Periodical China Asia Consumer & Media...

Deutsche Bank Markets Research

Asia

China

Consumer

Periodical

Asia Consumer & Media Daily

Date

10 May 2016

Consumer & Media Daily

________________________________________________________________________________________________________________

Deutsche Bank AG/Hong Kong

Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, 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. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 057/04/2016.

Anne Ling

Research Analyst

(+852 ) 2203 6177

[email protected]

Company news

China/HK

Biostime – 1Q16 result conference call key takeaways (Mark Yuan)

Giordano – NDR takeaways – focusing on same store GP (Anne Ling)

UPC – 1Q16 performance and disposal of 47.83% of JML interests

Global brands – Cooperates to develop serial men’s care products

Texhong Textile – Subscription and JV agreement

CPMC Holding – Appointment of independent financial adviser

South Korea

BGF Retail – Solid CVS business growth continues; maintaining Buy (Jeremy Kim)

CJ CGV – China WOFE sites reach 8% OPM (Dianna Kang)

Cosmax – Strong export leading to 1Q16 beat; maintaining Buy (Jeremy Kim)

Emart – Earnings quality improvement in 1Q16 brightening 2016 outlook (Jihyun Song)

Hyundai HS – Positive well reflected and upside potential limited (Jihyun Song)

Taiwan

Eclat Textile – Patiently waiting; upgrading to Hold (John Chou)

Singapore

First Resources – Excitement in 2H16 results (revised) (Jeffrey Ng)

Thailand

BIGC – Exploring synergy with new shareholder (Chalinee Congmuang)

Thai Union Group PLC – Rugen Fisch and improved GPM drive profit YoY (Chalinee Congmuang)

North America

Gap Inc. Alert – Old navy sinks the ship; reiterate Sell (Paul Trussell)

Sector news

China/HK

China White Goods – Destocking cycle continues, potential upside to GPM (Richard Rui-Huang)

China CBEC – Transition period for new policy may extend one year

China Retail – April sales of top 50 retailers increase 2.9% yoy

China sports – To introduce soccer lottery

China Consumer ¬– April CPI remains at 2.3% in China

Asia Consumer and Media team Gaurav Bhatia +91-22-6658 4055 (Indian Consumer/Media) Manoj Menon +91-22-7158 4358 (Indian Consumer/Media) Jihyun Song +82 2 316 8906 (Korea Retail/Consumer)

Reggy Susanto+62-21-3189-527 (Indonesia Consumer) Chalinee Congmuang +66-2-633 6482 (Thailand Consumer) Carissa Mangubat +63-2-894 6647 (Philippine Consumer/Media) Anne Ling +852 2203 6177 (HK/China Consumer/Media, Team Leader) (Office) +852 91221099 (Mobile) Jeffrey Ng +65 6423 5139 (Singapore/Malaysia Consumer/Gaming) Richard Huang +852-2203 6202 (HK/China Consumer/Media) Mark Yuan +852-2203 6181 (HK/China Consumer/Media) John Chou +852-2203 6196 (Taiwan Textile) Jeremy Kim +82-2-316 8902 (Korea Retail/Consumer)

10 May 2016



Company news

China/HK

Biostime – 1Q16 result conference call key takeaways

(1112.HK, HKD23.70, Sell)

Tough industry environment and seasonality impact 1Q16 sales, per management

Biostime reported 1Q16 operation updates with 12.8% yoy decline for baby products

and 49% yoy increase for nutritional products (yet 29% QoQ decline). We think the

operation update was below market expectations. Management explained that 1Q16

result has been affected by a few factors, including:

Infant formula: sales growth has been under pressure due to intensive

competition. Management have observed industry wide de-stocking pressure

due to the new food safety law that requires each certified manufacturer to

produce only three series of formula. Management expects the competitive

environment to remain intense in 2H16.

Nutritional products: management explained that QoQ sales declined mainly

due to 1) high base effects in 4Q15 due to double 11 and double 12 shopping

festival promotion; 2) the postponement of some of its 3Q15 sales in 4Q16

because of capacity limit in 3Q15; and 3) some negative effects from Chinese

New year. Management indicated that its market share in Australia is still on

an increasing trend. Yet we think the result still disappointed the market given

the 1Q16 sales were also lower than 3Q15.

Management suggested two ways to drive nutritional products sales in China…

Biostime’s nutritional products’ China sales have been impacted by the Central

government’s stricter regulation on April 8 on cross-border e-commerce (“CBEC”).

Management suggested two ways to mitigate the impacts: 1) use direct mail as

management believes the new regulation does not regulate that area; 2) register some

of its SKUs as normal foods which could therefore still be imported. Management also

thinks it is possible the government might relax the new regulation in the future.

…but we are concerned that the effects could be limited

We do not expect sales from the two-ways to completely compensate the sales impact

on the CBEC channel: 1) Customs has a capacity limit to deal with cross-border mail

packages and there is still risk on whether B2C direct mail e-commerce will be subject

to CFDA’s regulation; 2) the SKU that could be reported as normal food category could

be limited. We expect the new regulation’s negative impact began to emerge from

2Q16.

Maintain Sell

We expect its nutritional sales in China to be impacted by the new regulation and we

do not expect infant formula segment to recover in 2016. Maintain Sell. Upside risk:

reversal and loosening of regulations.

Please refer to full report:

http://gm.db.com/ger/document/ShowPdf.eqsr?productIDMore=0900b8c08b1ea89f

10 May 2016



Mark Yuan

Giordano – NDR takeaways – focusing on same store GP

(0709.HK, HKD3.49, Buy)

We hosted a post-1Q16 NDR today. Management and investors focused on:

1) Giordano’s strategy to focus on same-store GP. Management explained that

when the overall market is slowing, focusing on sssg is not relevant. Sometimes,

it can be a result from heavy promotion. Rather, it is the same-store gross profit

that management is focusing on. We note that Giordano’s GPM is 60%+ while its

peers were ~50%+. Management explained that this is the result of: a)

consolidating the number of suppliers. The top 10 accounted for ~ 70-80% of its

sourcing; b) moving sourcing from the Pearl Delta area and also some of the

sourcing outside China to SEA; and c) differentiated products to avoid direct

competition; e.g. during winter, instead of selling ultra light down jackets, it sold

double-sided reversible light down jackets or more expensive goose down jackets

as a differentiation.

2) Cash flow management. For brands, the key to generating steady cash flow is to

manage the fluctuation of working capital. It tends to have stringent AR terms

with franchisees and department stores; and it also tries to repay suppliers

quickly. However, it recently did see some delay in payment from department

stores as the latter might have experienced some operational issues as a sector.

The company is monitoring this closely. As for inventory, management is extra

cautious and it tends to under budget its inventory vs. its budgeted sales. If the

market is good, it will have fewer discounts. However, if the market is weaker

than expected, it will also have fewer discounts as it does not have inventory

pressure.

3) China and other markets’ long-term outlook. In 1Q16, it started to see its

franchisees in China gaining sssg and thus resuming store opening plans.

Management’s strategy is to increase the network operated by franchisees

especially in lower tier cities where it sees growth, while closing down some of

its self-operated stores in tier one cities. Currently, around 18% of its self-run

stores in China are loss-making but only marginal losses are reported.

Ecommerce accounted for 10% of its China sales and it targets to reach 20% over

time. Overseas, they are catching up with the ecommerce development. As for

other markets, its potential markets will be Vietnam, Cambodia and Philippines,

where it is currently under the franchise model. In SEA, which drove sales and

earnings growth for the group in the past, some of the markets like Indonesia are

getting more competitive, although Giordano still has good brand equity and has

bargaining power with mall operators, as it also distributes other brands. Markets

like HK, Singapore and Taiwan are more mature. Management is restructuring

Korea and Middle East markets. It already sees some improvement in S. Korea

while ME is still work in progress.


http://gm.db.com/ger/document/ShowPdf.eqsr?productIDMore=0900b8c08b1efb94

Anne Ling

10 May 2016



UPC – 1Q16 performance and disposal of 47.83% of JML interests

(0220.HK, HKD6.80, NR)

UPC recorded 1Q16 NP of RMB433m, a rise of 17.4% mainly thanks to better-than-

expected revenue growth from noodles and drinks, as well as profitability

improvement (falling raw material prices, such as prices of PET and milk powder). The

opex ratio also fell in this quarter. According to management, there was no significant

extraordinary item that contributed the bottom-line growth. Overall, management

expects that 2Q will be better than 1Q.

Noodles. The 1Q16 growth was mainly due to sales increase and product mix enhancement. Management is optimistic about noodles growth in 2Q, expecting it to be driven by new product launches since April. In addition, Laotan pickled noodles sales have started to normalise. For braised beef noodles, the product is gaining market share. The company’s market share in noodles reached 20.8% by 1Q16, according to Nielson. Management expects its market share to keep growing. The overall instant noodle market grew 2.9% in sales in 1Q16, thanks to ASP growth despite volume decline of 5%.

Drinks. Sales recorded growth although the market remained tough, attributable to: 1) strong sales momentum of xiaomingtongxue; 2) new product launches, such as shui qu duo; and 3) growth in Hai zhi yan, which is expected to pick up in May/June after restructuring. From an industry perspective, the soft drink market increased 2.4% in 1Q16 while water, functional drinks and tea drinks grew more than 5%.

UPC also announced to dispose of its 47.83% interest in JML for a consideration of

RMB1.3bn, implying 13.2x 2014 PE and 14.9x 2015 PE of JML. Management believes

the valuation of JML is reasonable amid a sluggish market environment. The buyer is a

sizeable PE fund. The UPC disposal is primarily due to JML restricting its business,

which will lead to a conflict of interest with its shareholders. UPC aims to focus on

developing high-end and differentiated products. The deal is expected to complete in

Jul/Aug.

Source: 9 May 2016, company announcement

Global brands – Cooperates to develop serial men’s care products

(0787.HK, HKD0.90, NR)

Global brands recently announced cooperation with Biotherm Homme and Seven

Global to develop serial men’s care products under the Biotherm Homme brand. The

collection, inclusive of both skincare and daily grooming products, will be launched in

2017.

Source: 9 May 2016, AAStockes

Texhong Textile – Subscription and JV agreement

(2678.HK, HKD7.80, NR)

10 May 2016



Texhong announced that the group has entered into a JV agreement with Ms. Lo, Mr.

Shiu and Hang Chi, for subscription of new shares at HKD1/share, which represents

49% of the enlarged issued share capital of Hang Chi. Hang Chi is mainly engaged in

the knit fabric business in Hong Kong and the PRC. Prior to the subscription, Ms.

Lo/Mr. Shiu owned 80%/20% of the entire issued share capital of Hang Chi. Upon

completion, Huafeng Knitting/Ms. Lo/Mr. Shiu will own 49%/40.8%/10.2%,

respectively. The parties have agreed that the group shall become the major yarn

supplier of the Wah Fung Group (Hang Chi and its subsidiaries). Also, the group shall

form a project company to establish a new knit fabric manufacturing and dyeing

factory in Vietnam with total investment not exceeding USD60m.


CPMC Holding – Appointment of independent financial adviser

(906.HK, HKD3.38, NR)

CPMC Holding announced that the company has appointed Ample Capital Ltd. as the

independent financial adviser of the company.


South Korea

BGF Retail – Solid CVS business growth continues; maintaining Buy

(027410.KS, KRW194,500, Buy)

Reiterating Buy

BGF Retail reported solid 1Q16 results, in line with consensus and our estimate. We

maintain our positive view on the growth of Korea CVS, thanks to solid new store

openings and merchandise mix improvement. F/F category growth, spearheaded by

strong growth of lunch box (+214% yoy in 1Q16), should continue to support the solid

per store sales growth. Relatively weaker growth of tobacco from 2Q16 will likely

enable the company to enjoy better profitability as well. We reiterate our Buy rating on

BGF Retail and increase our target price to W233,000, implying 20% upside potential

to the target price.


http://gm.db.com/ger/document/ShowPdf.eqsr?productIDMore=0900b8c08b17942e

Jeremy Kim

CJ CGV – China WOFE sites reach 8% OPM

(079160.KS, KRW114,500, Buy)

Further momentum as we enter the strongest season

We continue to rate CJ CGV as a Buy. The company's 1Q results indicated its overseas

business is a success, with both China and Vietnam delivering solid results. We project

domestic ticket sales will pick up in May with stronger movie line-ups and expect that

the share price will rally further as we enter 3Q, the strongest season. We forecast

10 May 2016



quarterly operating profit will post sequential yoy improvements in 2016E, with

operating profit growing 46% hoh in 2H16E. The stock is trading at 2016E P/E of 34x,

below the mid-cycle level since 2012.


http://gm.db.com/ger/document/ShowPdf.eqsr?productIDMore=0900b8c08b172c42

Dianna Kang

Cosmax – Strong export leading to 1Q16 beat; maintaining Buy

(192820.KS, KRW 155,000, Buy)

Reiterating Buy

Cosmax posted a solid beat in 1Q16, thanks to stronger-than-expected domestic entity

sales growth driven by robust export growth (+100% yoy in 1Q16). Such strong

growth of the domestic entity, in our view, provides further support for the company’s

solid top-line growth, which we estimate will grow by 36% yoy in 2016. We estimate

the company will be able to post 31% yoy growth from the China business, thanks to

new customer adoption in 1H16 and production for the product renewal of its biggest

customer in China in 2H16. We maintain Buy with a revised target price of W193,000.


http://gm.db.com/ger/document/ShowPdf.eqsr?productIDMore=0900b8c08b1e878b

Jeremy Kim

Emart – Earnings quality improvement in 1Q16 brightening 2016 outlook

(139480.KS, KRW185,500, Buy)

Reiterating Buy

We maintain our Buy rating on Emart, recommending the counter as one of our

preferred stocks in the retail sector. Looking at its qualitative earnings improvement in

1Q16, we have become more confident in our view that Emart will be able to deliver a

solid earnings recovery (+17.6% yoy in OP) in 2016E. In our view, this earnings

improvement will have a few drivers, such as a) a SSSg rebound for the offline

discount store business from 2Q16, b) rapid growth of Emart Mall, with additional

logistics centers increasing capacity, and c) margin improvements for the China

operation and DFS business, thanks to restructuring (inventory clearing) and closures

of loss-making stores.


http://gm.db.com/ger/document/ShowPdf.eqsr?productIDMore=0900b8c08b1e4efb

Jihyun Song

Hyundai HS – Positive well reflected and upside potential limited

(057050.KS, KRW132,000, Hold)

Maintaining Hold rating

10 May 2016



In our view, Hyundai HS’s earnings momentum will rebound robustly in 2016, posting

38.4% yoy growth in operating profit. The company’s efforts to grow its fashion and

beauty categories are paying off in sales growth, and mobile division growth will

remain strong for the next couple of years. One-off costs related to Baeksuo (c.W10bn)

recognized in 2015 will also disappear. However, we believe the positives have been

reflected in the share price, given the 14% share price rebound YTD. We see limited

chance of further re-rating from the current valuation of 11.3x 2016E adjusted P/E,

which is at the mid-cycle of its historical valuation, given a lackluster mid- to long-term

growth outlook.


http://gm.db.com/ger/document/ShowPdf.eqsr?productIDMore=0900b8c08b1e809e

Jihyun Song

Taiwan

Eclat Textile – Patiently waiting; upgrading to Hold

(1476.TW, TWD310.50, Hold)

Turn focus to 'new product' & ‘17 outlook; Street to cut ‘16 earnings further

Eclat’s 1Q16 results and April sales may trigger a further share price correction near

term. However, we turn our focus to Eclat’s ‘new product’ (DBe: customisation) and

2017 order momentum. We sense growing uncertainty about 2017 on both the upside

(TPP & new business) and downside (product saturation & inventory). We therefore

suggest that investors who wish to accumulate Eclat’s shares wait until 3Q16, when

we can get a better grasp on its 2017 outlook. We cut 16E/17E recurring EPS by

6%/1% and the TP from TWD380 to TWD330. Trading at a PER of two-year mean less

one standard deviation and with 31% underperformance YTD, we upgrade to Hold.


http://gm.db.com/ger/document/ShowPdf.eqsr?productIDMore=0900b8c08b1d1f1f

John Chou

Singapore

First Resources – Excitement in 2H16 results (revised)

(FRLD.SI, SGD1.68, Buy)

Remaining positive; Buy on weakness

The recent 7% setback in the crude palm oil (CPO) price plus weak results from

Indonesia listed peers have caused the First Resources (FR) share price to be 15%

weaker than its YTD peak. Fundamentally, the CPO price prospect, in our view,

remains attractive, underpinned by the renewed Indonesia biodiesel commitment

coupled with a worsening CPO production outlook. Trading at S$1.75, the share has

c.50% upside potential to our fair value target of S$2.60 (target FY16PE of 15x on CPO

price assumption of MYR3000/mt). We reiterate Buy.


http://gm.db.com/ger/document/ShowPdf.eqsr?productIDMore=0900b8c08b1ec6d6

10 May 2016



Jeffrey Ng

Thailand

BIGC – Exploring synergy with new shareholder

(BIGC.BK, THB247.00, Hold)

We attended BIGC’s 1Q16 earnings presentation this morning. Below are key

takeaways:

*Synergy exploration is now underway. BIGC and BJC are now exploring synergy

opportunities. Although there is no clear timetable for achieving synergy, BIGC

mentioned that key synergy areas are private labels, logistics, promotion of BJC Group

products, finance and accounting, IT, special projects (possibly related to Asia Books,

Thailand’s largest English language bookseller), real estate and retail operations.

*Management maintains 2016 target. Despite 1Q16 SSSg of -2.9%, BIGC

management maintained their SSSg target of 0-1% with total sales growth of 3-4%

and EBITDA margin at the 2014 level of 11.4%. On store expansion, management still

expect to open 6 Hypermarts, 3 BIGC Markets and 75 Mini BIGCs (openings will

mainly be in 2H16), implying rental area growth of 10%.

*Efficiency and supply chain enhancement to boost 2016 margins. Despite falling

retail sales due to the tough economic climate, BIGC expects various efficiency

initiatives (such as increasing DC centralization from 86% in 1Q16 to more than 90% in

the near future and a reduction in damage and shrinkage from improved operational

efficiency) to improve margins this year.

*Aggressive expansion on Mini-BIGC franchise stores. BIGC aims to open 50 new

stores in 2016 and currently has four franchise store businesses. To provide flexibility

for franchisees, the company is developing three different franchise models with

varying levels of upfront investment for the franchisee.

*April has been the best month so far. Led by upcountry stores and food items,

management said that April SSSg has already turned positive and has been the best

month so far this year.

Our takes:

Maintain HOLD and TP of Bt250. Note that as of May 3, BJC disclosed that 1.45% of

BIGC’s shares are tendered, bringing BJC’s total shareholding in BIGC to 60%. With

the final tender offer day on May 11, we reiterate our view of the generous tender offer

price of Bt250 given BIGC’s unexciting growth outlook and 1Q16 results.


http://gm.db.com/ger/document/ShowPdf.eqsr?productIDMore=0900b8c08b1e882f

Chalinee Congmuang

Thai Union Group PLC – Rugen Fisch and improved GPM drive profit YoY

(TU.BK, THB21.40, Buy)

10 May 2016



*TU’s 1Q16 normalized profit before FX came in at Bt967m (-31% QoQ, +61% YoY),

beating the Street by 5%. Including extra gain of Bt264m (consisting of FX and

derivative revaluation gains of Bt29m and Bt235m, respectively), TU’s 1Q16 net profit

was Bt1,231m (+62% QoQ, -18% YoY). While seasonality dragged QoQ performance,

growth in net profit was still seen YoY, mainly due to 2 months of Rugen Fisch

consolidation, improving branded tuna margins, and depreciation of THB against USD

and EUR.

*1Q16 sales grew to Bt31,256m (-6% QoQ, +9% YoY), thanks to consolidation of

Rugen Fisch and a favorable FX rate. Tuna sales also rose 6.5% YoY, helped by strong

performance in Europe and rising OEM tuna sales.

*GPM improves YoY but falls QoQ on seasonality. 1Q16 GPM came in at 15.5%, up

from 13.8% in 1Q15, but down from 15.7% in 4Q15. In addition to a strong Europe

unit, the YoY improvement was underpinned by TU’s shift in strategy to focus on

product profitability over market-share (in US) and continued recovery in the pet care

unit.

*SG&A-to-sales rose to 10.9% in 1Q16 from 9.8% in 1Q15. Increase in personnel

expense from Rugen Fisch consolidation and higher marketing spending are the main

reasons for the 1Q16 rise in SG&A-to-sales.

*Maintain BUY at TP of Bt24. Though labor-related issues remain an overhang, we

continue to believe the stock’s multiple will re-rate in the long run as TU adds more

branded and value-added products. Maintain Buy.


http://gm.db.com/ger/document/ShowPdf.eqsr?productIDMore=0900b8c08b1eab58

Chalinee Congmuang

North America

Gap Inc. Alert – Old navy sinks the ship; reiterate Sell

(GPS.N, USD21.81, Sell)

10 May 2016



GPS April comp results disappointed, falling below a bar that was meaningfully

lowered over the past week as industry data points and other mall retailers outlined a

difficult apparel backdrop. To this end, GPS comp of -7% (led by Old Navy down -10%)

was 800 bps below consensus of +1.1%, which had just been lowered by 200 bps

over the past few days (DB estimate was still at +3.5%). On a two-year stack basis,

April results represented a -19% comp equating to a 1500 bps deceleration from

March, supporting our view that beyond macro, GPS has company-specific concerns

including (1) an unfavorable pricing position vs. fast fashion peers, (2) product fit and

fashion challenges, (3) being over-stored, particularly in North America (company

however only announced strategic evaluation outside the U.S.), and (4) limited

expense savings and FCF to support bottom line as in past years. We reiterate our Sell

rating and lower our price target to $17 from $21. See further details below.

April Comp Well Below Estimates

GPS reported a consolidated April comp of -7%, well below DB at +3.5% and the

Street at +1.1%, and vs. a -6% in March. On a 2-year stack basis, April was down -

19%, decelerating significantly from a -4% in March. By brand, April monthly comps

were as follows: Gap Global -4% (vs. DB at +2% and the Street at +3.2%), Old Navy

Global -10% (vs. DB at +6% and the Street at +2.6%), and Banana Republic Global -8%

(vs. DB at flat and the Street at -5.1%).

1Q EPS Guidance Well Below Expectations; Lowering Estimates & PT

GPS guided 1Q EPS to $0.31-$0.32 vs. the Street at $0.44 and DB at $0.46. We are

lowering our 1Q EPS estimate to $0.32 based on GPM contraction of 230 bps (vs. prior

forecast of 120 bps) and SG&A deleverage of 146 bps (excl. D&A). Our FY16 and FY17

EPS estimates go to $1.73 from $2.07 (vs. the Street at $2.20) and to $1.73 from $2.12

(vs. the Street at $2.37). We are lowering our PT to $17 from $21 based on 10x

(unchanged) our revised FY17 EPS estimate. Upside risks to our Sell rating include an

improved consumer discretionary environment for apparel and better-than-expected

margin performance with less promotional activity.


http://gm.db.com/ger/document/ShowPdf.eqsr?productIDMore=0900b8c08b1ef148

Paul Trussell

10 May 2016



Sector news

China/HK

China White Goods – Destocking cycle continues, potential upside to GPM

AC demand to recover in 2H16, top pick is Midea

We expect air conditioner (AC) demand to remain weak in 1H16, especially in lower-

tier cities; we expect it to recover in 2H16. We expect AC destocking to be extended to

the end of 2016, vs. our previous expectation and the Street consensus of mid-2016.

For full-year 2016, we expect GP margin to improve on 1) stabilized ASP for AC, 2)

improved product mix, and 3) lower raw material prices. Among the three white goods

players, we prefer Midea on 1) its continuing gain in market share, 2) the decisive de-

stocking, which should benefit Midea in the long run, and 3) its focus on long-term

shareholder return.


http://gm.db.com/ger/document/ShowPdf.eqsr?productIDMore=0900b8c08b19656f

Richard Rui-Huang

China CBEC – Transition period for the new policy may extend one year

Since the new CBEC policy took effect on 8 April with adjusted regulations on tax and

imported product categories, many CBEC companies are still busy with category

adjustment, inventory clearance and waiting for details of the policy. According to

yicai.com, after several coordination meetings, the government has reached an

agreement to extend the transition period for the new policy by one year, changing the

tax rate but allowing pilot zones to keep their previous operation models. The decision

to extend the transition period may be announced in recent days, according to

Yicai.com.

Source: 8 May 2016, yicai.com.

China Retail – April sales of top 50 retailers increase 2.9% yoy

According to CNCIC, China’s top 50 retailers’ sales grew 2.9% in April 2016, up 5.1ppt

mom and 3.2 yoy. 15 out of the 50 retailers realised positive sales growth, three more

than that in March 2016. By category, except Gold & Jewellery, all achieved positive

yoy growth.

10 May 2016



Figure 1: Top 50 Retailers' sales

% 16-Apr 15-Apr YoY change

Top 50 Retailers' sales 2.9 -0.3 3.2

Gold&Jewelry -14.4 7.2 -21.6

Apparel 1.7 1.4 0.3

Food 3.5 -2.7 6.2

Home Appliance 12.7 -9.5 22.2

Cosmetics 3.1 2.4 0.7

Daily necessities 1.1 -2.4 3.5

Source: Deutsche Bank, CNCIC

Figure 2: China top 50 retailers' sales yoy% growth

Source: Deutsche Bank, CNCIC

Source: 10 May 2016, CNCIC

China sports – To introduce soccer lottery

Under the 2016-2020 plan unveiled by the General Administration of Sport on 5 May

2016, it would “actively study promoting a soccer lottery in which Chinese domestic

soccer leagues will be the object of guessing” on the part of members of the public.

China’s existing sports lottery sales, including some products relating to soccer

matches, declined 5.7% yoy in 2015 to RMB166.4bn, according to data released in

February by the Ministry of Finance.

Source: 10 May 2016, NBS

China Consumer ¬– April CPI remains at 2.3% in China

According to data released by the National Bureau of Statistics on 10 May 2016, CPI in

April remained at 2.3%, with food CPI decreasingslightly to 7.4%. CPI ytd for the first

four months reached 2.2% yoy. Among all, urban/rural areas saw CPI of 2.3%/2.4%.

Food, alcohol and cigarette prices increased 5.9%, contributing 1.74ppt of total CPI.

Fresh vegetable prices jumped 22.6%. Aquatic products price increased 4.1% yoy and

10 May 2016



meat and poultry prices rose 20.1% yoy (pork prices 33.5% yoy up). Grain prices edged

up 0.4% yoy while egg prices fell 1.6%.

Figure 3: China CPI overall & CPI food

Source: Deutsche Bank

Source: 9 May 2016, Caixin.

The authors of this report wish to acknowledge the contribution made by Louise Li,

Kerith Chen and Julia Xu, employees of Evalueserve, a third-party provider to Deutsche

Bank of offshore research support services; and Jean Chen, employee of CRISIL Global

Research & Analytics, a division of CRISIL Limited, a third-party provider of offshore

research support services to Deutsche Bank.

10 May 2016



Appendix 1

Important Disclosures

Additional information available upon request

*Prices are current as of the end of the previous trading session unless otherwise indicated and are sourced from local exchanges via Reuters, Bloomberg and other vendors . Other information is sourced from Deutsche Bank, subject companies, and other sources. For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our website at http://gm.db.com/ger/disclosure/DisclosureDirectory.eqsr

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This report covers more than one security and was contributed to by more than one analyst. The views expressed in this report accurately reflect the views of each contributor to this compendium report. In addition, each contributor has not and will not receive any compensation for providing a specific recommendation or view in this compendium report.

Equity rating key Equity rating dispersion and banking relationships

Buy: Based on a current 12- month view of total share-holder return (TSR = percentage change in share price from current price to projected target price plus pro-jected dividend yield ) , we recommend that investors buy the stock.

Sell: Based on a current 12-month view of total share-holder return, we recommend that investors sell the stock

Hold: We take a neutral view on the stock 12-months out and, based on this time horizon, do not recommend either a Buy or Sell.

Newly issued research recommendations and target prices supersede previously published research.

54 %

36 %

10 %17 %16 % 18 %

050

100150200250300350400450500

Buy Hold Sell

Asia-Pacific Universe

Companies Covered Cos. w/ Banking Relationship

10 May 2016



Regulatory Disclosures

1.Important Additional Conflict Disclosures

Aside from within this report, important conflict disclosures can also be found at https://gm.db.com/equities under the

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Deutsche Bank equity research analysts sometimes have shorter-term trade ideas (known as SOLAR ideas) that are

consistent or inconsistent with Deutsche Bank's existing longer term ratings. These trade ideas can be found at the

SOLAR link at http://gm.db.com.

10 May 2016



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10 May 2016



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David Folkerts-Landau Chief Economist and Global Head of Research

Raj Hindocha Global Chief Operating Officer

Research

Marcel Cassard Global Head

FICC Research & Global Macro Economics

Steve Pollard Global Head

Equity Research

Michael Spencer Regional Head

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Deutsche Bank Research, Germany

Andreas Neubauer Regional Head

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