Sun Art Retail Group (6808.HK)pg.jrj.com.cn/acc/Res/HK_RES/STOCK/2014/4/22/1e1b... · 4/22/2014 · Investment Profile Low High Percentile 20th 40th 60th 80th 100th * Returns = Return

April 22, 2014

ACTION

Buy Sun Art Retail Group (6808.HK)

Return Potential: 23% Equity Research

Moat widening in offline; gaining share in the “other 95%”; stay Buy

Source of opportunity

We reiterate Buy on Sun Art as we view it as a long-term winner in China’s

US$1tn food/home & personal care market (c.40% of China’s “core” retail

sales) of which Sun Art has 1% market share vs. most peers at 0.1%-0.3%.

While e-commerce (currently c.3-4% of market) is clearly a major disruptor, it

has also accelerated the consolidation speed within brick-and-mortar, as most

offline peers cut back on expansion. We think it is evident Sun Art’s most

important moat, its scale advantages vs. other players in the “other 95%” of

the market, is widening, as it achieved the best recent earnings performance

in our retail coverage (19% 2011-13 recurring profits CAGR vs. c.4% for peers).

Catalyst

We expect Sun Art to continue to deliver one of the best growth rates within

the sector, with 15% EPS 2013-15 CAGR driven by 12% topline growth and

15-20bp OP margin expansion p.a. In particular, we expect 2014 topline

reacceleration (+12% in 2014 vs. +8.4% in 2H13) to be a key positive

development in 2014. One key driver is SSSG improvement – we expect the

YTD run-rate of 2% can continue through the rest of 2014, as management

normalizes promotional intensity after opting to be less so in 2013.

Valuation

Sun Art’s valuation has pulled back from the high of c.30X P/E in 2013 to

23X at present, offering an attractive entry point. We switch to a discounted

cashflow (DCF) methodology from a P/E-based one (35X average 2013-14E

P/E) as we see significant operating performance divergence between Sun

Art and China peers (Wumart, CRE)and believe DCF is better at

encapsulating Sun Art’s longer-term growth prospects. We reduce our 12-m

TP to HK$12.0 from HK$13.9, implying 23% upside potential. We fine tune

our 2014-15 EPS following 2013 results and introduce 2016 EPS (15% yoy

growth).

Key risks

Stronger-than-expected e-commerce impact, unexpected SSSG slowdown.

INVESTMENT LIST MEMBERSHIP

Asia Pacific Buy List

Coverage View: Neutral

Joshua Lu +852-2978-1024 [email protected] Goldman Sachs (Asia) L.L.C. Goldman Sachs does and seeks to do business with companies

covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as research analysts with FINRA in the U.S.

Ricky Tsang +852-2978-6631 [email protected] Goldman Sachs (Asia) L.L.C.

The Goldman Sachs Group, Inc. Global Investment Research

Growth

Returns *

Multiple

Volatility Volatility

Multiple

Returns *

Growth

Investment Profile

Low High

Percentile 20th 40th 60th 80th 100th

* Returns = Return on Capital For a complete description of the

investment profile measures please refer to

the disclosure section of this document.

Sun Art Retail Group (6808.HK)

Asia Pacific Consumer Peer Group Average

Key data Current

Price (HK$) 9.76

12 month price target (HK$) 12.00

Market cap (HK$ mn / US$ mn) 93,107.5 / 12,007.3

Foreign ownership (%) --

12/13 12/14E 12/15E 12/16E

EPS (HK$) New 0.36 0.42 0.48 0.55

EPS revision (%) (1.6) (0.8) 1.0 --

EPS growth (%) 13.2 14.3 16.8 14.9

EPS (dil) (Rmb) New 0.29 0.33 0.38 0.44

P/E (X) 30.5 23.7 20.3 17.6

P/B (X) 4.5 3.6 3.3 2.9

EV/EBITDA (X) 13.2 10.1 8.7 7.7

Dividend yield (%) 2.5 1.7 2.0 2.3

ROE (%) 15.6 16.2 16.8 17.4

CROCI (%) 13.4 13.5 13.2 12.9

Price performance chart

8

9

10

11

12

13

14

Apr-13 Jul-13 Oct-13 Jan-14

50

55

60

65

70

75

80

Sun Art Retail Group (L) MSCI China (R)

Share price performance (%) 3 month 6 month 12 monthAbsolute (11.1) (17.1) (8.3)

Rel. to MSCI China (9.7) (12.8) (9.7)

Source: Company data, Goldman Sachs Research estimates, FactSet. Price as of 4/17/2014 close.

April 22, 2014 Sun Art Retail Group (6808.HK)

Goldman Sachs Global Investment Research 2

Sun Art Retail Group: Summary Financials

Analyst Contributors

Joshua Lu

[email protected]

Ricky Tsang

[email protected]

Profit model (Rmb mn) 12/13 12/14E 12/15E 12/16E Balance sheet (Rmb mn) 12/13 12/14E 12/15E 12/16E

Total revenue 86,195.0 96,536.3 108,243.5 121,880.8 Cash & equivalents 6,271.0 5,774.9 4,956.7 4,577.7

Cost of goods sold (67,582.0) (75,148.4) (83,675.9) (93,710.9) Accounts receivable 3,411.0 3,759.6 4,214.1 4,754.5

SG&A (15,106.0) (17,262.5) (19,741.9) (22,537.5) Inventory 11,268.0 12,529.5 13,951.4 15,624.5

R&D -- -- -- -- Other current assets 1,173.0 1,313.7 1,473.1 1,658.6

Other operating profit/(expense) 296.0 317.3 340.9 368.0 Total current assets 22,123.0 23,377.8 24,595.2 26,615.4

EBITDA 6,024.0 6,981.2 8,048.9 9,254.3 Net PP&E 26,953.0 31,289.8 35,712.2 40,272.2

Depreciation & amortization (2,221.0) (2,538.6) (2,882.3) (3,253.8) Net intangibles 108.0 244.2 413.7 604.7

EBIT 3,803.0 4,442.6 5,166.6 6,000.5 Total investments 0.0 0.0 0.0 0.0

Interest income 334.0 301.3 276.1 251.6 Other long-term assets 726.0 726.0 726.0 726.0

Interest expense (13.0) (9.6) (4.8) (2.9) Total assets 49,910.0 55,637.8 61,447.1 68,218.3

Income/(loss) from uncons. subs. 0.0 0.0 0.0 0.0

Others 10.0 0.0 0.0 0.0 Accounts payable 29,458.0 33,241.0 36,690.3 40,655.9

Pretax profits 4,134.0 4,734.3 5,437.9 6,249.2 Short-term debt 391.0 195.5 97.8 78.2

Income tax (1,192.0) (1,363.5) (1,566.1) (1,799.8) Other current liabilities 517.0 560.7 610.1 667.7

Minorities (167.0) (185.4) (212.9) (244.7) Total current liabilities 30,366.0 33,997.1 37,398.2 41,401.8

Long-term debt 0.0 0.0 0.0 0.0

Net income pre-preferred dividends 2,775.0 3,185.5 3,658.8 4,204.7 Other long-term liabilities 163.0 163.0 163.0 163.0

Preferred dividends 0.0 0.0 0.0 0.0 Total long-term liabilities 163.0 163.0 163.0 163.0

Net income (pre-exceptionals) 2,775.0 3,185.5 3,658.8 4,204.7 Total liabilities 30,529.0 34,160.1 37,561.2 41,564.8

Post-tax exceptionals 0.0 0.0 1.0 1.0

Net income 2,775.0 3,185.5 3,659.8 4,205.7 Preferred shares 0.0 0.0 0.0 0.0

Total common equity 18,748.0 20,659.3 22,854.6 25,377.4

EPS (basic, pre-except) (Rmb) 0.29 0.33 0.38 0.44 Minority interest 633.0 818.4 1,031.3 1,276.1

EPS (basic, post-except) (Rmb) 0.29 0.33 0.38 0.44

EPS (diluted, post-except) (Rmb) 0.29 0.33 0.38 0.44 Total liabilities & equity 49,910.0 55,637.8 61,447.1 68,218.3

DPS (Rmb) 0.22 0.13 0.15 0.18

Dividend payout ratio (%) 75.9 40.0 40.0 40.0 BVPS (Rmb) 1.97 2.17 2.40 2.66

Free cash flow yield (%) 1.5 1.3 1.0 1.7

Growth & margins (%) 12/13 12/14E 12/15E 12/16E Ratios 12/13 12/14E 12/15E 12/16E

Sales growth 10.7 12.0 12.1 12.6 CROCI (%) 13.4 13.5 13.2 12.9

EBITDA growth 16.3 15.9 15.3 15.0 ROE (%) 15.6 16.2 16.8 17.4

EBIT growth 17.8 16.8 16.3 16.1 ROA (%) 5.9 6.0 6.3 6.5

Net income growth 15.2 14.8 14.9 14.9 ROACE (%) 11.4 11.5 11.4 11.4

EPS growth 15.2 14.8 14.9 14.9 Inventory days 57.8 57.8 57.8 57.6

Gross margin 21.6 22.2 22.7 23.1 Receivables days 14.7 13.6 13.4 13.4

EBITDA margin 7.0 7.2 7.4 7.6 Payable days 150.5 152.3 152.5 150.6

EBIT margin 4.4 4.6 4.8 4.9 Net debt/equity (%) (30.3) (26.0) (20.3) (16.9)

Interest cover - EBIT (X) NM NM NM NM

Cash flow statement (Rmb mn) 12/13 12/14E 12/15E 12/16E Valuation 12/13 12/14E 12/15E 12/16E

Net income pre-preferred dividends 2,775.0 3,185.5 3,658.8 4,204.7

D&A add-back 2,221.0 2,538.6 2,882.3 3,253.8 P/E (analyst) (X) 30.5 23.7 20.3 17.6

Minorities interests add-back 167.0 185.4 212.9 244.7 P/B (X) 4.5 3.6 3.3 2.9

Net (inc)/dec working capital 3,061.0 2,075.7 1,463.2 1,624.0 EV/EBITDA (X) 13.2 10.1 8.7 7.7

Other operating cash flow (146.0) 0.0 0.0 0.0 EV/GCI (X) 2.1 1.7 1.5 1.4

Cash flow from operations 8,078.0 7,985.1 8,217.3 9,327.3 Dividend yield (%) 2.5 1.7 2.0 2.3

Capital expenditures (6,791.0) (7,008.5) (7,474.2) (8,004.8)

Acquisitions 0.0 0.0 0.0 0.0

Divestitures 0.0 0.0 0.0 0.0

Others 1,268.0 0.0 0.0 0.0

Cash flow from investments (5,523.0) (7,008.5) (7,474.2) (8,004.8)

Dividends paid (common & pref) (1,982.0) (1,274.2) (1,463.5) (1,681.9)

Inc/(dec) in debt (11.0) (195.5) (97.8) (19.6)

Common stock issuance (repurchase) 0.0 0.0 0.0 0.0

Other financing cash flows (48.0) (3.0) 0.0 0.0

Cash flow from financing (2,041.0) (1,472.7) (1,561.3) (1,701.4)

Total cash flow 514.0 (496.1) (818.2) (379.0) Note: Last actual year may include reported and estimated data.

Source: Company data, Goldman Sachs Research estimates.



Table of Contents

Reiterate Buy on widening scale moat, share gain, and store rollout 3

SSSG – Impact from e-commerce exists, but likely exaggerated 9

New store productivity: Down in the last few years, but we see stabilization ahead 10

Valuation: How much is a decade of double digit growth worth? 13

Disclosure Appendix 20

Prices in the body of this report are based on April 17 close unless stated otherwise.

The authors would like to thank Emma Sun for her valuation contribution to this report.

Reiterate Buy on widening scale moat, share gain, and store rollout

(1) Moat within bricks & mortar retail is widening in terms of scale

and margins

Having superior scale is one of the most important moats in food retail. While e-commerce

has created challenges (we discuss in more details below), we believe an important side-

effect from e-commerce is that it has forced bricks-and-mortar expansion to come to a halt.

Latest 2013 financials show that that majority of China’s leading food retailers saw just mid

single-digit topline growth last year. Besides Sun Art, which leads in scale and growth vs.

other China food retailers, the notable exceptions are CRE (largely driven by acquisitions)

and Yonghui.



Exhibit 1: Sun Art is a leader in both scale and growth in 2013 Revenue growth in absolute and percentage terms, key retailers in China

* Consensus is used for Hualian data

** CTF data is based on financial year, 2013 data refers to FY3/14

Source: Company data, WIND.

Equally important in our view is that Sun Art is the only company that have maintained and

improved its margins over the last few three years – most domestic peers have shown a

declining margin trend (Exhibit 2). We believe these are strong signs that, compared to

other offline players, Sun Art is now enjoying wider moats in the key areas of the business,

including procurement, real estate negotiations, and leverage on fixed costs.

(Rmb mn) 2012 revenue 2013 revenue

Absolute

amount YoY % chgFood retailersSun Art 75,936 83,958 8,022 10.6%CRE 67,363 75,542 8,179 12.1%Walmart China 59,798 62,369 2,571 4.3%Carrefour China 52,575 53,942 1,367 2.6%Yonghui 24,684 30,543 5,859 23.7%Wumart 15,363 16,988 1,625 10.6%Tesco China 13,390 14,198 808 6.0%Hualian * 12,323 13,112 789 6.4%Ren Ren Le 12,913 12,716 (197) (1.5%)Better Life 10,006 11,388 1,382 13.8%CP Lotus China 10,677 10,882 204 1.9%

E‐commerce

Jingdong (net GMV) 60,000 103,900 43,900 73.2%

Suning.com 13,005 18,709 5,704 43.9%Yihaodian 6,600 12,000 5,400 81.8%

VIP Shop (net GMV) 4,354 11,016 6,662 153.0%

Dang Dang (net GMV) 6,394 9,782 3,388 53.0%

Electric appliances

Suning ‐ offline 85,352 86,583 1,231 1.4%

Gome ‐ offline 47,328 53,751 6,423 13.6%

Footwear / JeweleryBelle 32,859 36,249 3,390 10.3%

CTF (China retail/wholesale) ** 30,308 42,074 11,766 38.8%

StaplesTingyi (ex Pepsi) 51,753 58,575 6,822 13.2%Mengniu 36,000 43,357 7,357 20.4%Tsingtao 25,782 28,291 2,509 9.7%CRE Brewery 22,787 26,351 3,564 15.6%Want Want 21,211 23,674 2,463 11.6%Uni President China 21,406 23,329 1,923 9.0%Hengan 15,041 16,920 1,880 12.5%

2013 revenue growth



Exhibit 2: Sun Art was the only hypermarket with flat or improving EBIT margins in recent

years

Source: Company data.

(2) E-commerce threat? Yes, but there is a lot of white space – 95%

E-commerce has clearly impacted the retail market in China today, but we believe in the

area of food retail the vast market potential for Sun Art ultimately outweighs the also

inevitable market gains by online peers. Sun Art’s market share in China’s core retail sales

(ex auto, gas, and restaurants) is still under just 1% as of 2013. Within the estimated

Rmb6.2tn food and Home & Personal Care (HPC) retail market, Sun Art’s market share is

still relatively low at 1.0% (Exhibit 3). This is very different from the apparel industry where

online penetration is already well in the double digits. We believe Sun Art can continue to

gain market share by entering more markets in China.

CRE (retail)

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

2009 2010 2011 2012 2013

OP

ma

rgin

Sun Art

Yonghui

Wumart

Lianhua



Exhibit 3: Within an extremely large Rmb 6.2tn Food and HPC retail market, Sun Art’s relative share is still small and we

believe it can grab market share from the other 95% Breakdown for China retail market (2013)

Note: (1) We define China core retail sales as total China retail sales ex Automobiles, Gasoline and Food services (restaurants) ; (2) When calculating e-

commerce penetration, we include cosmetics, mothers/childcare and F&B categories to proxy F&B+HPC total.

Source: Euromonitor, China NBS, iResearch.

(3) Sun Art still has the best store rollout story in China retail

It is one of our fundamental beliefs in retail stock investments that over the medium/long

term the best stories tend to come from retailers which can replicate and scale up its

business. SSSG is clearly important, but our analysis shows that alone is not enough. Our

previous case study of developed market retail leaders show that superior growth rates of

retail success stories come much more from the superiority of the roll-out speed than

the superiority of the SSSG (Exhibits 4-5) (see “Sun Art Retail Group (6808.HK): Between

SSSG and store growth, which is more important?”, March 12, 2012).

Food and HPC - Rmb 6.2 tn

China total core retail sales (2013) - Rmb 14.5 tn

Apparel + footwear - Rmb1.9 tn

Online(3.5%) Sun Art

(1.0%)

Others (95.6%)Food and

HPC(43%)

Apparel / footwear

(13%)

Elect-ronics / appli-ances(10%)

Others(35%)

Online(27%)

Dept stores(34%)

Others (41%)



Exhibit 4: Starting off at a similar base in 1980, Wal-Mart has since grown to 5X the size of Target, driven primarily by

store openings

Wal-Mart (WMT) and Target (TGT) are covered by our US analyst Matthew Fassler.

Source: Company data, Goldman Sachs Global Investment Research.

Sun Art’s store count can go up 5X over the coming decade

We believe Sun Art is at a similar expansion stage as Wal-Mart in the early 1980s. Hence,

we expect its store opening potential to remain tremendous over the medium term. We

forecast Sun Art’s store count to expand rapidly in the next decade at a 14% CAGR. We

note that management also set target at low-teens, slightly slower than Wal-Mart’s 18%

1980-1990 CAGR.

Sun Art has maintained a c.18% growth rate in store number in the past few years,

whereas most of its national peers have slowed significantly (Exhibit 7). We expect the rate

of increase to remain in the high teens, with store count increasing to 323 from 184 over

the past three years. We think the company can hit 875 stores by 2020, and with the

potential to increase to 1,244 in ten years from now. With a typical store servicing on

average 100,000 to 200,000 people, Sun Art would just be servicing 200 to 250 million

people ten years from now, or 20% of China’s total population. In contrast, more than 60%

of Americans shop at Wal-Mart every month.



Exhibit 5: Sun Art is at a similar stage as Wal-Mart in

early 1980s in terms of expansion

Exhibit 6: Sun Art to compound its stores at a 14% CAGR

in the next 10 years Store count: Wal-Mart vs. Sun Art vs. Carrefour

Source: Company data, Goldman Sachs Global Investment Research


Exhibit 7: Sun Art has the highest percentage store growth among national retailers

POS growth comparisons – Sun Art vs. Chow Tai Food vs. Belle


38330

1,721

3,118

4,413

Sun Art ('13)323

Sun Art ('23)1,244

WMT: 1970 WMT: 1980 WMT: 1990 WMT: 2000 WMT: 2010

Sun Art to also expandrapidly in the next decade, but at a slightly lower pace (14% CAGR)

Sun Art 323 storesin 2013 is similar to WMT in the 1980s

WMT saw fastest network expansion during the 1980s

202243

279328

370393

132 156184

230273

323

378440

509

587

674

770

875

134 156182 203 218

230 (GSe)

0

100

200

300

400

500

600

700

800

900

1000

2008 2009 2010 2011 2012 2013 2014E2015E2016E 2017 2018E2019E2020E

Walmart Sun Art Carrefour

# of PoS

25%

20%

24%

19%

14%

18%18%

12%

9%

17%

11%

8%

16%

11%

7%

0%

5%

10%

15%

20%

25%

30%

2011 2012 2013 2014E 2015E

Chow Tai Fook (China retail)

Belle (footwear)

Sun Art



SSSG – Impact from e-commerce exists, but likely exaggerated

We believe the slowing SSSG was a key driver of Sun Art’s share price performance in the

past six months. In Jan-Feb 2014, however, SSSG already recovered to about +2%. This is

despite some negative calendar effect (fewer trading days between Jan. 1 and CNY 2014 vs.

same period in 2013), and negative impact from gifting-related slowdown. From our

discussions with management, we believe management has been focusing more on

promotions and the sharper pricing policy YTD has allowed Sun Art to deliver a better

SSSG. This contrasts to 2013, during which management describes Sun Art’s promotional

intensity as weaker than usual – “2 on a scale of 1-5, and 3 being normal”.

To promote more without hurting gross margin, Sun Art needs to continue to drive down

procurement costs in our view. Our discussions with management also suggest that Sun

Art is not having difficulties in getting the desired procurement terms improvements for

2014. As noted earlier, we believe this is a core attractive attribute of Sun Art being a

leader in a scale-driven business.

Another factor that will contribute to better SSSG is related to the ramp up of new stores.

As discussed in the following section, first year sales output from new stores opened in the

last two years has been materially lower than that of the past two to three years owing to

greater concentration of new stores in tier 3 and tier 4 cities. Sun Art’s SSSG calculation

policy is on a rolling basis, meaning sales growth for stores opened in 2013 will enter

SSSG calculation for 2014 based on the same number of trading days.

What is the impact from e-commerce on SSSG slowdown?

What is the e-commerce impact? Clearly there is some, especially in textiles (8% of total

2013 sales). However, we note that Sun Art’s top 10 selling categories in 2013 include TVs,

refrigerators, washing machines, which are some of the categories considered to be

vulnerable to e-commerce.

As an illustration, we think Pizza Hut in China today may be one retail franchise to gauge

what the retail SSSG could be without a significant e-commerce impact, given the absence

of e-commerce penetration in food services. As we can see from Exhibit 8, Pizza Hut

China’s SSSG also slowed significantly from 20% to 5% in the three years to end 2013, but

remained at a respectable 5%, a level that we think reflects the best brick-and-mortar SSSG

with minimal ecommerce disruptions. Based on that, we estimate for Sun Art, ecommerce

has taken away 1%-2% of its SSSG in 2013. We think a SSSG target of +2%-3% is still

realistic considering the greater management focus, low penetration of ecommerce in food,

and the growing base of new stores with low sales productivity in the SSSG calculation.



Exhibit 8: Pizza Hut’s SSSG slowed to 5% in 2H13 from 15%+ in 2011, signifying the macro

impact – 5% SSSG may signify the best SSSG levels for a retail business without

ecommerce disruptions SSSG – Pizza Hut (China) vs. Sun Art


New store productivity: Down in the last few years, but we see

stabilization ahead

Sun Art’s new store productivity has been solid by industry standards in our view, given

that the company has been able to maintain its EBIT margin with its store count now 76%

higher than three years ago. Nevertheless, productivity has declined in 2012 and 2013.

New stores’ contribution to total sales dropped to 9% in 2013 from 10.8% in 2012 and

12.3% in 2011. We calculate that the underlying average sales for new stores dropped to

around Rmb150mn/store in 2013 from Rmb180mn in 2012 and Rmb209mn in 2011. This

has reduced overall sales per store to Rmb293mn in 2013 from Rmb330mn in 2011, even

that that is still well ahead of the industry average of Rmb100-150mn.

Management acknowledged that a major factor behind that is that many stores are in less

affluent markets in 3rd and 4th tier cities, with city population as few as just 200,000 people.

The rationale is that this creates early mover advantage, as competitors will find it simply

uneconomical to enter these smaller markets once Sun Art enters. The flipside is that

these stores ramp up slower.

The silver lining here is that the dilutive effort should moderate significantly going forward,

as we believe even in the most rural markets that Sun Art is entering, annualizing Rmb120-

140mn in first year of operation is achievable in our view (new store sales has stabilized to

Rmb150mn recently). We still model for the new stores to annualize Rmb125-130mn in

first year sales, but see new store contribution to overall sales growth to remain steady at

above 8% from 2014-16.

Sun Art 1-2%

Pizza Hut (China)5%

-5%

0%

5%

10%

15%

20%

25%

1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14

Sun Art's 1Q14 SSSG improved from 4Q13's negative levels



Exhibit 9: Growing proportion of Sun Art stores are in tier 3/4 cities – creating a first

mover advantage but running at lower sales productivity initially Store count by city tier

Source: Company data

Exhibit 10: The biggest adjustment has already happened in our view – we expect

stabilization in new store average sales going forward New store average sales vs. overall average sales (Rmb mn)


30 30 32

39 52 58

101120

14546

55

68

14

16

19

0

50

100

150

200

250

300

350

2011 2012 2013

1st tier 2nd tier 3rd tier 4th tier 5th tier

230

273

323

6%20%

44%

17%

13%

6%

11%

19%

44%

20%

10%

18%

45%

21%

6%Sun Art has 45% of stores in 3rd tier cities

309326 331

315

293

271256

245

207219

209

180

151

125 131 133

0

50

100

150

200

250

300

350

2009 2010 2011 2012 2013 2014E 2015E 2016E

Overall store avg sales (Rmb mn) New store avg sales (Rmb mn)

down 12% from 2013

down 31% from peak



Exhibit 11: Double-digit store growth to be driven mainly by new store openings Breakdown of total sales growth between SSSG and new stores contribution


5.6%

11.4%8.8%

3.3%2.0% 2.5% 2.5% 2.5%

14.2%

12.2%

12.3%

10.8%

9.0% 8.7% 8.1% 8.4%

19.7%

23.6%

21.1%

14.1%

11.0% 11.2% 10.6% 10.9%

0%

5%

10%

15%

20%

25%

2009 2010 2011 2012 2013 2014E 2015E 2016E

SSSG New Store Growth



Valuation: How much is a decade of double digit growth worth?

Our short answer is: 23% higher than current prices. As aforementioned, the key tenets to

Sun Art’s investment case lies in its ability to roll out stores in a sustained long period

while maintaining profitability. We hence believe a DCF valuation is a better way to capture

the longer-term growth potential.

Given Sun Art’s longer-term prospects and growing divergence in performance vs. China

peers, we switch our valuation methodology from P/E (35X average 2013-14 P/E, a relative

premium to Wumart [1025.HK, Not Covered] and CRE [0291.HK, Neutral, last close

HK$22.85]), to a DCF methodology.

Overall, we model a modest SSSG of 2%-3% to 2025 and a solid store opening plan

(discussed earlier), coupled with flattish EBIT margins. Exhibit 12 shows our key DCF

assumptions with a detailed DCF table in Exhibit 13. Our new 12-month target price is

HK$12.00, while lower vs. previous HK$13.90, still implying 23% upside potential.

Exhibit 12: Summary of DCF assumptions for Sun Art

Based on the market close of April 17, 2014

Source: Company data, Goldman Sachs Global Investment Research, Datastream

2013 2025E Rationale

Key assumptions

SSSG % 2.0% 3.0% We expect SSSG to track CPI at 2-3%

Store count # POS 323 1,535Still see Sun Art as the best retail roll-out story in China - even

with 1,535 stores by 2025

Store opening CAGR (2013-25E)

% 14% Store opening to reach low teens CAGR

Sales per avg store Rmb mn 293 216Dilutive effect of new stores to fade and allow store opening to be

more meaningful driver of topline growth

Total sales CAGR (2013-25E)

% 13% Store opening would be key driver for a 13% sales CAGR

Mkt Share as % core retail sales

% 0.6% 1.0%Expect mkt share to increase by half, but still <1% of China retail

mkt by 2025

Gross margins % 17.5% 19.2%GPM to gradually increase, but still below EU/US retailer levels of

c.25%

EBIT margins % 4.4% 4.7%Overall OPM of 4.7% at steady-state is well below best-in-class

DM peers' at 6%+

Group CROCI % 22% 17%Expect CROCI to normalize to high teens from 20%+ at present;

least adjusted CROCI at 12%

DCF value / share HK$/shr 12.0

Variance to current shr px

% 23%

April 22, 2014

Sun Art R

etail Group (6808.H

K)

Goldm

an Sachs Global Investm

ent Research

14

Exhibit 13: Sun Art’s DCF summary

Based on the market close of April 17, 2014. Note: 9.1% WACC is based on 3.5% risk free rate, 6.5% ERP, a 0.9X beta and a 0% debt structure Results from our DCF is similar to the DCF analysis conducted in our earlier reports (“Sun Art Retail Group (6808.HK) Buy: Scale leadership increasingly evident: Upgrade to Buy”, Sept 6, 2011), which had an implied equity value per share of HK$11.7.

Source: Company data, Goldman Sachs Global Investment Research, Datastream.

Exhibit 14: Our Sun Art steady-state margin forecasts of 4.7% is still well below DM peers

at 5-6% OPM


Cross checking our valuations

Historical P/E range implies limited downside

Our new target price implies 28.6x 14E P/E, or essentially 28.6x 12-month trailing P/E. This

implies 7% premium to current trailing (13A) P/E of 27x. On a forward basis, our target

price implies 25x 12-month forward (15E) P/E, also a c.7% premium to current forward

2014E P/E of 23x. On 52-week share price low, the stock was trading at trailing (2013) P/E of

23.3x. This gives us some comfort that, with the stock now trading at similar level, we see

limited downside in the current price even if valuation were to retest the 52-week low share

price.

WMT

Tesco

Carrefour

Woolworths Australia

Dairy Farm Supermarket

division

2%

3%

4%

5%

6%

7%

8%

199

01

991

199

21

993

199

41

995

199

61

997

199

81

999

200

02

001

200

22

003

200

42

005

200

62

007

200

82

009

201

02

011

201

22

013

OP

mar

gin

Sun Art



Exhibit 15: We see limited downside in current prices, as the stock trading close to its 52-

week low trailing P/E Summary of TP methodology changes and valuation ranges

Based on the market close of April 17, 2014

Source: Company data, Goldman Sachs Global Investment Research, Datastream.

Comparing with EM food retailers: target premium in line with historical average

Exhibit 16 shows that emerging market peer average forward P/E is 21x, and our target

price puts Sun Art at c.20% premium to average sector forward P/E, in line with historical

average premium levels for EM peers.

New OldTarget price (HK$) 12.0 13.9Methodology DCF 35X avg 13/14 P/E14E P/E on TP 28.615E P/E on TP 25.3

Current price (HK$) 9.76Potential upside 23%13A P/E on current price 2714E P/E on current price 2315E P/E on current price 20

52-wk high (HK$) 13.113A P/E on 52-wk high 3614E P/E on 52-wk high 31

52-wk low (HK$) 8.513A P/E on 52-wk low 2314E P/E on 52-wk low 20

Current 14E P/E is similar to trailing P/E

levels at 52-wk low prices, pointing to

limited further downside



Exhibit 16: Our target price for Sun Art is in line with the historical average premium for

EM supermarkets NTM P/E for Sun Art and EM food retailer avg

Source: Datastream.

Comparisons with HK/China peer group is less meaningful

We previously set the target P/E for Sun Art at a 15% premium relative to the 25-28x P/E for

Wumart and CRE (in 2011). However, as shown in Exhibit 17, Wumart’s earnings in 2012

and 2013 came under significant pressure. CRE saw some improvement in retail earnings

in 2013 but its beer division that accounted for the bulk of group earnings struggled (4.6%

ROE in 2013). We believe this makes it less meaningful to set our target price relative to

these two names, hence our change in valuation methodology.

Exhibit 17: The growth and return profile of Sun Art vs. CRE/Wumart has diverged in

recent years Growth and returns profile for Sun Art vs. CRE/Wumart


Sun Art:

23.4

EM avg:

20.5

0%

30%

60%

90%

10.0

20.0

30.0

40.0

Valuation premium (RHS) Sun Art

EM Avg (All) historical premium (RHS)(X)

12m fwd P/E

Sun Art has been

trading at about 20%

premium historically

SSSG 2011 2012 2013 Sales growth 2011 2012 2013Sun Art 8.8% 3.3% 2.0% Sun Art 21.2% 14.3% 10.7%CRE (retail) 10.9% 4.1% 4.7% CRE (retail) 27.3% 19.5% 14.0%Wumart 9.8% 2.1% 3.0% Wumart 15.8% 5.5% 10.6%

OP growth 2011 2012 2013 ROE 2011 2012 2013Sun Art 20.5% 11.0% 17.8% Sun Art 14.3% 14.7% 15.1%CRE (retail) 6.1% -8.3% 34.5% CRE (group) 5.5% 3.9% 4.0%Wumart 11.4% 1.3% -17.0% Wumart 19.4% 17.9% 12.7%* Sun Art sales growth includes only retail sales growth



Exhibit 18: Valuations have decoupled in recent years as well Forward P/E: Wumart vs. Sun Art vs. CRE

Note: Wumart (1025.HK, Not Covered) is based on Bloomberg consensus.

Source: Company data, Goldman Sachs Global Investment Research, Bloomberg.

Exhibit 19: We fine tune our 2014-15 Sun Art estimates by -0.8% to +1% as we factor in

actual 2013 financials and operating trends. We also introduce 2016E EPS of HK$0.55 (15%

yoy growth) Our new estimates for Sun Art

*EBIT excludes interest/investment income. Management defined operating income includes interest/investment

income.

Source: Company data, Goldman Sachs Global Investment Research.

10

15

20

25

30

35

40

Wumart Sun Art CRE

12m fwd P/E12m fwd P/E

CRE 27.5X

Sun Art 23.5X

Wumart 16.9X

Rmb mn 2013 2014E 2015E 2016E

Actual New Old Chg New Old Chg New

Total sales/revenues 86,195 96,536 98,237 -1.7% 108,243 110,292 -1.9% 121,881

Gross profit 18,613 21,388 21,094 1.4% 24,568 24,094 2.0% 28,170

EBIT* 3,803 4,443 4,418 0.6% 5,167 5,059 2.1% 6,001

Operating income (mgmt defined) 4,147 4,744 4,713 0.7% 5,443 5,321 2.3% 6,252

Net income 2,775 3,185 3,206 -0.6% 3,659 3,616 1.2% 4,205

EPS (HK$) 0.36 0.42 0.42 -0.8% 0.48 0.48 1.0% 0.55

YoY%

Total sales/revenues 10.7% 12.0% 13.0% -1.0pt 12.1% 12.3% -0.1pt 12.6%

Gross profit 15.3% 14.9% 14.7% 0.2pt 14.9% 14.2% 0.6pt 14.7%

EBIT 17.8% 16.8% 16.1% 0.7pt 16.3% 14.5% 1.8pt 16.1%

Operating income (mgmt defined) 17.9% 14.4% 13.9% 0.5pt 14.7% 12.9% 1.8pt 14.9%

Net income 15.2% 14.8% 13.7% 1.1pt 14.9% 12.8% 2.1pt 14.9%

Margins

Gross profit 21.6% 22.2% 21.5% 0.7pt 22.7% 21.8% 0.9pt 23.1%

EBIT 4.4% 4.6% 4.5% 0.1pt 4.8% 4.6% 0.2pt 4.9%



Exhibit 20: We see management share purchase as a positive as we believe it reflects

management ‘s confidence in the business Summary of Sun Art’s management buying in the past 12 months

Source: hkex.com.

Name Role

No. of shares

bought/sold/involved

Average price per

share (HKD)

Date of relevant event (dd/mm/yyyy)

Huang Ming-Tuan Chairman, RT-Mart China 200,000 10.0 4/3/2014Murray Desmond Independent Director 25,000 10.0 4/3/2014Huang Ming-Tuan Chairman, RT-Mart China 200,000 9.4 3/3/2014Mercier Bruno Robert CEO 50,000 10.9 5/12/2013Mercier Bruno Robert CEO 50,000 11.5 27/11/2013



Disclosure Appendix

Reg AC

We, Joshua Lu and Ricky Tsang, hereby certify that all of the views expressed in this report accurately reflect our personal views about the subject

company or companies and its or their securities. We also certify that no part of our compensation was, is or will be, directly or indirectly, related to

the specific recommendations or views expressed in this report.

Investment Profile

The Goldman Sachs Investment Profile provides investment context for a security by comparing key attributes of that security to its peer group and

market. The four key attributes depicted are: growth, returns, multiple and volatility. Growth, returns and multiple are indexed based on composites

of several methodologies to determine the stocks percentile ranking within the region's coverage universe.

The precise calculation of each metric may vary depending on the fiscal year, industry and region but the standard approach is as follows:

Growth is a composite of next year's estimate over current year's estimate, e.g. EPS, EBITDA, Revenue. Return is a year one prospective aggregate

of various return on capital measures, e.g. CROCI, ROACE, and ROE. Multiple is a composite of one-year forward valuation ratios, e.g. P/E, dividend

yield, EV/FCF, EV/EBITDA, EV/DACF, Price/Book. Volatility is measured as trailing twelve-month volatility adjusted for dividends.

Quantum

Quantum is Goldman Sachs' proprietary database providing access to detailed financial statement histories, forecasts and ratios. It can be used for

in-depth analysis of a single company, or to make comparisons between companies in different sectors and markets.

GS SUSTAIN

GS SUSTAIN is a global investment strategy aimed at long-term, long-only performance with a low turnover of ideas. The GS SUSTAIN focus list

includes leaders our analysis shows to be well positioned to deliver long term outperformance through sustained competitive advantage and

superior returns on capital relative to their global industry peers. Leaders are identified based on quantifiable analysis of three aspects of corporate

performance: cash return on cash invested, industry positioning and management quality (the effectiveness of companies' management of the

environmental, social and governance issues facing their industry).

Disclosures

Coverage group(s) of stocks by primary analyst(s)

Joshua Lu: Asia Pacific Consumer and Retail, Asia Pacific Media, Hong Kong/China Consumer.

Asia Pacific Consumer and Retail: Ace Hardware Indonesia, Amorepacific, CJ CheilJedang, China Foods, China Resources Enterprise, China Yurun

Food Group, E-Mart, GS Retail Co., Greatview Aseptic Packaging Company, Hengan International, Huishan Dairy, Hyundai Department Store, KT&G,

LG Household & Healthcare, Lotte Shopping, Matahari Department Store, Mengniu Dairy, Mitra Adiperkasa, Orion, PT Gudang Garam Tbk, PT

Indofood CBP Sukses Makmur, PT Indofood Sukses Makmur Tbk, PT Kalbe Farma Tbk, PT Unilever Indonesia Tbk, Ramayana Lestari Sentosa,

Shinsegae, Stella International Holdings, Sun Art Retail Group, Tingyi (Cayman Islands) Holdings, Tsingtao Brewery (A), Tsingtao Brewery (H), Uni-

President China Holdings Ltd., Want Want China Holdings, Yue Yuen Industrial.

Asia Pacific Media: Astro Malaysia Holdings Berhad, Autohome Inc, Baidu.com, Inc., CJ E&M Corporation, Changyou.com, Ctrip.com International,

Daum Communications, Dish TV India, Info Edge India Ltd, Just Dial Ltd, Makemytrip Ltd, NAVER Corporation, NCSOFT, New Oriental Education &

Technology Group Inc. (ADR), Qihoo 360 Technology Co. Ltd., Qunar.com, SINA Corporation, Sohu.com, SouFun Holdings Limited, Sun TV Network,

TAL Education Group, Television Broadcasts, Tencent Holdings, Vipshop Holdings Limited, Xueda Education Group, Youku Tudou Inc., Zee

Entertainment Enterprises.

Hong Kong/China Consumer: Anta Sports Products, Beijing Hualian Hypermarket Co., Belle International Holdings, Better Life Commercial Chain

Share Co., Bosideng International Holdings, Chow Sang Sang Holdings International Ltd., Chow Tai Fook Jewellery Group, Daphne International

Holdings, Esprit Holdings, Fujian New Hua Du Supercenter Co., Golden Eagle Retail Group, Gome Electrical Appliances Holding, Hengdeli Holdings

Ltd., Intime Retail (Group) Company Limited, Lao Feng Xiang Co., Li & Fung, Li Ning Company, Lifestyle International Holdings, Luk Fook Holdings

International Ltd., Maoye International Holdings, Renrenle Commercial Group Co., Samsonite International SA, Sanjiang Shopping Club Co., Suning

Commerce Group Co Ltd., Yonghui Superstores, Zhejiang Ming Jewelry Co., Zhongbai Holdings Group Co..

Company-specific regulatory disclosures

The following disclosures relate to relationships between The Goldman Sachs Group, Inc. (with its affiliates, "Goldman Sachs") and companies

covered by the Global Investment Research Division of Goldman Sachs and referred to in this research.

Goldman Sachs expects to receive or intends to seek compensation for investment banking services in the next 3 months: Sun Art Retail Group

(HK$9.76)

Distribution of ratings/investment banking relationships

Goldman Sachs Investment Research global coverage universe

Rating Distribution Investment Banking Relationships

Buy Hold Sell Buy Hold Sell

Global 32% 53% 15% 53% 47% 40%

As of April 1, 2014, Goldman Sachs Global Investment Research had investment ratings on 3,662 equity securities. Goldman Sachs assigns stocks as

Buys and Sells on various regional Investment Lists; stocks not so assigned are deemed Neutral. Such assignments equate to Buy, Hold and Sell for

the purposes of the above disclosure required by NASD/NYSE rules. See 'Ratings, Coverage groups and views and related definitions' below.



Price target and rating history chart(s)

Regulatory disclosures

Disclosures required by United States laws and regulations

See company-specific regulatory disclosures above for any of the following disclosures required as to companies referred to in this report: manager

or co-manager in a pending transaction; 1% or other ownership; compensation for certain services; types of client relationships; managed/co-

managed public offerings in prior periods; directorships; for equity securities, market making and/or specialist role. Goldman Sachs usually makes a

market in fixed income securities of issuers discussed in this report and usually deals as a principal in these securities.

The following are additional required disclosures: Ownership and material conflicts of interest: Goldman Sachs policy prohibits its analysts,

professionals reporting to analysts and members of their households from owning securities of any company in the analyst's area of

coverage. Analyst compensation: Analysts are paid in part based on the profitability of Goldman Sachs, which includes investment banking

revenues. Analyst as officer or director: Goldman Sachs policy prohibits its analysts, persons reporting to analysts or members of their

households from serving as an officer, director, advisory board member or employee of any company in the analyst's area of coverage. Non-U.S. Analysts: Non-U.S. analysts may not be associated persons of Goldman, Sachs & Co. and therefore may not be subject to NASD Rule 2711/NYSE

Rules 472 restrictions on communications with subject company, public appearances and trading securities held by the analysts.

Distribution of ratings: See the distribution of ratings disclosure above. Price chart: See the price chart, with changes of ratings and price targets in

prior periods, above, or, if electronic format or if with respect to multiple companies which are the subject of this report, on the Goldman Sachs

website at http://www.gs.com/research/hedge.html.

Additional disclosures required under the laws and regulations of jurisdictions other than the United States

The following disclosures are those required by the jurisdiction indicated, except to the extent already made above pursuant to United States laws

and regulations. Australia: Goldman Sachs Australia Pty Ltd and its affiliates are not authorised deposit-taking institutions (as that term is defined in

the Banking Act 1959 (Cth)) in Australia and do not provide banking services, nor carry on a banking business, in Australia. This research, and any

access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act, unless otherwise agreed by Goldman

Sachs. In producing research reports, members of the Global Investment Research Division of Goldman Sachs Australia may attend site visits and

other meetings hosted by the issuers the subject of its research reports. In some instances the costs of such site visits or meetings may be met in part

or in whole by the issuers concerned if Goldman Sachs Australia considers it is appropriate and reasonable in the specific circumstances relating to

the site visit or meeting. Brazil: Disclosure information in relation to CVM Instruction 483 is available at

http://www.gs.com/worldwide/brazil/area/gir/index.html. Where applicable, the Brazil-registered analyst primarily responsible for the content of this

research report, as defined in Article 16 of CVM Instruction 483, is the first author named at the beginning of this report, unless indicated otherwise at

the end of the text. Canada: Goldman Sachs Canada Inc. is an affiliate of The Goldman Sachs Group Inc. and therefore is included in the company

specific disclosures relating to Goldman Sachs (as defined above). Goldman Sachs Canada Inc. has approved of, and agreed to take responsibility for,

this research report in Canada if and to the extent that Goldman Sachs Canada Inc. disseminates this research report to its clients. Hong Kong: Further information on the securities of covered companies referred to in this research may be obtained on request from Goldman Sachs

(Asia) L.L.C. India: Further information on the subject company or companies referred to in this research may be obtained from Goldman Sachs

(India) Securities Private Limited. Japan: See below. Korea: Further information on the subject company or companies referred to in this research

may be obtained from Goldman Sachs (Asia) L.L.C., Seoul Branch. New Zealand: Goldman Sachs New Zealand Limited and its affiliates are neither

"registered banks" nor "deposit takers" (as defined in the Reserve Bank of New Zealand Act 1989) in New Zealand. This research, and any access to it,

is intended for "wholesale clients" (as defined in the Financial Advisers Act 2008) unless otherwise agreed by Goldman Sachs. Russia: Research

reports distributed in the Russian Federation are not advertising as defined in the Russian legislation, but are information and analysis not having

product promotion as their main purpose and do not provide appraisal within the meaning of the Russian legislation on appraisal

activity. Singapore: Further information on the covered companies referred to in this research may be obtained from Goldman Sachs (Singapore)

Pte. (Company Number: 198602165W). Taiwan: This material is for reference only and must not be reprinted without permission. Investors should

carefully consider their own investment risk. Investment results are the responsibility of the individual investor. United Kingdom: Persons who

would be categorized as retail clients in the United Kingdom, as such term is defined in the rules of the Financial Conduct Authority, should read this

research in conjunction with prior Goldman Sachs research on the covered companies referred to herein and should refer to the risk warnings that

have been sent to them by Goldman Sachs International. A copy of these risks warnings, and a glossary of certain financial terms used in this report,

are available from Goldman Sachs International on request.

European Union: Disclosure information in relation to Article 4 (1) (d) and Article 6 (2) of the European Commission Directive 2003/126/EC is available

at http://www.gs.com/disclosures/europeanpolicy.html which states the European Policy for Managing Conflicts of Interest in Connection with

Investment Research.

Japan: Goldman Sachs Japan Co., Ltd. is a Financial Instrument Dealer registered with the Kanto Financial Bureau under registration number Kinsho

69, and a member of Japan Securities Dealers Association, Financial Futures Association of Japan and Type II Financial Instruments Firms

Association. Sales and purchase of equities are subject to commission pre-determined with clients plus consumption tax. See company-specific

disclosures as to any applicable disclosures required by Japanese stock exchanges, the Japanese Securities Dealers Association or the Japanese

Securities Finance Company.

Sun Art Retail Group (6808.HK)

13.9

1312

11.810.8

6.00

7.00

8.00

9.00

10.00

11.00

12.00

13.00

14.00

40

45

50

55

60

65

70

75

80

Goldman Sachs rating and stock price target history

Stock Price Currency : Hong Kong Dollar

Source: Goldman Sachs Investment Research for ratings and price targets; FactSet closing prices as of 3/31/2014.

The price targets show n should be considered in the context of all prior published Goldman Sachs research, w hich may or may not have included price targets, as w ell as developments relating to the company, its industry and f inancial markets.

Rating

Price target

Price target at removal

Covered by Joshua Lu,as of Aug 17, 2011

Not covered by current analyst

Aug 17, 2011 N

MSCI China

Inde

x P

rice

Sto

ck P

rice Sep 5

MB

J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M2011 2012 2013 2014



Ratings, coverage groups and views and related definitions

Buy (B), Neutral (N), Sell (S) -Analysts recommend stocks as Buys or Sells for inclusion on various regional Investment Lists. Being assigned a Buy

or Sell on an Investment List is determined by a stock's return potential relative to its coverage group as described below. Any stock not assigned as

a Buy or a Sell on an Investment List is deemed Neutral. Each regional Investment Review Committee manages various regional Investment Lists to a

global guideline of 25%-35% of stocks as Buy and 10%-15% of stocks as Sell; however, the distribution of Buys and Sells in any particular coverage

group may vary as determined by the regional Investment Review Committee. Regional Conviction Buy and Sell lists represent investment

recommendations focused on either the size of the potential return or the likelihood of the realization of the return.

Return potential represents the price differential between the current share price and the price target expected during the time horizon associated

with the price target. Price targets are required for all covered stocks. The return potential, price target and associated time horizon are stated in each

report adding or reiterating an Investment List membership.

Coverage groups and views: A list of all stocks in each coverage group is available by primary analyst, stock and coverage group at

http://www.gs.com/research/hedge.html. The analyst assigns one of the following coverage views which represents the analyst's investment outlook

on the coverage group relative to the group's historical fundamentals and/or valuation. Attractive (A). The investment outlook over the following 12

months is favorable relative to the coverage group's historical fundamentals and/or valuation. Neutral (N). The investment outlook over the

following 12 months is neutral relative to the coverage group's historical fundamentals and/or valuation. Cautious (C). The investment outlook over

the following 12 months is unfavorable relative to the coverage group's historical fundamentals and/or valuation.

Not Rated (NR). The investment rating and target price have been removed pursuant to Goldman Sachs policy when Goldman Sachs is acting in an

advisory capacity in a merger or strategic transaction involving this company and in certain other circumstances. Rating Suspended (RS). Goldman

Sachs Research has suspended the investment rating and price target for this stock, because there is not a sufficient fundamental basis for

determining, or there are legal, regulatory or policy constraints around publishing, an investment rating or target. The previous investment rating and

price target, if any, are no longer in effect for this stock and should not be relied upon. Coverage Suspended (CS). Goldman Sachs has suspended

coverage of this company. Not Covered (NC). Goldman Sachs does not cover this company. Not Available or Not Applicable (NA). The

information is not available for display or is not applicable. Not Meaningful (NM). The information is not meaningful and is therefore excluded.

Global product; distributing entities

The Global Investment Research Division of Goldman Sachs produces and distributes research products for clients of Goldman Sachs on a global

basis. Analysts based in Goldman Sachs offices around the world produce equity research on industries and companies, and research on

macroeconomics, currencies, commodities and portfolio strategy. This research is disseminated in Australia by Goldman Sachs Australia Pty Ltd

(ABN 21 006 797 897); in Brazil by Goldman Sachs do Brasil Corretora de Títulos e Valores Mobiliários S.A.; in Canada by either Goldman Sachs

Canada Inc. or Goldman, Sachs & Co.; in Hong Kong by Goldman Sachs (Asia) L.L.C.; in India by Goldman Sachs (India) Securities Private Ltd.; in

Japan by Goldman Sachs Japan Co., Ltd.; in the Republic of Korea by Goldman Sachs (Asia) L.L.C., Seoul Branch; in New Zealand by Goldman Sachs

New Zealand Limited; in Russia by OOO Goldman Sachs; in Singapore by Goldman Sachs (Singapore) Pte. (Company Number: 198602165W); and in

the United States of America by Goldman, Sachs & Co. Goldman Sachs International has approved this research in connection with its distribution in

the United Kingdom and European Union.

European Union: Goldman Sachs International authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority

and the Prudential Regulation Authority, has approved this research in connection with its distribution in the European Union and United Kingdom;

Goldman Sachs AG and Goldman Sachs International Zweigniederlassung Frankfurt, regulated by the Bundesanstalt für

Finanzdienstleistungsaufsicht, may also distribute research in Germany.

General disclosures

This research is for our clients only. Other than disclosures relating to Goldman Sachs, this research is based on current public information that we

consider reliable, but we do not represent it is accurate or complete, and it should not be relied on as such. We seek to update our research as

appropriate, but various regulations may prevent us from doing so. Other than certain industry reports published on a periodic basis, the large

majority of reports are published at irregular intervals as appropriate in the analyst's judgment.

Goldman Sachs conducts a global full-service, integrated investment banking, investment management, and brokerage business. We have

investment banking and other business relationships with a substantial percentage of the companies covered by our Global Investment Research

Division. Goldman, Sachs & Co., the United States broker dealer, is a member of SIPC (http://www.sipc.org).

Our salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies to our clients and our

proprietary trading desks that reflect opinions that are contrary to the opinions expressed in this research. Our asset management area, our

proprietary trading desks and investing businesses may make investment decisions that are inconsistent with the recommendations or views

expressed in this research.

The analysts named in this report may have from time to time discussed with our clients, including Goldman Sachs salespersons and traders, or may

discuss in this report, trading strategies that reference catalysts or events that may have a near-term impact on the market price of the equity

securities discussed in this report, which impact may be directionally counter to the analyst's published price target expectations for such stocks. Any

such trading strategies are distinct from and do not affect the analyst's fundamental equity rating for such stocks, which rating reflects a stock's

return potential relative to its coverage group as described herein.

We and our affiliates, officers, directors, and employees, excluding equity and credit analysts, will from time to time have long or short positions in,

act as principal in, and buy or sell, the securities or derivatives, if any, referred to in this research.

This research is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be

illegal. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of

individual clients. Clients should consider whether any advice or recommendation in this research is suitable for their particular circumstances and, if

appropriate, seek professional advice, including tax advice. The price and value of investments referred to in this research and the income from them

may fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur.

Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments.

Certain transactions, including those involving futures, options, and other derivatives, give rise to substantial risk and are not suitable for all investors.

Investors should review current options disclosure documents which are available from Goldman Sachs sales representatives or at

http://www.theocc.com/about/publications/character-risks.jsp. Transaction costs may be significant in option strategies calling for multiple purchase

and sales of options such as spreads. Supporting documentation will be supplied upon request.

All research reports are disseminated and available to all clients simultaneously through electronic publication to our internal client websites. Not all

research content is redistributed to our clients or available to third-party aggregators, nor is Goldman Sachs responsible for the redistribution of our



research by third party aggregators. For research or data available on a particular security, please contact your sales representative or go to

http://360.gs.com.

Disclosure information is also available at http://www.gs.com/research/hedge.html or from Research Compliance, 200 West Street, New York, NY

10282.

© 2014 Goldman Sachs.

No part of this material may be (i) copied, photocopied or duplicated in any form by any means or (ii) redistributed without the prior written consent of The Goldman Sachs Group, Inc.

Documents

Sun Art Retail Group (6808.HK)pg.jrj.com.cn/acc/Res/HK_RES/STOCK/2014/4/22/1e1b... · 4/22/2014 · Investment Profile Low High Percentile 20th 40th 60th 80th 100th * Returns = Return