term earnings, especially given the high base of 1H17.

Hengan (1044 HK, Reduce): Maintain Reduce on Hengan, due to uncertainties on the efficiency of its Amoeba reforms and as higher raw material prices continue to put pressure on its margins in FY18F.

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Recommendation

The MSCI China Consumer Staples Index has outperformed the MSCI China Index over the past year by 7.6%. We maintain our Overweight stance on the consumer staples sector as we expect further recovery, riding on 1) continuous product mix upgrades, 2) further price hikes, 3) easing raw material price pressure, and 4) positive impact from reforms in the distribution channel.

Based on the price hike theme this year; our top picks are Tingyi and Uni-President China. Both have raised the selling prices of their beverage products YTD, and we believe there is further upside from the noodle price hikes. Raw material cost pressure has also eased for both companies. As such, we believe both companies should see strong earnings growth momentum in FY18F as the incremental revenue from price hikes can be directly passed down.

We also recommend investors to take a look at Want Want. Want Want has been a beneficiary of recovering dairy demand in China, with its Hot Kid milk seeing good sales recovery in 4QCY17. The company has also been actively optimising its distribution channels to further penetrate into modern channels and e-commerce through differentiated products, generating incremental sales growth. Given this, coupled with price hikes in Apr/May, we expect Want Want to see an earnings recovery from topline reacceleration and easing GPM pressure in FY19F.

Key risks include higher raw material prices and ineffective channel reforms.

Figure 36: MSCI China vs. MSCI China Consumer Staples Index relative performance


Figure 37: Historical returns of MSCI China and MSCI China Consumer Staples Indices


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MSCI China MSCI China Consumer Staples Index

MSCI China Consumer Staples Index MSCI China Index

April closing price 1,200.87 91.28

1 month return -2.1% -0.1%

3 months return -1.5% -9.2%

6 months return 15.8% 5.9%

1 year return 41.4% 33.8%

26



Figure 38: Tingyi's historical P/E trend Figure 39: Uni-President China's historical P/E trend


Figure 40: Want Want's historical P/E trend Figure 41: Mengniu’s historical P/E trend


Figure 42: Hengan's historical P/E trend Figure 43: Vinda's historical P/E trend


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Figure 45: Consumer staple sector peer comps


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Price TP Mkt cap 3-year EPS

Company Ticker Recom. (LC$) (LC$) (US$) CY18F CY19F CY20F CAGR (%) CY18F CY19F CY18F CY19F CY18F CY19F

Uni-President China 220 HK Add 8.55 9.50 4,761 28.1 25.1 22.7 24.3% 2.3 2.2 11.5 10.4 2.8% 3.3%

Tingyi 322 HK Add 16.08 18.10 11,610 32.0 28.6 25.7 23.4% 3.7 3.5 9.7 9.2 1.5% 1.7%

Want Want 151 HK Add 7.10 8.00 11,311 23.2 21.5 20.0 3.1% 5.2 4.5 13.7 12.4 1.4% 1.9%

Mengniu 2319 HK Add 26.80 29.20 13,212 25.9 21.5 18.4 37.4% 3.3 3.0 15.2 13.2 1.2% 1.4%

Tsingtao 168 HK Reduce 48.50 25.70 9,479 34.6 32.0 N/A 10.0% 2.9 2.7 18.5 17.0 1.3% 1.4%

Hengan 1044 HK Reduce 70.60 65.00 11,129 18.3 17.1 15.9 7.4% 4.1 3.7 11.6 10.9 3.6% 3.9%

Vinda 3331 HK Hold 14.06 15.50 2,131 21.5 17.7 15.1 11.0% 1.8 1.7 11.4 9.9 1.3% 1.6%

P/E (x) P/BV (x) EV/EBITDA (x) Dividend yield (x)

28



Insert Insert

Uni-President China Price hikes to drive topline growth in FY18F ■ We expect further product mix upgrades and price hikes for the noodle segment to

drive topline and margins in FY18F. ■ Classic beverages saw continued strong sales growth momentum in 1Q18; we expect

UPC to boost beverage ASP growth by lowering distributors’ discount in 2Q18. ■ We expect operating margin expansion trend to continue into FY18 with distribution

channel adjustments and stricter cost controls. ■ We maintain our Add call with a higher DCF-based target price of HK$9.50.

Continued product mix upgrades in noodle segment UPC continues to upgrade its noodle product mix by focusing on high-end noodle products (above Rmb5/bowl). In 1Q18, high-end segment recorded double-digit sales growth. In FY18, UPC will introduce self-heating food “Lazy Time” and fresh cold noodle product “Q-Fresh”. It will also begin promoting its “Teng Jiao” noodle brand nationwide. Management also plans to revise the pricing of selected noodle products upwards this year; we forecast noodle segment sales to rise 6.6% yoy in FY18.

Beverage growth to be boosted by ASP growth beginning 2Q18 Post Lunar New Year, UPC began to lower distributors’ discounts of some drinks (indirectly increasing ex-factory price; currently the gap between actual and suggested ex-factory price amounts to c.10%), including classic beverage and juice products. We expect this to boost beverage ASP in 2Q18, and forecast beverage sales growth of 6.1% yoy in FY18. Management will stay focused on revitalising sales of major products through consolidation of product series and brand-building promotional campaigns.

Channel check indicates significant price hikes for beverages From our channel check, we noted that Tingyi and UPC raised prices of beverage products, especially classic tea and juice products. Tingyi raised selling price of classic tea products by 5.7-10.0% yoy; while UPC raised prices of similar products by 20.5-24.7%. We also expect UPC to raise noodle selling prices in 2Q18 to boost revenue growth and margins in FY18.

To explore additional distribution channels Management plans to invest 30% of its capital expenditure this year (Rmb1.3bn-1.5bn) in new distribution channels, including vending machines. The vending machines will be placed in high traffic areas not covered by existing points of sales. Vending machines allow UPC greater control over the product quality and shelf space distribution; while incurring lower overhead costs.

Further margin recovery in FY18F Given easing 1) raw material cost pressure, 2) lowering of distributors discount, and 3) continued product mix upgrades and price hikes, we forecast GPM to expand 0.4% pt yoy in FY18F. We expect OPM to improve 0.9% pt in FY18 to 6.5%. UPC will focus on distribution channels with higher profitability, and reduce the need for distributors’ discounts through stricter control of channel inventory. Management plans to adopt targeted marketing and focus resources on brand building for key products in FY18F.

Maintain Add with a higher DCF-based TP of HK$9.50 (WACC: 9.0%) We raise our FY18-20F EPS forecasts by 1.8-3.6% to reflect higher topline growth and GPM assumption on the back of price hikes. We remain confident of further topline and margin recovery for UPC in FY18F and FY19F and maintain our Add rating with a higher DCF-based TP of HK$9.50. Potential share price catalysts include noodle product price hikes; downside risks include raw material prices trending higher over a longer period.

SOURCES: CGS-CIMB RESEARCH, COMPANY REPORTS

Hong Kong

ADD (no change) Consensus ratings*: Buy 14 Hold 11 Sell 1

Current price: HK$8.55

Target price: HK$9.50

Previous target: HK$8.60

Up/downside: 11.1%

CGS-CIMB / Consensus: 16.3%

Reuters: 0220.HK

Bloomberg: 220 HK

Market cap: US$4,705m

HK$36,930m

Average daily turnover: US$5.45m

HK$42.78m

Current shares o/s: 4,319m

Free float: 29.5% *Source: Bloomberg

Key changes in this note

FY18F EPS increased by 1.8%.



Source: Bloomberg

Price performance 1M 3M 12M Absolute (%) 14.2 23.2 50

Relative (%) 12.8 25.1 29.3

Major shareholders % held Uni-President Enterprise 70.5

Insert

Analyst(s)

Lei YANG, CFA



Financial Summary Dec-16A Dec-17A Dec-18F Dec-19F Dec-20F

Revenue (Rmbm) 20,986 21,297 22,620 23,699 24,669

Operating EBITDA (Rmbm) 2,238 2,531 2,550 2,839 3,112

Net Profit (Rmbm) 607 878 1,094 1,246 1,390

Core EPS (Rmb) 0.12 0.20 0.25 0.29 0.32

Core EPS Growth (39.2%) 73.1% 24.6% 13.9% 11.6%

FD Core P/E (x) 59.26 34.24 27.49 24.14 21.64

DPS (Rmb) 0.03 0.17 0.21 0.24 0.26

Dividend Yield 0.47% 2.39% 2.97% 3.38% 3.77%

EV/EBITDA (x) 13.17 11.00 10.88 9.66 8.67

P/FCFE (x) 39.56 74.04 43.48 28.48 23.70

Net Gearing 1.1% (11.8%) (11.9%) (13.6%) (15.9%)

P/BV (x) 2.50 2.35 2.26 2.18 2.10

ROE 4.29% 7.07% 8.38% 9.20% 9.90%

% Change In Core EPS Estimates 1.84% 3.48% 3.59%

CIMB/consensus EPS (x) 1.01 1.02 0.98

76.0

88.5

101.0

113.5

126.0

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6.30

7.30

8.30

9.30

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May-17 Aug-17 Nov-17 Feb-18

Vo

l m

29

Food & Beverages│Hong Kong

Uni-President China│May 24, 2018

Price hikes to drive topline growth in FY18F

Figure 1: Earnings revisions


Figure 2: DCF valuation Figure 3: WACC assumptions

SOURCES: CGS-CIMB, COMPANY REPORTS SOURCES: CGS-CIMB, COMPANY REPORTS

Figure 4: Uni-President China’s historical P/E ratio


FY18F FY19F FY20F

Old New % change Old New % change Old New % change

Revenue (Rmbm) 22,619.7 22,619.7 0.0% 23,634.8 23,698.7 0.3% 24,551.8 24,669.4 0.5%

Gross margin 33.4% 33.6% 0.2ppt 33.6% 33.8% 0.2ppt 33.8% 34.0% 0.2ppt

Distribution exp/sales 23.6% 23.6% 0.0ppt 23.4% 23.4% 0.0ppt 23.2% 23.2% 0.0ppt

Admin exp/sales 4.4% 4.5% 0.1ppt 4.3% 4.3% 0.0ppt 4.2% 4.2% 0.0ppt

Operating margin 6.3% 6.4% 0.1ppt 6.8% 7.0% 0.2ppt 7.3% 7.5% 0.2ppt

Net profit (Rmbm) 1,074.1 1,093.9 1.8% 1,203.8 1,245.7 3.5% 1,341.5 1,389.6 3.6%

EPS (Rmb) 0.249 0.253 1.8% 0.279 0.288 3.5% 0.311 0.322 3.6%

Discounted Cash Flow Valuation Rmb m

Value of Phase 1: Explicit 402.8

Value of Phase 2: Value Driver 13,957.7

Value of Phase 3: Fade 13,630.7

Terminal Value 4,551.7

Enterprise Value 32,542.8

Less: Net Debt / Leases -1,110.1

Equity Value 33,653.0

No. Shares (millions) 4,319.3

Target price (HK$) 9.5

(%)

Cost of equity 10.4%

Risk free 3.5%

Market risk premium 10.0%

Beta 0.69

Cost of debt 4.5%

Kd (after tax) 3.4%

Target Debt / (Debt + Equity) 20.0%

Target Equity / (Debt + Equity) 80.0%

WACC 9.0%

Title:

Source:


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BY THE NUMBERS


0.9%

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P/BV vs ROE

Rolling P/BV (x) (lhs) ROE (rhs)

-110%-60%-10%40%90%140%190%240%290%340%390%

122232425262728292

102112

Jan-14A Jan-15A Jan-16A Jan-17A Jan-18F Jan-19F

12-mth Fwd FD Core P/E vs FD Core EPS Growth

12-mth Fwd Rolling FD Core P/E (x) (lhs)

FD Core EPS Growth (rhs)

Profit & Loss

(Rmbm) Dec-16A Dec-17A Dec-18F Dec-19F Dec-20F

Total Net Revenues 20,986 21,297 22,620 23,699 24,669

Gross Profit 7,228 7,052 7,590 8,000 8,379

Operating EBITDA 2,238 2,531 2,550 2,839 3,112

Depreciation And Amortisation (1,376) (1,344) (1,093) (1,173) (1,256)

Operating EBIT 863 1,187 1,457 1,666 1,856

Financial Income/(Expense) 12 62 77 85 101

Pretax Income/(Loss) from Assoc. 93 29 29 29 29

Non-Operating Income/(Expense) 0 0 0 0 0

Profit Before Tax (pre-EI) 968 1,277 1,563 1,780 1,985

Exceptional Items

Pre-tax Profit 968 1,277 1,563 1,780 1,985

Taxation (461) (399) (469) (534) (596)

Exceptional Income - post-tax 100

Profit After Tax 607 878 1,094 1,246 1,390

Minority Interests 0 0 0 0 0

Preferred Dividends

FX Gain/(Loss) - post tax

Other Adjustments - post-tax

Net Profit 607 878 1,094 1,246 1,390

Recurring Net Profit 507 878 1,094 1,246 1,390

Fully Diluted Recurring Net Profit 507 878 1,094 1,246 1,390

Cash Flow


EBITDA 2,238 2,531 2,550 2,839 3,112

Cash Flow from Invt. & Assoc.

Change In Working Capital 336 365 (33) 101 88

(Incr)/Decr in Total Provisions

Other Non-Cash (Income)/Expense

Other Operating Cashflow (15) 219 57 57 57

Net Interest (Paid)/Received (147) (94) 77 85 101

Tax Paid (270) (568) (460) (527) (589)

Cashflow From Operations 2,143 2,453 2,192 2,556 2,769

Capex (1,057) (1,001) (1,500) (1,500) (1,500)

Disposals Of FAs/subsidiaries 1,298 90 0 0 0

Acq. Of Subsidiaries/investments (29) (60) 0 0 0

Other Investing Cashflow 60 188 0 0 0

Cash Flow From Investing 272 (782) (1,500) (1,500) (1,500)

Debt Raised/(repaid) (1,655) (1,265) 0 0 0

Proceeds From Issue Of Shares 0 0 0 0 0

Shares Repurchased

Dividends Paid (168) (120) (615) (766) (872)

Preferred Dividends

Other Financing Cashflow 0 0 0 0 0

Cash Flow From Financing (1,823) (1,384) (615) (766) (872)

Total Cash Generated 592 286 77 290 397

Free Cashflow To Equity 760 406 692 1,056 1,269

Free Cashflow To Firm 2,562 1,764 742 1,106 1,319

31



BY THE NUMBERS… cont’d


Balance Sheet


Total Cash And Equivalents 2,463 2,843 2,920 3,209 3,606

Total Debtors 1,997 1,818 1,921 2,012 2,095

Inventories 1,215 1,159 1,252 1,308 1,357

Total Other Current Assets 0 0 0 0 0

Total Current Assets 5,675 5,820 6,093 6,530 7,058

Fixed Assets 11,097 10,504 10,920 11,251 11,498

Total Investments 730 720 748 777 805

Intangible Assets 30 19 10 6 3

Total Other Non-Current Assets 3,173 2,973 2,916 2,859 2,801

Total Non-current Assets 15,031 14,216 14,595 14,892 15,108

Short-term Debt 2,100 835 835 835 835

Current Portion of Long-Term Debt

Total Creditors 5,442 5,461 5,632 5,887 6,114

Other Current Liabilities 0 0 0 0 0

Total Current Liabilities 7,543 6,296 6,467 6,722 6,948

Total Long-term Debt 500 500 500 500 500

Hybrid Debt - Debt Component

Total Other Non-Current Liabilities 431 251 251 251 251

Total Non-current Liabilities 931 751 751 751 751

Total Provisions 192 174 174 174 174

Total Liabilities 8,665 7,221 7,393 7,648 7,874

Shareholders' Equity 12,040 12,815 13,295 13,775 14,292


Total Equity 12,040 12,815 13,295 13,775 14,292

Key Ratios

Dec-16A Dec-17A Dec-18F Dec-19F Dec-20F

Revenue Growth (5.05%) 1.48% 6.21% 4.77% 4.10%

Operating EBITDA Growth (5.9%) 13.1% 0.8% 11.3% 9.6%

Operating EBITDA Margin 10.7% 11.9% 11.3% 12.0% 12.6%

Net Cash Per Share (Rmb) (0.03) 0.35 0.37 0.43 0.53

BVPS (Rmb) 2.79 2.97 3.08 3.19 3.31

Gross Interest Cover 9.02 22.92 29.15 33.32 37.12

Effective Tax Rate 47.6% 31.2% 30.0% 30.0% 30.0%

Net Dividend Payout Ratio 12.5% 48.1% 49.0% 49.0% 49.0%

Accounts Receivables Days 9.35 9.48 9.28 9.26 9.32

Inventory Days 34.35 30.41 29.28 29.77 29.94

Accounts Payables Days 31.49 32.47 33.18 31.77 31.96

ROIC (%) 6.4% 9.8% 13.2% 14.6% 16.1%

ROCE (%) 6.3% 8.9% 10.9% 12.0% 12.9%

Return On Average Assets 4.52% 5.96% 7.30% 8.05% 8.65%

Company Note Food & Beverages│Hong Kong│May 24, 2018

IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. IF THIS REPORT IS DISTRIBUTED IN THE UNITED STATES IT IS DISTRIBUTED BY CIMB SECURITIES (USA), INC. AND IS CONSIDERED THIRD-PARTY AFFILIATED RESEARCH.

Powered by the EFA Platform

Insert Insert

Want Want China Distribution channel optimisation bearing fruit

■ We expect Want Want to enjoy stronger topline growth on the back of robust dairy demand and its distribution channel optimisation bearing fruit.

■ Want Want has raised selling prices by mid-single digits in Apr-May, which should benefit its GPM in FY3/19.

■ We expect topline to rise to 11.2% yoy in 4QFY3/18 and 8.3% in 2HFY3/18, and earnings growth to recover to 8.4% and 1.3% yoy, respectively (1H18: -9.9% yoy).

■ Our Add call is intact with a higher DCF-based target price of HK$8.00 (WACC: 8.6%).

Expect topline recovery in 2HFY3/18 We forecast 2HFY3/18F revenue growth of 8.3% yoy, accelerating from 1HFY3/18’s 6.3%. We expect a recovery in dairy demand and expansion into new distribution channels to benefit Want Want’s dairy segment sales growth at 12.2% yoy in 2HFY3/18F. We believe distribution channel optimisation and organisational restructuring have begun to bear fruit. Hence, we forecast a sales recovery across Want Want’s key segments (rice cracker: +5.2% yoy, snacks: +4.8% yoy) in 2HFY3/18.

Increased focus on product development Want Want is focusing more on new product development, with plans to 1) upgrade its rice cracker products, 2) launch alcoholic fruit drinks (3.5% alcohol) and a new popsicle product in CY18. The new high-protein milk launched in its online stores and selected regions in CY17 will also be introduced nationwide in CY18. Management expects new products to collectively contribute 3% of total revenue in CY18 (CY17: c.2%).

Continued distribution channel optimisation to drive sales growth In CY17, e-commerce sales doubled, helped by differentiated product packaging and active participation in Tmall’s and JD.com’s business to business (B2B) model. Sales via maternity channels also doubled, while modern channels grew by double digits yoy. Management is mulling setting up production lines in Southeast Asia in CY18 to boost overseas sales (c.7% revenue contribution). It also plans to invest in vending machines as a new channel in FY19. We expect sales growth of 6.7% yoy in FY3/19.

Margin pressure easing Domestic sugar price continued on a downward trend since the peak in Sep 2017 while milk powder price YTD has remained flattish. We expect margin pressure to ease in 2HFY3/18, and expect GPM to contract 1.9% pts yoy to 44.7% (1HFY3/18: down 4.2% pts yoy). Want Want has raised selling prices across three business segments by mid-single digits in Apr-May; and we expect GPM expansion of 0.2% pt in FY3/19F.

Maintain Add with higher DCF-based TP of HK$8.00 We keep our Add call as we expect Want Want to see an earnings recovery from topline reacceleration and easing GPM pressure. We expect topline growth to improve to 11.2% yoy in 4QFY3/18 and 8.3% in 2HFY3/18, and earnings growth to recover to 8.4% and 1.3% yoy (1H18: -9.9% yoy), respectively. We raise our FY18-20 EPS forecasts on the back of higher topline growth and GPM assumptions due to higher ASP. Our DCF-based TP is raised to HK$8.00. Catalysts include better-than-expected dairy recovery.

Risks Despite the recent share price rally, we believe current valuation remains attractive, as Want Want is only trading at 20.8x FY19F P/E, c.0.4 s.d. above 5-year historical average despite visible fundamental recovery. Key risks include higher-than-expected raw material prices.


Hong Kong

ADD (no change) Consensus ratings*: Buy 7 Hold 11 Sell 5

Current price: HK$7.13

Target price: HK$8.00

Previous target: HK$7.30

Up/downside: 12.2%

CGS-CIMB / Consensus: 18.4%

Reuters: 0151.HK

Bloomberg: 151 HK

Market cap: US$11,308m

HK$88,763m

Average daily turnover: US$12.79m

HK$100.00m

Current shares o/s: 12,706m

Free float: 48.5% *Source: Bloomberg

Key changes in this note

FY3/18F EPS increased by 0.3%.



Source: Bloomberg

Price performance 1M 3M 12M Absolute (%) 2.4 6.7 32.5

Relative (%) 2 8.3 11.5

Major shareholders % held Tsai Eng Meng 48.0 Wen Hsien Cheng 3.5

Insert

Analyst(s)

Lei YANG, CFA



Financial Summary Mar-16A Mar-17A Mar-18F Mar-19F Mar-20F

Revenue (Rmbm) 21,016 19,756 20,427 21,740 22,977

Operating EBITDA (Rmbm) 5,466 5,514 5,252 5,644 6,010

Net Profit (Rmbm) 3,395 3,405 3,222 3,543 3,761

Core EPS (Rmb) 0.26 0.27 0.25 0.28 0.29

Core EPS Growth (7.2%) 2.6% (3.4%) 9.9% 6.1%

FD Core P/E (x) 22.13 21.56 23.17 20.82 19.61

DPS (Rmb) 0.12 0.11 0.08 0.11 0.12

Dividend Yield 2.06% 1.90% 1.38% 1.90% 2.03%

EV/EBITDA (x) 13.44 12.88 13.88 11.88 10.70

P/FCFE (x) 23.35 15.39 20.53 18.59 17.51

Net Gearing (10.9%) (16.4%) (26.7%) (38.9%) (48.8%)

P/BV (x) 6.18 5.81 5.20 4.51 3.96

ROE 27.5% 27.5% 24.1% 23.2% 21.5%

% Change In Core EPS Estimates 0.34% 2.25% 2.76%

CIMB/consensus EPS (x) 1.01 1.00 1.01

82.0

95.3

108.7

122.0

4.80

5.80

6.80

7.80

Price Close Relative to HSI (RHS)

20

40

60

80

May-17 Aug-17 Nov-17 Feb-18

Vo

l m

33


Want Want China│May 24, 2018

Distribution channel optimisation bearing fruit

Figure 1: Want Want's FY3/18 preview


Figure 2: Earnings revision


Figure 3: DCF valuation Figure 4: WACC assumptions

SOURCE: CIMB RESEARCH, COMPANY SOURCE: CIMB RESEARCH, COMPANY

lei

(Rmb m) 1HFY3/18 1HFY3/17 yoy chg 2HFY3/18F 2HFY3/17 yoy chg FY3/18F FY3/17 yoy chg

Turnover 9,005.7 8,468.5 6.3% 11,421.4 10,548.4 8.3% 20,427.1 19,016.8 7.4%

Rice crackers 1,885.3 1,702.6 10.7% 3,696.3 3,514.3 5.2% 5,581.6 5,217.0 7.0%

Dairy and beverages 4,576.7 4,298.0 6.5% 5,247.2 4,678.5 12.2% 9,824.0 8,976.5 9.4%

Snacks 2,515.3 2,446.3 2.8% 2,437.0 2,324.3 4.8% 4,952.4 4,770.7 3.8%

Others 28.3 21.5 31.7% 40.8 31.3 30.5% 69.1 52.8 31.0%

Cost of sales -5,074.5 -4,413.5 15.0% -6,319.2 -5,630.1 12.2% -11,393.7 -10,043.6 13.4%

Gross profit 3,931.2 4,055.0 -3.1% 5,102.2 4,918.3 3.7% 9,033.4 8,973.3 0.7%

Gross margin 43.7% 47.9% -4.2% pts 44.7% 46.6% -2.0% pts 44.2% 47.2% -3.0% pts

Other operating income 273.9 227.0 20.7% 393.4 341.8 15.1% 667.3 568.7 17.3%

Distribution costs -1,330.5 -1,167.7 14.0% -1,657.5 -1,501.6 10.4% -2,988.1 -2,669.2 11.9%

G&A expenses -1,120.4 -1,179.7 -5.0% -1,237.1 -1,166.8 6.0% -2,357.5 -2,346.5 0.5%

Operating profit 1,754.2 1,934.6 -9.3% 2,600.9 2,591.7 0.4% 4,355.1 4,526.3 -3.8%

Operating margin 19.5% 22.8% -3.4% pts 22.8% 24.6% -1.8% pts 21.3% 23.8% -2.5% pts

Share of profits of associates -3.3 -2.8 16.4% -4.2 -1.8 132.0% -7.5 -4.6 62.1%

Net financing charges 12.8 50.4 -74.6% 47.1 35.6 32.4% 59.9 86.0 -30.3%

Profit before tax 1,763.8 1,982.2 -11.0% 2,643.8 2,625.5 0.7% 4,407.5 4,607.7 -4.3%

Tax -495.6 -570.8 -13.2% -703.1 -703.0 0.0% -1,198.7 -1,273.8 -5.9%

Minority interest 5.9 3.0 96.7% 7.3 -0.1 -9752.6% 13.3 2.9 351.2%

Net profit 1,274.1 1,414.4 -9.9% 1,948.0 1,922.5 1.3% 3,222.1 3,336.9 -3.4%

FY3/18F FY3/19F FY3/20F

Old New % change Old New % change Old New % change

Sales (Rmb m) 20,427 20,427 0.0% 21,740 21,790 0.2% 22,977 23,029 0.2%

Gross margin 44.2% 44.2% 0.0% 44.2% 44.4% 0.2% 44.3% 44.5% 0.3%

Distribution expen/sales 14.6% 14.6% 0.1% 14.4% 14.4% 0.0% 14.3% 14.3% 0.0%

Operating margin 21.2% 21.3% 0.1% 21.2% 21.7% 0.4% 21.4% 22.0% 0.6%

Effective tax rate 27.2% 27.2% 0.0% 27.5% 27.5% 0.0% 27.5% 27.5% 0.0%

Net profit (Rmb m) 3,211 3,222 0.3% 3,465 3,543 2.2% 3,659 3,761 2.8%

Discounted Cash Flow Valuation US$ m

Value of Phase 1: Explicit 317.9

Value of Phase 2: Value Driver 5,263.8

Value of Phase 3: Fade 6,304.2

Terminal Value 696.9

Enterprise Value 12,582.9

Less: Minorities 7.3

Less: Net Debt -330.4

Equity Value 12,906.0

No. Shares (millions) 12,706.2

Per Share Equity Value (US$) 1.02

Target Price (HK$) 8.00

(%)

Cost of equity 9.4%

Risk free 5.5%

Market risk premium 6.8%

Beta 0.58

Cost of debt 1.36%

Target Debt / (Debt + Equity) 10%

Target Equity / (Debt + Equity) 90%

WACC 8.6%

34



Figure 5: Want Want’s historical P/E trend


Title:

Source:


19.4

22.9

16.0

10

14

18

22

26

30


35



BY THE NUMBERS


17.0%

25.3%

33.7%

42.0%

50.3%

58.7%

67.0%

0

20

40

60

80

100

120

Jan-14A Jan-15A Jan-16A Jan-17F Jan-18F Jan-19F

P/BV vs ROE

Rolling P/BV (x) (lhs) ROE (rhs)

-120%

160%

440%

720%

1,000%

1,280%

13.0

18.0

23.0

28.0

33.0

38.0

Jan-14A Jan-15A Jan-16A Jan-17F Jan-18F Jan-19F

12-mth Fwd FD Core P/E vs FD Core EPS Growth

12-mth Fwd Rolling FD Core P/E (x) (lhs)

FD Core EPS Growth (rhs)

Profit & Loss

(Rmbm) Mar-16A Mar-17F Mar-18F Mar-19F Mar-20F

Total Net Revenues 21,016 19,756 20,060 21,790 23,029

Gross Profit 9,415 9,274 8,894 9,683 10,254

Operating EBITDA 5,466 5,517 5,016 5,645 6,010

Depreciation And Amortisation (872) (865) (720) (923) (948)

Operating EBIT 4,594 4,652 4,296 4,722 5,062

Financial Income/(Expense) 216 86 71 160 120

Pretax Income/(Loss) from Assoc. (7) (6) (6) (6) (6)

Non-Operating Income/(Expense) 0 0 0 0 0

Profit Before Tax (pre-EI) 4,803 4,732 4,361 4,875 5,176

Exceptional Items

Pre-tax Profit 4,803 4,732 4,361 4,875 5,176

Taxation (1,411) (1,329) (1,191) (1,341) (1,423)

Exceptional Income - post-tax 0 0 0 0 0

Profit After Tax 3,392 3,402 3,171 3,535 3,753


Preferred Dividends

FX Gain/(Loss) - post tax

Other Adjustments - post-tax

Net Profit 3,395 3,407 3,184 3,543 3,761

Recurring Net Profit 3,395 3,407 3,184 3,543 3,761

Fully Diluted Recurring Net Profit 3,395 3,407 3,184 3,543 3,761

Cash Flow


EBITDA 5,466 5,517 5,016 5,645 6,010

Cash Flow from Invt. & Assoc.

Change In Working Capital 656 435 (164) (52) (51)

(Incr)/Decr in Total Provisions

Other Non-Cash (Income)/Expense

Other Operating Cashflow 27 64 0 0 0

Net Interest (Paid)/Received (135) (179) (200) (174) (166)

Tax Paid (1,426) (1,272) (957) (1,341) (1,423)

Cashflow From Operations 4,587 4,566 3,695 4,078 4,370

Capex (1,156) (422) (357) (444) (444)

Disposals Of FAs/subsidiaries 11 15 0 0 0

Acq. Of Subsidiaries/investments

Other Investing Cashflow 147 (383) 255 334 286

Cash Flow From Investing (998) (790) (102) (111) (158)

Debt Raised/(repaid) (386) 996 0 0 0

Proceeds From Issue Of Shares (1,740) (1,077) 0 0 0

Shares Repurchased

Dividends Paid (1,497) (1,403) (1,006) (1,382) (1,478)

Preferred Dividends

Other Financing Cashflow 3 1 0 0 0

Cash Flow From Financing (3,620) (1,482) (1,006) (1,382) (1,478)

Total Cash Generated (31) 2,293 2,587 2,585 2,734

Free Cashflow To Equity 3,203 4,772 3,593 3,967 4,212

Free Cashflow To Firm 3,724 3,954 3,793 4,141 4,378

36



BY THE NUMBERS… cont’d


Balance Sheet


Total Cash And Equivalents 9,916 11,981 13,698 16,277 19,005

Total Debtors 983 1,205 939 1,057 1,149

Inventories 2,779 2,594 3,165 3,498 3,726

Total Other Current Assets 949 1,622 1,627 1,692 1,735

Total Current Assets 14,626 17,401 19,429 22,524 25,614

Fixed Assets 10,334 9,850 9,487 9,009 8,505

Total Investments 370 361 361 361 361

Intangible Assets 6 8 8 8 8

Total Other Non-Current Assets 0 0 0 0 0

Total Non-current Assets 10,710 10,219 9,855 9,377 8,873

Short-term Debt 2,255 4,013 4,013 4,013 4,013

Current Portion of Long-Term Debt

Total Creditors 1,209 1,337 1,302 1,458 1,573

Other Current Liabilities 3,070 3,458 3,640 3,948 4,144

Total Current Liabilities 6,533 8,808 8,955 9,419 9,730

Total Long-term Debt 6,336 5,890 5,890 5,890 5,890

Hybrid Debt - Debt Component

Total Other Non-Current Liabilities 260 226 226 226 226

Total Non-current Liabilities 6,597 6,116 6,116 6,116 6,116

Total Provisions 0 0 0 0 0

Total Liabilities 13,129 14,924 15,071 15,535 15,847

Shareholders' Equity 12,157 12,648 14,177 16,337 18,620


Total Equity 12,206 12,695 14,213 16,366 18,641

Key Ratios

Mar-16A Mar-17F Mar-18F Mar-19F Mar-20F

Revenue Growth (7.83%) (6.00%) 1.54% 8.62% 5.69%

Operating EBITDA Growth (0.3%) 0.9% (9.1%) 12.5% 6.5%

Operating EBITDA Margin 26.0% 27.9% 25.0% 25.9% 26.1%

Net Cash Per Share (Rmb) 0.10 0.16 0.30 0.50 0.72

BVPS (Rmb) 0.94 1.00 1.12 1.29 1.47

Gross Interest Cover 31.91 23.20 17.35 27.12 30.53

Effective Tax Rate 29.4% 28.1% 27.3% 27.5% 27.5%

Net Dividend Payout Ratio 32.2% 29.4% 23.0% 28.3% 28.5%

Accounts Receivables Days 15.81 20.21 19.50 16.72 17.53

Inventory Days 103.9 93.5 94.1 100.4 103.5

Accounts Payables Days 38.00 44.32 43.12 41.60 43.42

ROIC (%) 29.4% 31.1% 29.7% 33.3% 37.2%

ROCE (%) 23.6% 22.8% 19.9% 20.1% 19.5%

Return On Average Assets 18.1% 17.7% 15.3% 15.6% 15.3%

37



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as we may notify you from time to time. In addition, the recipient who is an accredited investor, expert investor or institutional investor acknowledges that a CGS-CIMBR is exempt from Section 27 of the FAA, the recipient will also not be able to file a civil claim against CGS-CIMBR for any loss or damage arising from the recipient’s reliance on any recommendation made by CGS-CIMBR which would otherwise be a right that is available to the recipient under Section 27 of the FAA, the recipient will also not be able to file a civil claim against CGS-CIMBR for any loss or damage arising from the recipient’s reliance on any recommendation made by CGS-CIMBR which would otherwise be a right that is available to the recipient under Section 27 of the FAA.

CGS-CIMBR, its affiliates and related corporations, their directors, associates, connected parties and/or employees may own or have positions in securities of the company(ies) covered in this research report or any securities related thereto and may from time to time add to or dispose of, or may be materially interested in, any such securities. Further, CGS-CIMBR, its affiliates and its related corporations do and seek to do business with the company(ies) covered in this research report and may from time to time act as market maker or have assumed an underwriting commitment in securities of such company(ies), may sell them to or buy them from customers on a principal basis and may also perform or seek to perform significant investment banking, advisory, underwriting or placement services for or relating to such company(ies) as well as solicit such investment, advisory or other services from any entity mentioned in this report.

As of May 23, 2018, CGS-CIMBR does not have a proprietary position in the recommended securities in this report.

CGS-CIMBR does not make a market on other securities mentioned in the report.

South Korea: This report is issued and distributed in South Korea by CGS-CIMB Securities (Hong Kong) Limited, Korea Branch (“CGS-CIMB Korea”) which is licensed as a cash equity broker, and regulated by the Financial Services Commission and Financial Supervisory Service of Korea. In South Korea, this report is for distribution only to professional investors under Article 9(5) of the Financial Investment Services and Capital Market Act of Korea (“FSCMA”).

Spain: This document is a research report and it is addressed to institutional investors only. The research report is of a general nature and not personalised and does not constitute investment advice so, as the case may be, the recipient must seek proper advice before adopting any investment decision. This document does not constitute a public offering of securities.

CGS-CIMB is not registered with the Spanish Comision Nacional del Mercado de Valores to provide investment services.

Sweden: This report contains only marketing information and has not been approved by the Swedish Financial Supervisory Authority. The distribution of this report is not an offer to sell to any person in Sweden or a solicitation to any person in Sweden to buy any instruments described herein and may not be forwarded to the public in Sweden.

Switzerland: This report has not been prepared in accordance with the recognized self-regulatory minimal standards for research reports of banks issued by the Swiss Bankers’ Association (Directives on the Independence of Financial Research).

Thailand: This report is issued and distributed by CGS-CIMB Securities (Thailand) Co. Ltd. (“CGS-CIMB Thailand”) based upon sources believed to be reliable (but their accuracy, completeness or correctness is not guaranteed). The statements or expressions of opinion herein were arrived at after due and careful consideration for use as information for investment. Such opinions are subject to change without notice and CGS-CIMB Thailand has no obligation to update its opinion or the information in this research report.

CGS-CIMB Thailand may act or acts as Market Maker, and issuer and offerer of Derivative Warrants and Structured Note which may have the following securities as its underlying securities. Investors should carefully read and study the details of the derivative warrants in the prospectus before making investment decisions.

AAV, ADVANC, AMATA, ANAN, AOT, AP, BA, BANPU, BBL, BCH, BCP, BCPG, BDMS, BEAUTY, BEC, BEM, BJC, BH, BIG, BLA, BLAND, BPP, BTS, CBG, CENTEL, CHG, CK, CKP, COM7, CPALL, CPF, CPN, DELTA, DTAC, EA, EGCO, EPG, GFPT, GLOBAL, GLOW, GPSC, GUNKUL, HMPRO, INTUCH, IRPC, ITD, IVL, KBANK, KCE, KKP, KTB, KTC, LH, LHBANK, LPN, MAJOR, MALEE, MEGA, MINT, MONO, MTLS, PLANB, PSH, PTL, PTG, PTT, PTTEP, PTTGC, QH, RATCH, ROBINS, S, SAWAD, SCB, SCC, SCCC, SIRI, SPALI, SPRC, STEC, STPI, SUPER, TASCO, TCAP, THAI, THANI, THCOM, TISCO, TKN, TMB, TOP, TPIPL, TRUE, TTA, TU, TVO, UNIQ, VGI, WHA, WORK.

Corporate Governance Report:

The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the Market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information.

The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey result may be changed after that date. CGS-CIMB Thailand does not confirm nor certify the accuracy of such survey result.

Score Range: 90 - 100 80 – 89 70 - 79 Below 70 or No Survey Result

Description: Excellent Very Good Good N/A

United Arab Emirates: The distributor of this report has not been approved or licensed by the UAE Central Bank or any other relevant licensing authorities or governmental agencies in the United Arab Emirates. This report is strictly private and confidential and has not been reviewed by, deposited or registered with UAE Central Bank or any other licensing authority or governmental agencies in the United Arab Emirates. This report is being issued outside the United Arab Emirates to a limited number of institutional investors and must not be provided to any person other than the original recipient and may not be reproduced or used for any other purpose. Further, the information contained in this report is not intended to lead to the sale of investments under any subscription agreement or the conclusion of any other contract of whatsoever nature within the territory of the United Arab Emirates.

United Kingdom and European Economic Area (EEA): In the United Kingdom and European Economic Area, this material is also being distributed by CGS-CIMB Securities (UK) Limited (“CGS-CIMB UK”). CGS-CIMB UK is authorized and regulated by the Financial Conduct Authority and its registered office is at 27 Knightsbridge, London, SW1X7YB. The material distributed by CGS-CIMB UK has been prepared in accordance with CGS-CIMB’s policies for managing conflicts of interest arising as a result of publication and distribution of this material. This material is for distribution only to, and is solely directed at, selected persons on the basis that those persons: (a) are eligible counterparties and professional clients of CGS-CIMB UK; (b) have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and

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Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the “Order”), (c) fall within Article 49(2)(a) to (d) (“high net worth companies, unincorporated associations etc”) of the Order; (d) are outside the United Kingdom subject to relevant regulation in each jurisdiction, material(all such persons together being referred to as “relevant persons”). This material is directed only at relevant persons and must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this material relates is available only to relevant persons and will be engaged in only with relevant persons.

Where this material is labelled as non-independent, it does not provide an impartial or objective assessment of the subject matter and does not constitute independent “research” (cannot remove research from here under the applicable rules of the Financial Conduct Authority in the UK. Consequently, any such non-independent material will not have been prepared in accordance with legal requirements designed to promote the independence of research (cannot remove research from here) and will not subject to any prohibition on dealing ahead of the dissemination of research. Any such non-independent material must be considered as a marketing communication.

United States: This research report is distributed in the United States of America by CGS-CIMB Securities (USA) Inc, a U.S. registered broker-dealer and a related company of CGS-CIMB Research Pte Ltd, PT CGS-CIMB Sekuritas Indonesia, CGS-CIMB Securities (Thailand) Co. Ltd, CGS-CIMB Securities (Hong Kong) Limited, CGS-CIMB Securities (India) Private Limited, and is distributed solely to persons who qualify as “U.S. Institutional Investors” as defined in Rule 15a-6 under the Securities and Exchange Act of 1934. This communication is only for Institutional Investors whose ordinary business activities involve investing in shares, bonds, and associated securities and/or derivative securities and who have professional experience in such investments. Any person who is not a U.S. Institutional Investor or Major Institutional Investor must not rely on this communication. The delivery of this research report to any person in the United States of America is not a recommendation to effect any transactions in the securities discussed herein, or an endorsement of any opinion expressed herein. CGS-CIMB Securities (USA) Inc, is a FINRA/SIPC member and takes responsibility for the content of this report. For further information or to place an order in any of the above-mentioned securities please contact a registered representative of CGS-CIMB Securities (USA) Inc.

CIMB Securities (USA) Inc. does not make a market on other securities mentioned in the report.

CGS-CIMB Securities (USA) Inc. has not managed or co-managed a public offering of any of the securities mentioned in the past 12 months.

CGS-CIMB Securities (USA) Inc. has not received compensation for investment banking services from any of the company mentioned in the past 12 months.

CGS-CIMB Securities (USA) Inc. neither expects to receive nor intends to seek compensation for investment banking services from any of the company mentioned within the next 3 months.

Other jurisdictions: In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is only for distribution to professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.

Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (Thai IOD) in 2017, Anti-Corruption 2017

AAV – Very Good, n/a, ADVANC – Excellent, Certified, AEONTS – Good, n/a, AMATA – Very Good, n/a, ANAN – Excellent, n/a, AOT – Excellent, Declared, AP – Excellent, Declared, ASK – Very Good, Declared, ASP – Very Good, Certified, BANPU – Excellent, Certified, BAY – Excellent, Certified, BBL – Very Good, Certified, BCH – Good, Declared, BCP - Excellent, Certified, BCPG – Very Good, n/a, BEM – Very Good, n/a, BDMS – Very Good, n/a, BEAUTY – Good, n/a, BEC – Very Good, n/a, , BGRIM – not available, n/a, BH - Good, n/a, BJC – Very Good, Declared, BJCHI – Very Good, Declared, BLA – Very Good, Certified, BPP – Good, n/a, BR - Good, Declared, BTS - Excellent, Certified, CBG – Good, n/a, CCET – Good, n/a, CENTEL – Very Good, Certified, CHG – Very Good, Declared, CK – Excellent, n/a, COL – Very Good, Declared, CPALL – not available, Declared, CPF – Excellent, Declared, CPN - Excellent, Certified, DELTA - Excellent, n/a, DEMCO – Excellent, Certified, DIF – not available, n/a, DTAC – Excellent, Certified, EA – Very Good, n/a, ECL – Very Good, Certified, EGCO - Excellent, Certified, EPG – Very Good, n/a, GFPT - Excellent, Declared, GGC – not available, Declared, GLOBAL – Very Good, Declared, GLOW – Very Good, Certified, GPSC – Excellent, Declared, GRAMMY - Excellent, n/a, GUNKUL – Excellent, Declared, HANA - Excellent, Certified, HMPRO - Excellent, Certified, ICHI – Excellent, n/a, III – not available, n/a, INTUCH - Excellent, Certified, IRPC – Excellent, Certified, ITD – Very Good, n/a, IVL - Excellent, Certified, JAS – not available, Declared, JASIF – not available, n/a, JUBILE – Good, Declared, KAMART – not available, n/a, KBANK - Excellent, Certified, KCE - Excellent, Certified, KGI – Very Good, Certified, KKP – Excellent, Certified, KSL – Very Good, Certified, KTB - Excellent, Certified, KTC – Excellent, Certified, LH - Very Good, n/a, LPN – Excellent, Certified, M – Very Good, n/a, MACO – Very Good, n/a, MAJOR – Very Good, n/a, MAKRO – Very Good, Declared, MALEE – Very Good, n/a, MBKET – Very Good, Certified, MC – Very Good, Declared, MCOT – Excellent, Certified, MEGA – Very Good, n/a, MINT - Excellent, Certified, MTLS – Very Good, Declared, NYT – Excellent, n/a, OISHI – Very Good, n/a, PLANB – Excellent, Declared, PLAT – Very Good, Certified, PSH – Excellent, Certified, PSL - Excellent, Certified, PTT - Excellent, Certified, PTTEP - Excellent, Certified, PTTGC - Excellent, Certified, QH – Excellent, Certified, RATCH – Excellent, Certified, ROBINS – Excellent, Certified, RS – Very Good, n/a, SAMART - Excellent, n/a, SAPPE - Good, n/a, SAT – Excellent, Certified, SAWAD – Very Good, n/a, SC – Excellent, Declared, SCB - Excellent, Certified, SCBLIF – not available, n/a, SCC – Excellent, Certified, SCN – Very Good, Declared, SCCC - Excellent, Declared, SIM - Excellent, n/a, SIRI – Very Good, Declared, SPA - Good, n/a, SPALI - Excellent, n/a, SPRC – Excellent, Declared, STA – Very Good, Declared, STEC – Excellent, n/a, SVI – Excellent, Certified, TASCO – Very Good, n/a, TCAP – Excellent, Certified, THAI – Very Good, n/a, THANI – Very Good, Certified, THCOM – Excellent, Certified, THRE – Very Good, Certified, THREL – Excellent, Certified, TICON – Very Good, Declared, TIPCO – Very Good, Certified, TISCO - Excellent, Certified, TK – Very Good, n/a, TKN – Very Good, Declared, TMB - Excellent, Certified, TNR – Good, n/a, TOP - Excellent, Certified, TPCH – Good, n/a, TPIPP – not available, n/a, TRUE – Excellent, Declared, TTW – Very Good, n/a, TU – Excellent, Declared, TVO – Excellent, Declared, UNIQ – not available, Declared, VGI – Excellent, Declared, WHA – not available, Declared, WHART – not available, n/a,

Rating Distribution (%) Inv estment Banking clients (%)

Add 61.1% 5.5%

Hold 29.7% 2.0%

Reduce 8.9% 0.4%

Distribution of stock ratings and inv estment banking clients for quarter ended on 31 March 2018

1275 companies under cov erage for quarter ended on 31 March 2018

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WORK – not available, n/a.

Companies participating in Thailand’s Private Sector Collective Action Coalition Against Corruption programme (Thai CAC) under Thai Institute of Directors (as of October 28, 2016) are categorized into:

- Companies that have declared their intention to join CAC, and

- Companies certified by CAC

Recommendation Framework

Stock Ratings Definition:

Add The stock’s total return is expected to exceed 10% over the next 12 months.

Hold The stock’s total return is expected to be between 0% and positive 10% over the next 12 months.

Reduce The stock’s total return is expected to fall below 0% or more over the next 12 months.

The total expected return of a stock is defined as the sum of the: (i) percentage difference between the target price and the current price and (ii) the forward net dividend yields of the stock. Stock price targets have an investment horizon of 12 months.

Sector Ratings Definition:

Overweight An Overweight rating means stocks in the sector have, on a market cap-weighted basis, a positive absolute recommendation.

Neutral A Neutral rating means stocks in the sector have, on a market cap-weighted basis, a neutral absolute recommendation.

Underweight An Underweight rating means stocks in the sector have, on a market cap-weighted basis, a negative absolute recommendation.

Country Ratings Definition:

Overweight An Overweight rating means investors should be positioned with an above-market weight in this country relative to benchmark.

Neutral A Neutral rating means investors should be positioned with a neutral weight in this country relative to benchmark.

Underweight An Underweight rating means investors should be positioned with a below-market weight in this country relative to benchmark.

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