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Coal-to-MEG: Great Room for Growth,Watch Danhua Chemical Technology

中金公司


Investment Focus November 29, 2011 Zheng GAO gaozheng@cicc.com.cn
Chemicals
RESEARCH
Zixin WANG Wangzx@cicc.com.cn
Bin GUAN SFC CE Ref: AGL097
Yujie WANG Yujie.wang@cicc.com.cn
Coal-to-MEG: Great Room for Growth, Watch Danhua Chemical Technology
guanbin@cicc.com.cn
Bing GAO gaobing@cicc.com.cn
Highlights Growth of global monoethylene glycol (MEG) production capacity to slow in the next three years. Fixed asset investment growth has been hampered by the post-financial crisis credit crunch and tightening supply of cheap ethane in the Middle East. Even including China’s coal-to-MEG projects, which will account for >50% of the world’s new capacity, we expect global MEG production capacity to grow at a mere 3.2% CAGR before 2013, relatively low. Domestic demand for MEG to steadily increase, with 2012 consumption to top 10mt. Domestic PET production capacity will grow from >12mt in 2010, to 41.5mt by 2012 and the conservative estimate of 2012 PET fiber output is 27mt, a 2mt increase from 2010’s level. Both should give stable support to MEG demand. Driven by China’s momentum, global demand for MEG could post 2011/2012 growth of 5.8%/5.6%, a prudent forecast based on the 1.8x/1.6x 2011/2012 GDP growth expected by the World Bank. Huge supply-demand gap forcing China to depend on MEG imports. The downstream PET industry boom propelled the rapid growth of China’s MEG consumption; insufficient oil and gas resources constrained production using traditional techniques, forcing China to depend on imports to fulfill >70% of its MEG demand. Even assuming all existing coal-to-MEG projects reach design capacity as scheduled, there will still be a huge supply shortage in the domestic market. Competitive cost of MEG production from coal. The coal-based process is cheaper than both the naphtha-based process and the North American ethane-based process, but more expensive than the Middle East ethane-based process. However, the more cost-efficient Middle East ethane-based process will not pose a threat to the coal-based process. As the Middle East’s supply of cheap ethane tightens, an increasing amount of heavy feedstock for ethylene cracking has been used; meanwhile the mining cost of non-associated gas resources remains high and the natural gas pricing mechanism faces reform. The Middle East’s cost advantage in petrochemical products will likely wane. Danhua Chemical Technology, pioneer of China’s coal-to-MEG commercialization. The company uses the oxalate hydrogenation process, producing MEG from lignite through dimethyl oxalate. Since coming online with qualified output in 2009, its 0.2mt/yr facility in Tongliao has been undergoing a debugging process, with key problems in catalyst adsorption and coking when the load is raised. During a later trial operation in November 2011, the loading rate steadily improved and the average cost was estimated to be reduced to ~Rmb4,750/t. We expect the company’ profitability to rapidly improve as Phase-2 of Tongliao project and the 5x0.2mt/yr project in Henan gradually reach design capacity.
Please read carefully the important disclosures at the end of this report

CICC Research: November 29, 2011
Contents Growth of global MEG production capacity to slow .................................................................................. 3 MEG demand to continue growing steadily................................................................................................ 4 China has a large MEG supply gap, high dependence on imports........................................................... 5 Coal-to-MEG projects unlikely to change China’s MEG supply/demand landscape ............................... 6 A brief introduction to the coal-to-MEG process........................................................................................ 7 Cost of MEG production from coal .............................................................................................................. 8 Coal-to-MEG projects unlikely to be hurt by the Middle East’s cheap MEG .......................................... 10 Danhua Chemical Technology (600844.SH): Maintain BUY ..................................................................... 12
Figures Figure 1: Expansion of MEG production capacity in the Middle East.........................................................................3 Figure 2: MEG production lines that were shut down or shifted to other products in recent years (LHS); MEG is not the only downstream product of ethylene oxide (RHS)................................................................................3 Figure 3: Increasing polyester production capacity in China (LHS); MEG demand under different scenarios (RHS) ......................................................................................................................................................................4 Figure 4: Polyester fiber accounts for the majority of production of chemical fiber products (LHS); increasing polyester fiber production provides strong support to MEG demand (RHS)................................................4 Figure 5: MEG demand breakdown: Global (LHS), and China (RHS) .......................................................................5 Figure 6: China’s MEG consumption as a percentage of the world’s total has continued to rise (LHS); China’s MEG import dependence is likely to stay high (RHS) ...........................................................................................5 Figure 7: Danhua’s coal-to-MEG project in Tongliao (LHS); planned coal-to-MEG projects (RHS)...........................6 Figure 8: Impact of coal-to-MEG projects on the MEG supply/demand landscape in China .....................................6 Figure 9: Coal-to-MEG process via oxalate hydrogenation........................................................................................7 Figure 10: Progress in the catalysts used in the coal-to-MEG process via oxalate hydrogenation ...........................7 Figure 11: MEG cost in the naphtha-based process (LHS); naphtha-WTI crude oil fitting curve (RHS)....................8 Figure 12: MEG cost in the natural gas-based process (LHS); cost composition (RHS) in North America (upper) and Middle East (lower)................................................................................................................................8 Figure 13: MEG cost composition in the coal-based process: Operating at 50% load (LHS), and 100% load (center); basic assumptions (RHS).............................................................................................................................9 Figure 14: Cost comparison for various MEG production methods......................................................................... 10 Figure 15: Share of Middle East in ethylene and MEG production capacity to decline: ethylene (LHS); MEG (RHS) ................................................................................................................................................................... 10 Figure 16: Short supply of cheap ethane resources to make Middle East petrochemicals less cost competitive ...11 Figure 17: Increase in the proportion of natural gas in ethylene cracking feedstock will likely slow........................11 Financial highlights .................................................................................................................................................. 12 Share information..................................................................................................................................................... 12 Recent price performance ....................................................................................................................................... 12 52wk performance ................................................................................................................................................... 12 Figure 18: Danhua’s shareholding structure............................................................................................................ 13 Figure 19: Breakdown of Danhua’s sales volume, sales revenue and gross margin by product............................ 13 Figure 20: Danhua’s coal-to-MEG projects.............................................................................................................. 13 Figure 21: Price movement and spread of MEG vs. ethylene................................................................................. 14 Figure 22: Danhua’s historical and forecast financial data, earnings forecast assumptions & revisions ................ 14 Figure 23: Danhua’s P/E and P/B bands ................................................................................................................. 14
Please read carefully the important disclosures at the end of this report 2

CICC Research: November 29, 2011
Growth of global MEG production capacity to slow The Middle East and North America are the world’s major MEG producing regions, followed by China, with Southeast Asia, South Korea and Taiwan also playing important roles. After several years of rapid expansion, China now accounts for ~15% of the world’s MEG production capacity. With new projects in the Middle East and China reaching design capacity, global MEG production capacity has increased by ~50% to nearly 27mt in 2010, up from 2005’s <18mt, implying a CAGR of 8.5%. Despite this high growth, the world’s MEG capacity expansion is expected to slow over the next three years.
Production growth in the Middle East to be limited MEG production capacity in the Middle East has seen great expansion in recent years, thanks to the remarkable cost advantages resulting from their use of cheap ethane as a substitute for naphtha in ethylene cracking. In 2009 alone, three world-class EG production facilities were put into operation in Saudi Arabia, with a combined production capacity of 2mt/yr. A 0.6mt/yr EG facility also went into operation in Kuwait in 2008. The Middle East has now overtaken North America as the world’s largest MEG producing region, with a total production capacity of 7.48mt/yr, or 28% of the world’s total. However, we expect a slowdown in Middle East MEG production growth going forward. First, new production capacity in the region should be limited in the next three years. The planned MEG projects have total production capacity of just 1.18mt/yr, which means growth will be slower than in previous years, even if all the projects are completed as scheduled. Figure 1: Expansion of MEG production capacity in the Middle East Country Iran Kuwait Saudi Arabia Saudi Arabia Saudi Arabia Saudi Arabia Saudi Arabia Project NPC #10 Equate - 2 SHARQ, AI Jubail Rabigh PC SABIC, Yanbu PMD Exxon Capacity ‘000 tonnes/year 443 600 700 600 700 475 700 5,302 9,520 2008 2008 2009 2009 2009 2011 2013 0 0% 3,000 10% 6,000 20% 9,000 30%
(Estimated) Time of production
12,000
Capacity
Growth rate(right axis)
40%
Capacity before 2008 Capacity of ME 2013(E)
2008
2009
2010
2011
2012
2013
Source: Asia Chemical, CICC Research
Some production facilities in Europe and North America to shut down or shift to other products While MEG production capacity continues to expand in the Middle East, small and obsolete production facilities in North America and Europe will be shut down. In the past two years, Dow Chemical, among others, closed some MEG production facilities or shifted to other products, including high purity ethylene oxide, glycol ethers and ethanolamine. Figure 2: MEG production lines that were shut down or shifted to other products in recent years (LHS); MEG is not the only downstream product of ethylene oxide (RHS) Producer Dow Chemical PD Glycol Indian Glycol Dow Chemical Dow Chemical Dow Chemical Dow Chemical Samsung (Korea) Honam (Korea) Total Location Terneuzen,NED Texas, U.S. Kashipur, India Chiba,Japan Wilton, U.K. Louisiana,U.S. Louisiana,U.S. Capacity ‘000 tonnes/year 130 360 100 140 180 330 420 120 120 1660 Jan, 2009 Jan, 2009 Jan, 2009 Nov, 2009 Jan, 2010 2010 (Switch to HPEOE) 2010 year end ~2011 beginning Nov, 2010 Nov, 2010 (Switch to HPEOE) 23%
Time of Shutdown
HPEOE Purification Glycol ethers Ethanolamine Ethylene oxide 77% byproducts
MEG DEG,TEG
Source: CMAI, CICC Research
Please read carefully the important disclosures at the end of this report 3

CICC Research: November 29, 2011
MEG demand to continue growing steadily We expect domestic MEG demand will maintain steady growth in the next two years, reaching >10mt in 2012. For one thing, China’s polyester production capacity has expanded significantly, with total capacity expected to be ~41.5mt at end-2012, up ~40% from 2010. Even if the polyester industry’s operating rate is as low as 65%, its MEG demand will still reach ~9.2mt. Taking into account the use of MEG in the production of automotive antifreeze, China’s apparent MEG consumption will reach, or even surpass, 10mt in 2012. Figure 3: Increasing polyester production capacity in China (LHS); MEG demand under different scenarios (RHS) 50,000 40,000 30,000 20,000 10,000 0 2000 2002 2004 2006 2008 2010 2012E '000 tones PET Capacity Grow th rate (right axis) 40% 30% 20% 10% 0% 50%
PET Output ('000 tonnes) Operating rate 75% Operating rate 70% Operating rate 65%
2011E 26,213 24,465 22,718
2012E 31,238 29,155 27,073 2012E 11,420 10,659 9,897
Demand of Glycol ('000 tonnes) 2011E Operating rate 75% 9,583 Operating rate 70% 8,944 Operating rate 65% 8,305
*assumptions: 1.Producing one ton of PET consumes 0.34 tone of Glycol 2.consumption by Producing PET accounts for 93% of total Glycol demand
Source: Sinopec, CICC Research
Another reason domestic MEG demand is set to grow is that China’s polyester products are mainly used in the production of polyester fiber, or terylene, which accounts for >80% of polyester consumption. The chemical fiber industry is one of China’s pillar industries, and polyester fiber accounts for >80% of chemical fiber production. Given the limited output of natural fiber (e.g. cotton) and a continuously growing population, we believe the demand for polyester fiber as a substitute material should be strong and it is likely to maintain steady growth in the future. We conservatively estimate that polyester fiber production will reach >27mt by end-2012, translating to MEG consumption of ~8.5mt (assuming production of 1t of polyester requires 0.34t of MEG, and production of 1t of polyester fiber requires 1.1t of polyester). Historical data shows that the production of polyester fiber tends to make up ~85% of MEG consumption; we estimate that total MEG demand will reach 10mt/yr (MEG is also used to produce polyester chips and automotive antifreeze). Figure 4: Polyester fiber accounts for the majority of production of chemical fiber products (LHS); increasing polyester fiber production provides strong support to MEG demand (RHS) 40,000 '000 tones Fiber Output Dacron%(right axis) 32,000 82% Dacron Output 85% 35,000 '000 tones Dacron Output Glycol consumption by dacron demand of Glycol Dacron % (right axis)
95%
28,000
90%
24,000
79%
21,000
85%
16,000
76%
14,000
80%
8,000
73%
7,000
75%
0 2002 2004 2006 2008 2010 2012E
70%
0 2002 2004 2006 2008 2010 2012E
70%
Source: Sinopec, Wind, CICC Research
Please read carefully the important disclosures at the end of this report 4

CICC Research: November 29, 2011
China has a large MEG supply gap, high dependence on imports As an important organic chemical raw material, MEG is primarily used in the manufacture of polyester, and is also used in the production of automotive antifreeze. China’s apparent consumption of MEG reached ~9mt in 2010, and its proportion of world demand for MEG has continued to increase, driven by the rapid growth of China’s polyester industry. From 2005 to 2010, global MEG consumption increased from 16mt to ~21.3mt, while China’s apparent consumption of MEG rose from ~5mt to nearly 9mt. China accounted for ~80% of incremental global consumption during this period. Figure 5: MEG demand breakdown: Global (LHS), and China (RHS) 6% 11%
3% 4%
PET Resin
Anti-freeze
83% Others
93% PET Resin Anti-freeze Others
Source: CMAI, CICC Research
Figure 6: China’s MEG consumption as a percentage of the world’s total has continued to rise (LHS); China’s MEG import dependence is likely to stay high (RHS) 30,000 ’000 tonnes China Consumption Global Consumption China% (right axis) 60% 16,000 '000 tonnes Consumption 85% Output Foeign trade dependence (right axis)
24,000
45%
12,000 70%
18,000 30% 12,000 15% 4,000 8,000 55%
6,000
0 2002 2004 2006 2008 2010 2012E
0%
0 2000 2002 2004 2006 2008 2010 2012E
40%
Source: Wind, www.baiinfo.com, CICC Research
In the traditional MEG production process, ethylene is produced from naphtha or ethane through cracking, and is then used to produce ethylene oxide and MEG. Since ethylene oxide is flammable and explosive, and difficult to transport a long distance, MEG production has to depend on ethylene plants. Therefore, China’s MEG production facilities are mostly concentrated in large-scale petrochemical enterprises that are far less competitive in cost terms than those in the Middle East, which use natural gas as the raw material, leading to the slow expansion of domestic production. The capacity addition from domestic MEG projects that use other processes, such as Danhua Chemical Technology's coal-to-MEG projects, and Hualu Hengsheng and Ningbo Heyuan Chemical’s imported methanol-to-olefins-MEG project, will still be limited relative to the domestic supply gap. We expect China’s MEG import dependence to stay high in the next two years.
Please read carefully the important disclosures at the end of this report 5

CICC Research: November 29, 2011
Coal-to-MEG projects unlikely to change China’s MEG supply/demand landscape Coal-to-MEG projects will help ease China’s tight MEG supply, but they will not completely fill the supply gap. There is only one new traditional-process MEG project scheduled to come on stream in the next two years (PetroChina’s 0.3mt/yr project in Chengdu). Even assuming that all planned coal-to-MEG projects reach design capacity as scheduled, the capacity addition by 2012 will be no more than 2.5mt, still far from enough to fill the nearly 7mt supply gap at present. Figure 7: Danhua’s coal-to-MEG project in Tongliao (LHS); planned coal-to-MEG projects (RHS) Company Project Status Trial run Construction Construction Construction Construction Planing Planing Planing Capacity Year into production Investment k tons/year Danhua Technology Tongliao I Danhua Technology Tongliao II Hualu Hengsheng Berun Group Berun Group Dezhou Xilin Gol I Xilin Gol II 200 400 50 100 100 1,000 300 600 2,750 2011 2012 2011 2012 2013 2012 2013 RMB bn 1.7 4.0 0.4 1.3 1.0 10.0 3.0
Danhua Technology Xin xiang, An yang,etc Qian xi Chemical Shanghai Huayi Total Qianxi County Wuwei County
Source: CICC Research
Figure 8: Impact of coal-to-MEG projects on the MEG supply/demand landscape in China 6,000
'000 tonnes
Coal-to-MEG output Tranditional output
80%
Foreign trade dependence (including coal-to-MEG) Foreign trade dependence (excluding coal-to-MEG)
14,000
'000 tonnes
Demand Output(excluding coal-to-MEG) Output of coal-to-MEG
75% 4,500 10,500
70% 3,000 7,000
Demand supply gap
65% 1,500 3,500
60%
0 2009 2010 2011E 2012E 2013E
55% 2009 2010 2011E 2012E 2013E
0
2001
2003
2005
2007
2009
2011E
2013E
Source: CICC Research
Please read carefully the important disclosures at the end of this report 6

CICC Research: November 29, 2011
A brief introduction to the coal-to-MEG process The existing commercialized coal-to-MEG process is characterized by oxalate hydrogenation. Its main steps include: 1) Production of synthetic gas (CO+H2) from coal and purification. 2) Separation of the gas into industrial CO and H2 raw materials using the pressure swing absorption process. 3) Removal of the remaining H2 from industrial CO using the dehydrogenation process. 4) Production of nitrogen oxides NxOy through ammonia oxidation and synthesis, with methanol to form methyl nitrite for carbonylation reaction. 5) Carbonylation reaction between pure CO and methyl nitrite to produce dimethyl oxalate (DMO) as well as nitrogen oxides NxOy that can be used to form methyl nitrite after reaction with methanol. 6) Hydrogenation of DMO to produce MEG as well as methanol that can be used in Step 4. 7) Separation of polymer-grade MEG. Figure 9: Coal-to-MEG process via oxalate hydrogenation NH3 Steam Regeneration Methyl nitrite Regeneration Byproduct MEG Oxidation NxOy Esterification Methanol Oxalic acid
Lignite
Gasification Raw Gas
Gas conversion
Industrial CO
Dehydrogenation Catalyst a
Carbonylation Purified CO Catalyst b
Demethyl Oxalate
Hydrogenation Catalyst c
O2 Seperating Air H2
Refine
MEG (PET grade)
Source: Fujian Institute of Research on Structure of Matter, Chinese Academy of Sciences, CICC Research
Catalysts used in the coal-to-MEG process via oxalate hydrogenation The coal-to-MEG process via oxalate hydrogenation needs to use catalysts in three steps: Dehydrogenation of synthetic gas, CO carbonylation reaction to produce DMO, and hydrogenation of DMO to produce MEG. Stable and efficient catalysts are key to the success of coal-to-MEG projects on a commercial scale. Figure 10: Progress in the catalysts used in the coal-to-MEG process via oxalate hydrogenation Process CO Dehydrogenation OXO-synthesis DMO hydrogenation Catalyst Pd-Catalyst Pd-Catalyst/α-Al203 carrier Cu-Ni/Cr, SiO2 carrier Progress Removing H2 from CO gas to ppm level Large diameter carrier improving yield per liter per hour,and reducing the load rate Reducing the proportion of by-products Problem Pujing and Huayi claim that their oxo-synthesis need not dehydrogenate CO Narrow active window and poor controllability of strong exothermic reaction restricts operating rate Narrow active window, poor controllability of strong exothermic reaction;necessary to get rid of toxic Cr
Source: CICC Research
Please read carefully the important disclosures at the end of this report 7

CICC Research: November 29, 2011
Cost of MEG production from coal By raw material, there are four production processes for MEG, namely the naphtha-based traditional process, the Middle Eastern process based on associated gas, the process based on shale gas in North America, and the coal-based process in China. Below is our analysis of these processes.
MEG cost in the naphtha-based process: Rmb6,000/t In the naphtha-ethylene-MEG process, the naphtha consumption per tonne of ethylene is ~3.3t and the ethylene consumption per tonne of MEG is ~0.6t. It is estimated that when WTI crude oil price is at US$90/bbl, the full cost of MEG production from naphtha is >Rmb6,000/t after taking into account depreciation and other production costs, and excluding by-products such as propylene and C4. Figure 11: MEG cost in the naphtha-based process (LHS); naphtha-WTI crude oil fitting curve (RHS) Price/Cost USD90/barrel Unit consumption Crude oil price of naphtha=0.996WTI-1.45 USD88/barrel 3.3t USD923/tonne 0.8-0.85t Ethylene oxide 0.71t Naphtha Propylene Crude C4s Ethylene By-products Pygas Fuel 0.80t
160
$/barrel
Naphtha
Fitting Naphtha price
R2 =0.87 120 0.58t 0.38t
80
40 0.60t
0 ~RMB6000/tonne MEG
Jan-05
May-06
Sep-07
Jan-09
May-10
Sep-11
Source: WIND, CMAI, CICC Research
Full MEG cost in the ethane-based process: Rmb5,500/t in North America vs. Rmb4,000/t in the Middle East MEG production in the Middle East and North America is based on natural gas. The difference is that the cracker feedstock in the Middle East is mainly associated gas, while the feedstock in North America is mainly shale gas which has been rapidly developed in recent years. Due to the different raw materials used, the MEG cost is ~US$480/t in the Middle East and ~US$750/t in North America. Even taking into account freight costs and tariffs, the full cost of MEG in the Middle East is still only ~US$600/t, well below that of the naphtha-based process. Figure 12: MEG cost in the natural gas-based process (LHS); cost composition (RHS) in North America (upper) and Middle East (lower) Price/cost Unit consumption Middle East Associated gas North America Shale gas Price/cost Other variables 37% Freight,storage and tariff 13%
USD47/tonne
Ethane C3 1.30t C4 Pygas fuel 0.04t 0.04t 0.02t 0.15t
USD0.5/gallon
Ethane 32% Depreciation 18%
USD220/tonne 0.8-0.85t
Ethylene
USD640/tonne
Freight,storage and tariff 18%
Ethylene Oxide 0.71t USD480/tonne MEG USD750/tonne
Other variables 51%
Ethane 6%
USD600/tonne
Export to China
USD870/tonne
Depreciation 25%
Source: HSBC, CMAI, CICC Research
Please read carefully the important disclosures at the end of this report 8

CICC Research: November 29, 2011
MEG cost in the coal-based process: Rmb4,500/t if operating at full load The cost of MEG production from coal using the oxalate hydrogenation process is expected to be much lower than the cost of using the traditional naphtha-based process. Coal consumption per tonne of MEG is 5~6t, compared to naphtha consumption of 2.4t per tonne of MEG. Lignite prices are only ~Rmb300/t, indicating a low raw material cost. We estimate the cost of MEG production from coal at only ~Rmb4,500/t if production facilities operate at full load (after overcoming technical hurdles). That would mean a gross margin of >40% at a tax-excluded MEG price of nearly Rmb8,000/t. Figure 13: MEG cost composition in the coal-based process: Operating at 50% load (LHS), and 100% load (center); basic assumptions (RHS) Items Lignite Utilities Catalysts Depreciation Wages Others Total Cost Cost%
Items Lignite Utilities Catalysts Depreciation Wages Others Total
Cost 1,451 800 180 800 120 1,400 4,751
Cost% 31% 17% 4% 17% 3% 29% 100%
1,451 800 180 1,600 120 1,400 5,551
26% 14% 3% 29% 2% 25% 100%
Basic assumptions Lignite consumption 5.66 tonne/tonne MEG Price of Coal (including VAT) Investment Depreciation period Rmb 300/tonne Tongliao 20kt project: Rmb 3bn; Henan 1mt project: Rmb 10bn 15 years
Source: CICC Research
Please read carefully the important disclosures at the end of this report 9

CICC Research: November 29, 2011
Coal-to-MEG projects unlikely to be hurt by the Middle East’s cheap MEG The production of MEG from coal costs much less than MEG made from naphtha, but it is still more than MEG made from ethane in the Middle East (even after taking freight costs and tariffs into account). However, we do not think the Middle East’s MEG will pose a significant threat to coal-to-MEG projects, for the following reasons: First, as a new entrant, coal-to-MEG projects do not have to benchmark themselves against the world’s cost leader. If facilities operate at full load, the cost of MEG production from coal will be higher than only the ethane-based process in the Middle East. Naphtha-based MEG producers are the market’s marginal suppliers and have the highest unit cost. In China, Northeast Asia and Southeast Asia, where the traditional naphtha-based process is prevalent, coal-to-MEG projects have significant cost advantages. Second, the expansion of petrochemical production capacity in the Middle East has slowed. The rapid expansion of petrochemical plants in the Middle East has come to the end, with only 1.2mt/yr of new ethylene production capacity, and <0.5mt/yr of new MEG production capacity scheduled to come online in the next two years. The Middle East’s share of both the world’s ethylene market and its MEG production capacity are set to decline. In Iran, the operating rate of ethylene cracking facilities is only 50~60% of levels in the past five years due to sanctions against the country, and it is unlikely to improve much in the near term. Figure 14: Cost comparison for various MEG production methods 8,000 Rmb/tonne *Cost of freight and tariff have been included in the cost for Middle East and North America Ethane 。
6,000
4,000
2,000
0 Middle East Ethane Danhua (100% load) Danhua (50% load) North America Ethane Naphtha
Source: CICC Research
Figure 15: Share of Middle East in ethylene and MEG production capacity to decline: ethylene (LHS); MEG (RHS) 200,000
'000 tonnes
150,000
Global Ethylene Middle East Middle East %(right axis)
25% 20% 15%
36,000
'000 tonnes
Global MEG Middle East Middle East %(right axis)
40%
27,000
30%
100,000
18,000
20%
10% 50,000
5% 0% 2005 2006 2007 2008 2009 2010 2011E2012E
9,000
10%
0
0 2005 2006 2007 2008 2009 2010 2011E2012E
0%
Source: Oil & Gas Journal (US), CBI China, CICC Research
Please read carefully the important disclosures at the end of this report 10

CICC Research: November 29, 2011 Third, the increase in the proportion of ethane in ethylene cracking feedstock will likely slow, as cheap associated ethane resources gradually come into short supply. This has forced Middle Eastern countries to seek heavy feedstock for ethylene cracking, and change the natural gas pricing mechanism, or develop high-cost non-associated natural gas, which will significantly push up the raw material cost for producing ethylene and MEG from ethane. The pressure on producers in China will likely decline gradually and there should be no substantial threat to coal-to-MEG projects with cost advantages at home. Figure 16: Short supply of cheap ethane resources to make Middle East petrochemicals less cost competitive Processing,purification costs much higer than associated gas
Develop Non-associated gas?
Qutar: Before 2014,Ethane quota can only support one world-class facility
Saudi Arabia: No additional ethane quota since 2006 Shortage of Cheap Ethane
Middle East petrochemical products facing upward costs and downward competitiveness
Feedstock tends to become 'heavier' in the Middle East
Pricing mechanism of Nature gas needs reform
UAE: 1mt/a cracking facility fed solely by naphtha
Kuwait: 1.4mt/a cracking facility likely to use naphtha as feedstock
Iran: pricing ethane base on calorific value
Saudi Arabia: May raise the price of ethane gradually and reduce subsidies of propane/butane
Source: CICC Research
Figure 17: Increase in the proportion of natural gas in ethylene cracking feedstock will likely slow 100 Mn tonnes Naphtha Others 80 Ethane Ethane%(right axis) 35% 40%
60 30% 40 25%
20
2000 2002 2004 2006 2008 2010 2012E
20%
Source: CMAI, CICC Research
Please read carefully the important disclosures at the end of this report 11

CICC Research: November 29, 2011
Danhua Chemical Technology (600844.SH): Maintain BUY Financial highlights (RMB Mn) Revenue ( +/- ) Operating profit ( +/- ) Net income ( +/- ) EPS(Yuan) PE-A share PB-A share EV/EBITDA-A ROE ROCE OCFPS P/OCFPS-A 2008A 2009A 490 263 11% -46% 53 -17 -52% -132% 17 -45 -78% -367% 0.02 -0.06 1,015.1 n.m. 65.1 13.6 893.7 5,543.4 6.4% -3.6% 3.3% -1.6% 0.31 0.06 69.77 381.37 2010A 309 17% -4 -73% 14 -130% 0.02 1,256.6 13.4 540.5 1.1% 0.4% 0.24 92.51 2011E 521 69% 72 -1693% -5 -137% -0.01 n.m. 13.5 103.0 -0.4% -0.1% 0.54 40.73 2012E 2013E 2,590 10,556 397% 308% 1,092 4,656 1424% 326% 302 1,547 -6183% 412% 0.39 1.99 56.5 11.0 10.9 5.6 18.0 5.4 19.2% 50.6% 3.7% 11.4% 1.23 3.99 17.81 5.49
Coal-to-MEG test-run going well, earnings taking off as expected Investment theme in the mid-/long-term (1~2 years): ? The coal-to-MEG project at Tongliao GEM Chemical is running well. Our estimates show the company’s MEG production cost is Rmb4,500/t, implying a gross margin of 42%, much higher than the traditional naphtha-based process. Construction has started on Tongliao GEM Chemical’s 0.4mt/yr phase II project and Henan Yongjin Chemical’s 5x0.2mt/yr project. The completion of these two projects will take the company’s equity production capacity to 0.6mt/yr. We expect a significant increase in its production and sales after technical hurdles are cleared. MEG demand is growing steadily thanks to the rapid expansion of domestic polyester production capacity. At the same time, growth of the world’s traditional-process MEG production capacity is slowing. The domestic MEG market will continue to face a long-term supply shortage.
?
Share information A-Share 600844.CH RMB21.93 7.51 RMB24.48/13.55 779 585 14,146 Jiangsu Danhua Group(18.85%) China Energy Power Financial Co., Ltd (5.78%) Bloomberg code Share price Daily turnover (mn shs) 52wk high/low Issued shares (mn) Free float (mn) Mkt. Cap (mn) Major shareholders (%) B-Share 900921.CH US$1.072 1.32 US$1.288/0.728 779 194 14,146 Jiangsu Danhua Group(18.85%) China Energy Power Financial Co., Ltd (5.78%)
?
Recent price performance [600844.SH] [SHASHR Index] Last week +0.83 +0.12 1m +8.46 -3.65 3m +12.75 -8.78 YTD +44.56 -15.11
52wk performance 160 Relative Value(%)
Catalysts in the short-term (3-6 months): Danhua Chemical Technology SHASHR Index
? ?
Further cost reductions thanks to breakthroughs in coal-to-MEG technologies. Rebound in MEG prices due to improved economic outlook.
140 120
100 80 2010-11-28
Factors the share price is sensitive to: ? 2011-2-28 2011-5-28 2011-8-28 2011-11-28
Stability of the coal-to-MEG production process. Financial and operating data.
?
Source: Company data, Bloomberg, CICC Research
Valuation Our 2011/2012/2013 EPS forecasts are Rmb -0.01/0.39/1.99 respectively. We maintain our BUY rating considering Danhua's enormous growth potential after it overcomes technical barriers. Risks Failure to raise the load of its MEG facilities; a fall in commodity prices; a valuation de-rating for the broader market.
Please read carefully the important disclosures at the end of this report 12

CICC Research: November 29, 2011 Figure 18: Danhua’s shareholding structure Sharewin equity fund 5.14% Jiangsu Danhua Group 18.85% CPFC 5.78% Others 70.23% Danhua Technology (600844 SH)
Coal-to-MEG Sector
75% Danhua Acetic anhydride
54.01% Tongliao Jinmei Coal Chemical 50% Tongliao MEG, 20+40kt/a Yongjin Chemical investment Henan MEG 5x200kt/a Henan Coal Chemical 50%
Source: Company data, CICC Research
Figure 19: Breakdown of Danhua’s sales volume, sales revenue and gross margin by product 2,000 '000 tonnes
Sales volume MEG Oxalic acid
14,000
Rmb Mn
Revenue MEG Oxalic acid
5,900 4,700 3,500
Rmb Mn
Gross profit MEG Oxalic acid
Acetic anhydride 1,500
Acetic anhydride 10,500
Acetic anhydride
1,000
7,000 2,300
500
3,500
1,100 (100) 2008 2009 2010 2011E 2012E 2013E 2008 2009 2010 2011E 2012E 2013E
0 2008 2009 2010 2011E 2012E 2013E
0
Source: Company data, CICC Research
Figure 20: Danhua’s coal-to-MEG projects Company Tongliao Jinmei Chemical Project Tongliao I Tongliao II Xinxiang Anyang Yongcheng Puyang Luoyang Planed Capacity Share% '000 tonnes/year 200 54% 400 54% 200 200 200 200 200 1,600 27% 27% 27% 27% 27% Shareholders' interest in capacity '000 tonnes/year 108 216 54 54 54 54 54 594 Estimated time of production 2011 2013 2012 2013 2013 2013 2013
Yongjin Chemical investment
Total
Source: Company data, CICC Research
Please read carefully the important disclosures at the end of this report 13

CICC Research: November 29, 2011 Figure 21: Price movement and spread of MEG vs. ethylene 16,000 12,000 Rmb/tonne
8,000 4,000 Oct-02 Apr-04 Oct-05 Apr-07 Oct-08 MEG Apr-10 Oct-11 MEG-Ethylene spread Ethylene
Source: Chinaiol, baiinfo, CICC Research
Figure 22: Danhua’s historical and forecast financial data, earnings forecast assumptions & revisions P&L (RMB mn) Revenue Gross profit Selling expenses G&A Financial expenses Operating profit Tax Minority interest Net income Cash Flow Operating Cashflow Investing cashflow Financing cashflow Cash and cash equivalents change Balance Sheet Current Assets Fixed Assets Current liabilities Long-term liabilities Shareholder's equity Total asset Financial Ratio Gross margin EBIT margin Net margin ROE ROA Debt ratio Debt to equity Current ratio Quick ratio AR turnover days Inventory turnover days Dividend payout ratio 2008A 490 53 10 18 30 -8 -11 6 17 96 -162 43 -23 97 565 418 147 262 935 10.8% 4.4% 3.4% 6.4% 1.8% 60.4% 215.4% 0.23 0.16 26 21 0.0% 2009A 263 -17 8 18 22 -71 -14 -11 -45 22 -1,563 1,835 295 940 2,162 731 581 1,260 3,453 -6.4% -18.6% -17.1% -3.6% -1.3% 38.0% 104.2% 1.29 1.23 725 52 0.0% 2010A 309 -4 7 19 17 -48 -2 -11 14 185 -613 322 -106 593 420 572 1,159 1,273 3,991 -1.5% -10.1% 4.4% 1.1% 0.3% 43.4% 135.9% 1.04 0.98 386 41 0.0% 2011E 521 72 8 13 79 -29 3 22 -5 419 -2,495 1,948 -128 193 5,284 617 2,115 1,268 5,808 13.7% 9.7% -1.0% -0.4% -0.1% 47.0% 215.4% 0.31 0.27 33 20 0.0% 2012E 2,590 1,092 91 78 149 775 116 357 302 958 -1,995 2,361 1,324 1,821 6,939 837 4,515 1,570 9,088 42.2% 35.7% 11.7% 19.2% 3.3% 58.9% 340.8% 2.18 2.00 33 20 0.0% 2013E 10,556 4,656 380 422 206 3,647 547 1,554 1,547 3,108 -1,995 2,159 3,272 6,264 8,441 1,436 6,815 3,057 15,028 44.1% 36.5% 14.7% 50.6% 10.3% 54.9% 269.9% 4.36 3.95 33 20 20.0%
Assumption of sales volume Kt/year Acetic anhydride MEG Oxalic acid Assumption of ASP Rmb/tonne (After VAT) Acetic anhydride MEG Oxalic acid 2010 65 2011E 70 20 10 2012E 70 220 100 2013E 70 1,000 500
2010 5,446
2011E 5,000 9,000 8,000
2012E 5,000 9,000 7,000
2013E 5,000 9,000 6,000 2012E After 2,590 1,495 1,092 91 78 149 302 0.39
(RMB mn) Before Revenue 692 Cost 490 Gross Profit 202 Selling expenses 17 G&A 35 Financial expenses 89 Net profit -8 EPS(Yuan) -0.01
2011E After 521 449 72 8 13 79 -5 -0.01
+/-% -24.69% -8.24% -64.54% -54.81% -62.35% -11.20% -37.99% -37.99%
Before 4,795 2,073 2,718 120 240 149 595 0.76
+/-% -45.99% -27.87% -59.81% -24.39% -67.59% -0.03% -49.22% -49.22%
Source: Company data, CICC Research
Figure 23: Danhua’s P/E and P/B bands 30 RMB
PE band of Danhua
32 24
RMB
PB band of Danhua
20
16
10 8
Nov-05 -10
Nov-06
Nov-07
Nov-08
Nov-09
Nov-10
Nov-11
Nov-05
Nov-06
Nov-07
Nov-08
Nov-09
Nov-10
Nov-11
Px Last
10X
20X
30X
35X
Px Last
1X
2X
3X
7X
Source: Bloomberg, Company data, CICC Research
Please read carefully the important disclosures at the end of this report 14

CICC Research: November 29, 2011
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Please read carefully the important disclosures at the end of this report 15

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Coal-to-MEG: Great Room for Growth,Watch Danhua Chemical Technology

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报告类型:外行报告 发布日期:2011/11/29
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Investment Focus November 29, 2011 Zheng GAO gaozheng@cicc.com.cn
Chemicals
RESEARCH
Zixin WANG Wangzx@cicc.com.cn
Bin GUAN SFC CE Ref: AGL097
Yujie WANG Yujie.wang@cicc.com.cn
Coal-to-MEG: Great Room for Growth, Watch Danhua Chemical Technology
guanbin@cicc.com.cn
Bing GAO gaobing@cicc.com.cn
Highlights Growth of global monoethylene glycol (MEG) production capacity to slow in the next three years. Fixed asset investment growth has been hampered by the post-financial crisis credit crunch and tightening supply of cheap ethane in the Middle East. Even including China’s coal-to-MEG projects, which will account for >50% of the world’s new capacity, we expect global MEG production capacity to grow at a mere 3.2% CAGR before 2013, relatively low. Domestic demand for MEG to steadily increase, with 2012 consumption to top 10mt. Domestic PET production capacity will grow from >12mt in 2010, to 41.5mt by 2012 and the conservative estimate of 2012 PET fiber output is 27mt, a 2mt increase from 2010’s level. Both should give stable support to MEG demand. Driven by China’s momentum, global demand for MEG could post 2011/2012 growth of 5.8%/5.6%, a prudent forecast based on the 1.8x/1.6x 2011/2012 GDP growth expected by the World Bank. Huge supply-demand gap forcing China to depend on MEG imports. The downstream PET industry boom propelled the rapid growth of China’s MEG consumption; insufficient oil and gas resources constrained production using traditional techniques, forcing China to depend on imports to fulfill >70% of its MEG demand. Even assuming all existing coal-to-MEG projects reach design capacity as scheduled, there will still be a huge supply shortage in the domestic market. Competitive cost of MEG production from coal. The coal-based process is cheaper than both the naphtha-based process and the North American ethane-based process, but more expensive than the Middle East ethane-based process. However, the more cost-efficient Middle East ethane-based process will not pose a threat to the coal-based process. As the Middle East’s supply of cheap ethane tightens, an increasing amount of heavy feedstock for ethylene cracking has been used; meanwhile the mining cost of non-associated gas resources remains high and the natural gas pricing mechanism faces reform. The Middle East’s cost advantage in petrochemical products will likely wane. Danhua Chemical Technology, pioneer of China’s coal-to-MEG commercialization. The company uses the oxalate hydrogenation process, producing MEG from lignite through dimethyl oxalate. Since coming online with qualified output in 2009, its 0.2mt/yr facility in Tongliao has been undergoing a debugging process, with key problems in catalyst adsorption and coking when the load is raised. During a later trial operation in November 2011, the loading rate steadily improved and the average cost was estimated to be reduced to ~Rmb4,750/t. We expect the company’ profitability to rapidly improve as Phase-2 of Tongliao project and the 5x0.2mt/yr project in Henan gradually reach design capacity.
Please read carefully the important disclosures at the end of this report

CICC Research: November 29, 2011
Contents Growth of global MEG production capacity to slow .................................................................................. 3 MEG demand to continue growing steadily................................................................................................ 4 China has a large MEG supply gap, high dependence on imports........................................................... 5 Coal-to-MEG projects unlikely to change China’s MEG supply/demand landscape ............................... 6 A brief introduction to the coal-to-MEG process........................................................................................ 7 Cost of MEG production from coal .............................................................................................................. 8 Coal-to-MEG projects unlikely to be hurt by the Middle East’s cheap MEG .......................................... 10 Danhua Chemical Technology (600844.SH): Maintain BUY ..................................................................... 12
Figures Figure 1: Expansion of MEG production capacity in the Middle East.........................................................................3 Figure 2: MEG production lines that were shut down or shifted to other products in recent years (LHS); MEG is not the only downstream product of ethylene oxide (RHS)................................................................................3 Figure 3: Increasing polyester production capacity in China (LHS); MEG demand under different scenarios (RHS) ......................................................................................................................................................................4 Figure 4: Polyester fiber accounts for the majority of production of chemical fiber products (LHS); increasing polyester fiber production provides strong support to MEG demand (RHS)................................................4 Figure 5: MEG demand breakdown: Global (LHS), and China (RHS) .......................................................................5 Figure 6: China’s MEG consumption as a percentage of the world’s total has continued to rise (LHS); China’s MEG import dependence is likely to stay high (RHS) ...........................................................................................5 Figure 7: Danhua’s coal-to-MEG project in Tongliao (LHS); planned coal-to-MEG projects (RHS)...........................6 Figure 8: Impact of coal-to-MEG projects on the MEG supply/demand landscape in China .....................................6 Figure 9: Coal-to-MEG process via oxalate hydrogenation........................................................................................7 Figure 10: Progress in the catalysts used in the coal-to-MEG process via oxalate hydrogenation ...........................7 Figure 11: MEG cost in the naphtha-based process (LHS); naphtha-WTI crude oil fitting curve (RHS)....................8 Figure 12: MEG cost in the natural gas-based process (LHS); cost composition (RHS) in North America (upper) and Middle East (lower)................................................................................................................................8 Figure 13: MEG cost composition in the coal-based process: Operating at 50% load (LHS), and 100% load (center); basic assumptions (RHS).............................................................................................................................9 Figure 14: Cost comparison for various MEG production methods......................................................................... 10 Figure 15: Share of Middle East in ethylene and MEG production capacity to decline: ethylene (LHS); MEG (RHS) ................................................................................................................................................................... 10 Figure 16: Short supply of cheap ethane resources to make Middle East petrochemicals less cost competitive ...11 Figure 17: Increase in the proportion of natural gas in ethylene cracking feedstock will likely slow........................11 Financial highlights .................................................................................................................................................. 12 Share information..................................................................................................................................................... 12 Recent price performance ....................................................................................................................................... 12 52wk performance ................................................................................................................................................... 12 Figure 18: Danhua’s shareholding structure............................................................................................................ 13 Figure 19: Breakdown of Danhua’s sales volume, sales revenue and gross margin by product............................ 13 Figure 20: Danhua’s coal-to-MEG projects.............................................................................................................. 13 Figure 21: Price movement and spread of MEG vs. ethylene................................................................................. 14 Figure 22: Danhua’s historical and forecast financial data, earnings forecast assumptions & revisions ................ 14 Figure 23: Danhua’s P/E and P/B bands ................................................................................................................. 14
Please read carefully the important disclosures at the end of this report 2

CICC Research: November 29, 2011
Growth of global MEG production capacity to slow The Middle East and North America are the world’s major MEG producing regions, followed by China, with Southeast Asia, South Korea and Taiwan also playing important roles. After several years of rapid expansion, China now accounts for ~15% of the world’s MEG production capacity. With new projects in the Middle East and China reaching design capacity, global MEG production capacity has increased by ~50% to nearly 27mt in 2010, up from 2005’s <18mt, implying a CAGR of 8.5%. Despite this high growth, the world’s MEG capacity expansion is expected to slow over the next three years.
Production growth in the Middle East to be limited MEG production capacity in the Middle East has seen great expansion in recent years, thanks to the remarkable cost advantages resulting from their use of cheap ethane as a substitute for naphtha in ethylene cracking. In 2009 alone, three world-class EG production facilities were put into operation in Saudi Arabia, with a combined production capacity of 2mt/yr. A 0.6mt/yr EG facility also went into operation in Kuwait in 2008. The Middle East has now overtaken North America as the world’s largest MEG producing region, with a total production capacity of 7.48mt/yr, or 28% of the world’s total. However, we expect a slowdown in Middle East MEG production growth going forward. First, new production capacity in the region should be limited in the next three years. The planned MEG projects have total production capacity of just 1.18mt/yr, which means growth will be slower than in previous years, even if all the projects are completed as scheduled. Figure 1: Expansion of MEG production capacity in the Middle East Country Iran Kuwait Saudi Arabia Saudi Arabia Saudi Arabia Saudi Arabia Saudi Arabia Project NPC #10 Equate - 2 SHARQ, AI Jubail Rabigh PC SABIC, Yanbu PMD Exxon Capacity ‘000 tonnes/year 443 600 700 600 700 475 700 5,302 9,520 2008 2008 2009 2009 2009 2011 2013 0 0% 3,000 10% 6,000 20% 9,000 30%
(Estimated) Time of production
12,000
Capacity
Growth rate(right axis)
40%
Capacity before 2008 Capacity of ME 2013(E)
2008
2009
2010
2011
2012
2013
Source: Asia Chemical, CICC Research
Some production facilities in Europe and North America to shut down or shift to other products While MEG production capacity continues to expand in the Middle East, small and obsolete production facilities in North America and Europe will be shut down. In the past two years, Dow Chemical, among others, closed some MEG production facilities or shifted to other products, including high purity ethylene oxide, glycol ethers and ethanolamine. Figure 2: MEG production lines that were shut down or shifted to other products in recent years (LHS); MEG is not the only downstream product of ethylene oxide (RHS) Producer Dow Chemical PD Glycol Indian Glycol Dow Chemical Dow Chemical Dow Chemical Dow Chemical Samsung (Korea) Honam (Korea) Total Location Terneuzen,NED Texas, U.S. Kashipur, India Chiba,Japan Wilton, U.K. Louisiana,U.S. Louisiana,U.S. Capacity ‘000 tonnes/year 130 360 100 140 180 330 420 120 120 1660 Jan, 2009 Jan, 2009 Jan, 2009 Nov, 2009 Jan, 2010 2010 (Switch to HPEOE) 2010 year end ~2011 beginning Nov, 2010 Nov, 2010 (Switch to HPEOE) 23%
Time of Shutdown
HPEOE Purification Glycol ethers Ethanolamine Ethylene oxide 77% byproducts
MEG DEG,TEG
Source: CMAI, CICC Research
Please read carefully the important disclosures at the end of this report 3

CICC Research: November 29, 2011
MEG demand to continue growing steadily We expect domestic MEG demand will maintain steady growth in the next two years, reaching >10mt in 2012. For one thing, China’s polyester production capacity has expanded significantly, with total capacity expected to be ~41.5mt at end-2012, up ~40% from 2010. Even if the polyester industry’s operating rate is as low as 65%, its MEG demand will still reach ~9.2mt. Taking into account the use of MEG in the production of automotive antifreeze, China’s apparent MEG consumption will reach, or even surpass, 10mt in 2012. Figure 3: Increasing polyester production capacity in China (LHS); MEG demand under different scenarios (RHS) 50,000 40,000 30,000 20,000 10,000 0 2000 2002 2004 2006 2008 2010 2012E '000 tones PET Capacity Grow th rate (right axis) 40% 30% 20% 10% 0% 50%
PET Output ('000 tonnes) Operating rate 75% Operating rate 70% Operating rate 65%
2011E 26,213 24,465 22,718
2012E 31,238 29,155 27,073 2012E 11,420 10,659 9,897
Demand of Glycol ('000 tonnes) 2011E Operating rate 75% 9,583 Operating rate 70% 8,944 Operating rate 65% 8,305
*assumptions: 1.Producing one ton of PET consumes 0.34 tone of Glycol 2.consumption by Producing PET accounts for 93% of total Glycol demand
Source: Sinopec, CICC Research
Another reason domestic MEG demand is set to grow is that China’s polyester products are mainly used in the production of polyester fiber, or terylene, which accounts for >80% of polyester consumption. The chemical fiber industry is one of China’s pillar industries, and polyester fiber accounts for >80% of chemical fiber production. Given the limited output of natural fiber (e.g. cotton) and a continuously growing population, we believe the demand for polyester fiber as a substitute material should be strong and it is likely to maintain steady growth in the future. We conservatively estimate that polyester fiber production will reach >27mt by end-2012, translating to MEG consumption of ~8.5mt (assuming production of 1t of polyester requires 0.34t of MEG, and production of 1t of polyester fiber requires 1.1t of polyester). Historical data shows that the production of polyester fiber tends to make up ~85% of MEG consumption; we estimate that total MEG demand will reach 10mt/yr (MEG is also used to produce polyester chips and automotive antifreeze). Figure 4: Polyester fiber accounts for the majority of production of chemical fiber products (LHS); increasing polyester fiber production provides strong support to MEG demand (RHS) 40,000 '000 tones Fiber Output Dacron%(right axis) 32,000 82% Dacron Output 85% 35,000 '000 tones Dacron Output Glycol consumption by dacron demand of Glycol Dacron % (right axis)
95%
28,000
90%
24,000
79%
21,000
85%
16,000
76%
14,000
80%
8,000
73%
7,000
75%
0 2002 2004 2006 2008 2010 2012E
70%
0 2002 2004 2006 2008 2010 2012E
70%
Source: Sinopec, Wind, CICC Research
Please read carefully the important disclosures at the end of this report 4

CICC Research: November 29, 2011
China has a large MEG supply gap, high dependence on imports As an important organic chemical raw material, MEG is primarily used in the manufacture of polyester, and is also used in the production of automotive antifreeze. China’s apparent consumption of MEG reached ~9mt in 2010, and its proportion of world demand for MEG has continued to increase, driven by the rapid growth of China’s polyester industry. From 2005 to 2010, global MEG consumption increased from 16mt to ~21.3mt, while China’s apparent consumption of MEG rose from ~5mt to nearly 9mt. China accounted for ~80% of incremental global consumption during this period. Figure 5: MEG demand breakdown: Global (LHS), and China (RHS) 6% 11%
3% 4%
PET Resin
Anti-freeze
83% Others
93% PET Resin Anti-freeze Others
Source: CMAI, CICC Research
Figure 6: China’s MEG consumption as a percentage of the world’s total has continued to rise (LHS); China’s MEG import dependence is likely to stay high (RHS) 30,000 ’000 tonnes China Consumption Global Consumption China% (right axis) 60% 16,000 '000 tonnes Consumption 85% Output Foeign trade dependence (right axis)
24,000
45%
12,000 70%
18,000 30% 12,000 15% 4,000 8,000 55%
6,000
0 2002 2004 2006 2008 2010 2012E
0%
0 2000 2002 2004 2006 2008 2010 2012E
40%
Source: Wind, www.baiinfo.com, CICC Research
In the traditional MEG production process, ethylene is produced from naphtha or ethane through cracking, and is then used to produce ethylene oxide and MEG. Since ethylene oxide is flammable and explosive, and difficult to transport a long distance, MEG production has to depend on ethylene plants. Therefore, China’s MEG production facilities are mostly concentrated in large-scale petrochemical enterprises that are far less competitive in cost terms than those in the Middle East, which use natural gas as the raw material, leading to the slow expansion of domestic production. The capacity addition from domestic MEG projects that use other processes, such as Danhua Chemical Technology's coal-to-MEG projects, and Hualu Hengsheng and Ningbo Heyuan Chemical’s imported methanol-to-olefins-MEG project, will still be limited relative to the domestic supply gap. We expect China’s MEG import dependence to stay high in the next two years.
Please read carefully the important disclosures at the end of this report 5

CICC Research: November 29, 2011
Coal-to-MEG projects unlikely to change China’s MEG supply/demand landscape Coal-to-MEG projects will help ease China’s tight MEG supply, but they will not completely fill the supply gap. There is only one new traditional-process MEG project scheduled to come on stream in the next two years (PetroChina’s 0.3mt/yr project in Chengdu). Even assuming that all planned coal-to-MEG projects reach design capacity as scheduled, the capacity addition by 2012 will be no more than 2.5mt, still far from enough to fill the nearly 7mt supply gap at present. Figure 7: Danhua’s coal-to-MEG project in Tongliao (LHS); planned coal-to-MEG projects (RHS) Company Project Status Trial run Construction Construction Construction Construction Planing Planing Planing Capacity Year into production Investment k tons/year Danhua Technology Tongliao I Danhua Technology Tongliao II Hualu Hengsheng Berun Group Berun Group Dezhou Xilin Gol I Xilin Gol II 200 400 50 100 100 1,000 300 600 2,750 2011 2012 2011 2012 2013 2012 2013 RMB bn 1.7 4.0 0.4 1.3 1.0 10.0 3.0
Danhua Technology Xin xiang, An yang,etc Qian xi Chemical Shanghai Huayi Total Qianxi County Wuwei County
Source: CICC Research
Figure 8: Impact of coal-to-MEG projects on the MEG supply/demand landscape in China 6,000
'000 tonnes
Coal-to-MEG output Tranditional output
80%
Foreign trade dependence (including coal-to-MEG) Foreign trade dependence (excluding coal-to-MEG)
14,000
'000 tonnes
Demand Output(excluding coal-to-MEG) Output of coal-to-MEG
75% 4,500 10,500
70% 3,000 7,000
Demand supply gap
65% 1,500 3,500
60%
0 2009 2010 2011E 2012E 2013E
55% 2009 2010 2011E 2012E 2013E
0
2001
2003
2005
2007
2009
2011E
2013E
Source: CICC Research
Please read carefully the important disclosures at the end of this report 6

CICC Research: November 29, 2011
A brief introduction to the coal-to-MEG process The existing commercialized coal-to-MEG process is characterized by oxalate hydrogenation. Its main steps include: 1) Production of synthetic gas (CO+H2) from coal and purification. 2) Separation of the gas into industrial CO and H2 raw materials using the pressure swing absorption process. 3) Removal of the remaining H2 from industrial CO using the dehydrogenation process. 4) Production of nitrogen oxides NxOy through ammonia oxidation and synthesis, with methanol to form methyl nitrite for carbonylation reaction. 5) Carbonylation reaction between pure CO and methyl nitrite to produce dimethyl oxalate (DMO) as well as nitrogen oxides NxOy that can be used to form methyl nitrite after reaction with methanol. 6) Hydrogenation of DMO to produce MEG as well as methanol that can be used in Step 4. 7) Separation of polymer-grade MEG. Figure 9: Coal-to-MEG process via oxalate hydrogenation NH3 Steam Regeneration Methyl nitrite Regeneration Byproduct MEG Oxidation NxOy Esterification Methanol Oxalic acid
Lignite
Gasification Raw Gas
Gas conversion
Industrial CO
Dehydrogenation Catalyst a
Carbonylation Purified CO Catalyst b
Demethyl Oxalate
Hydrogenation Catalyst c
O2 Seperating Air H2
Refine
MEG (PET grade)
Source: Fujian Institute of Research on Structure of Matter, Chinese Academy of Sciences, CICC Research
Catalysts used in the coal-to-MEG process via oxalate hydrogenation The coal-to-MEG process via oxalate hydrogenation needs to use catalysts in three steps: Dehydrogenation of synthetic gas, CO carbonylation reaction to produce DMO, and hydrogenation of DMO to produce MEG. Stable and efficient catalysts are key to the success of coal-to-MEG projects on a commercial scale. Figure 10: Progress in the catalysts used in the coal-to-MEG process via oxalate hydrogenation Process CO Dehydrogenation OXO-synthesis DMO hydrogenation Catalyst Pd-Catalyst Pd-Catalyst/α-Al203 carrier Cu-Ni/Cr, SiO2 carrier Progress Removing H2 from CO gas to ppm level Large diameter carrier improving yield per liter per hour,and reducing the load rate Reducing the proportion of by-products Problem Pujing and Huayi claim that their oxo-synthesis need not dehydrogenate CO Narrow active window and poor controllability of strong exothermic reaction restricts operating rate Narrow active window, poor controllability of strong exothermic reaction;necessary to get rid of toxic Cr
Source: CICC Research
Please read carefully the important disclosures at the end of this report 7

CICC Research: November 29, 2011
Cost of MEG production from coal By raw material, there are four production processes for MEG, namely the naphtha-based traditional process, the Middle Eastern process based on associated gas, the process based on shale gas in North America, and the coal-based process in China. Below is our analysis of these processes.
MEG cost in the naphtha-based process: Rmb6,000/t In the naphtha-ethylene-MEG process, the naphtha consumption per tonne of ethylene is ~3.3t and the ethylene consumption per tonne of MEG is ~0.6t. It is estimated that when WTI crude oil price is at US$90/bbl, the full cost of MEG production from naphtha is >Rmb6,000/t after taking into account depreciation and other production costs, and excluding by-products such as propylene and C4. Figure 11: MEG cost in the naphtha-based process (LHS); naphtha-WTI crude oil fitting curve (RHS) Price/Cost USD90/barrel Unit consumption Crude oil price of naphtha=0.996WTI-1.45 USD88/barrel 3.3t USD923/tonne 0.8-0.85t Ethylene oxide 0.71t Naphtha Propylene Crude C4s Ethylene By-products Pygas Fuel 0.80t
160
$/barrel
Naphtha
Fitting Naphtha price
R2 =0.87 120 0.58t 0.38t
80
40 0.60t
0 ~RMB6000/tonne MEG
Jan-05
May-06
Sep-07
Jan-09
May-10
Sep-11
Source: WIND, CMAI, CICC Research
Full MEG cost in the ethane-based process: Rmb5,500/t in North America vs. Rmb4,000/t in the Middle East MEG production in the Middle East and North America is based on natural gas. The difference is that the cracker feedstock in the Middle East is mainly associated gas, while the feedstock in North America is mainly shale gas which has been rapidly developed in recent years. Due to the different raw materials used, the MEG cost is ~US$480/t in the Middle East and ~US$750/t in North America. Even taking into account freight costs and tariffs, the full cost of MEG in the Middle East is still only ~US$600/t, well below that of the naphtha-based process. Figure 12: MEG cost in the natural gas-based process (LHS); cost composition (RHS) in North America (upper) and Middle East (lower) Price/cost Unit consumption Middle East Associated gas North America Shale gas Price/cost Other variables 37% Freight,storage and tariff 13%
USD47/tonne
Ethane C3 1.30t C4 Pygas fuel 0.04t 0.04t 0.02t 0.15t
USD0.5/gallon
Ethane 32% Depreciation 18%
USD220/tonne 0.8-0.85t
Ethylene
USD640/tonne
Freight,storage and tariff 18%
Ethylene Oxide 0.71t USD480/tonne MEG USD750/tonne
Other variables 51%
Ethane 6%
USD600/tonne
Export to China
USD870/tonne
Depreciation 25%
Source: HSBC, CMAI, CICC Research
Please read carefully the important disclosures at the end of this report 8

CICC Research: November 29, 2011
MEG cost in the coal-based process: Rmb4,500/t if operating at full load The cost of MEG production from coal using the oxalate hydrogenation process is expected to be much lower than the cost of using the traditional naphtha-based process. Coal consumption per tonne of MEG is 5~6t, compared to naphtha consumption of 2.4t per tonne of MEG. Lignite prices are only ~Rmb300/t, indicating a low raw material cost. We estimate the cost of MEG production from coal at only ~Rmb4,500/t if production facilities operate at full load (after overcoming technical hurdles). That would mean a gross margin of >40% at a tax-excluded MEG price of nearly Rmb8,000/t. Figure 13: MEG cost composition in the coal-based process: Operating at 50% load (LHS), and 100% load (center); basic assumptions (RHS) Items Lignite Utilities Catalysts Depreciation Wages Others Total Cost Cost%
Items Lignite Utilities Catalysts Depreciation Wages Others Total
Cost 1,451 800 180 800 120 1,400 4,751
Cost% 31% 17% 4% 17% 3% 29% 100%
1,451 800 180 1,600 120 1,400 5,551
26% 14% 3% 29% 2% 25% 100%
Basic assumptions Lignite consumption 5.66 tonne/tonne MEG Price of Coal (including VAT) Investment Depreciation period Rmb 300/tonne Tongliao 20kt project: Rmb 3bn; Henan 1mt project: Rmb 10bn 15 years
Source: CICC Research
Please read carefully the important disclosures at the end of this report 9

CICC Research: November 29, 2011
Coal-to-MEG projects unlikely to be hurt by the Middle East’s cheap MEG The production of MEG from coal costs much less than MEG made from naphtha, but it is still more than MEG made from ethane in the Middle East (even after taking freight costs and tariffs into account). However, we do not think the Middle East’s MEG will pose a significant threat to coal-to-MEG projects, for the following reasons: First, as a new entrant, coal-to-MEG projects do not have to benchmark themselves against the world’s cost leader. If facilities operate at full load, the cost of MEG production from coal will be higher than only the ethane-based process in the Middle East. Naphtha-based MEG producers are the market’s marginal suppliers and have the highest unit cost. In China, Northeast Asia and Southeast Asia, where the traditional naphtha-based process is prevalent, coal-to-MEG projects have significant cost advantages. Second, the expansion of petrochemical production capacity in the Middle East has slowed. The rapid expansion of petrochemical plants in the Middle East has come to the end, with only 1.2mt/yr of new ethylene production capacity, and <0.5mt/yr of new MEG production capacity scheduled to come online in the next two years. The Middle East’s share of both the world’s ethylene market and its MEG production capacity are set to decline. In Iran, the operating rate of ethylene cracking facilities is only 50~60% of levels in the past five years due to sanctions against the country, and it is unlikely to improve much in the near term. Figure 14: Cost comparison for various MEG production methods 8,000 Rmb/tonne *Cost of freight and tariff have been included in the cost for Middle East and North America Ethane 。
6,000
4,000
2,000
0 Middle East Ethane Danhua (100% load) Danhua (50% load) North America Ethane Naphtha
Source: CICC Research
Figure 15: Share of Middle East in ethylene and MEG production capacity to decline: ethylene (LHS); MEG (RHS) 200,000
'000 tonnes
150,000
Global Ethylene Middle East Middle East %(right axis)
25% 20% 15%
36,000
'000 tonnes
Global MEG Middle East Middle East %(right axis)
40%
27,000
30%
100,000
18,000
20%
10% 50,000
5% 0% 2005 2006 2007 2008 2009 2010 2011E2012E
9,000
10%
0
0 2005 2006 2007 2008 2009 2010 2011E2012E
0%
Source: Oil & Gas Journal (US), CBI China, CICC Research
Please read carefully the important disclosures at the end of this report 10

CICC Research: November 29, 2011 Third, the increase in the proportion of ethane in ethylene cracking feedstock will likely slow, as cheap associated ethane resources gradually come into short supply. This has forced Middle Eastern countries to seek heavy feedstock for ethylene cracking, and change the natural gas pricing mechanism, or develop high-cost non-associated natural gas, which will significantly push up the raw material cost for producing ethylene and MEG from ethane. The pressure on producers in China will likely decline gradually and there should be no substantial threat to coal-to-MEG projects with cost advantages at home. Figure 16: Short supply of cheap ethane resources to make Middle East petrochemicals less cost competitive Processing,purification costs much higer than associated gas
Develop Non-associated gas?
Qutar: Before 2014,Ethane quota can only support one world-class facility
Saudi Arabia: No additional ethane quota since 2006 Shortage of Cheap Ethane
Middle East petrochemical products facing upward costs and downward competitiveness
Feedstock tends to become 'heavier' in the Middle East
Pricing mechanism of Nature gas needs reform
UAE: 1mt/a cracking facility fed solely by naphtha
Kuwait: 1.4mt/a cracking facility likely to use naphtha as feedstock
Iran: pricing ethane base on calorific value
Saudi Arabia: May raise the price of ethane gradually and reduce subsidies of propane/butane
Source: CICC Research
Figure 17: Increase in the proportion of natural gas in ethylene cracking feedstock will likely slow 100 Mn tonnes Naphtha Others 80 Ethane Ethane%(right axis) 35% 40%
60 30% 40 25%
20
2000 2002 2004 2006 2008 2010 2012E
20%
Source: CMAI, CICC Research
Please read carefully the important disclosures at the end of this report 11

CICC Research: November 29, 2011
Danhua Chemical Technology (600844.SH): Maintain BUY Financial highlights (RMB Mn) Revenue ( +/- ) Operating profit ( +/- ) Net income ( +/- ) EPS(Yuan) PE-A share PB-A share EV/EBITDA-A ROE ROCE OCFPS P/OCFPS-A 2008A 2009A 490 263 11% -46% 53 -17 -52% -132% 17 -45 -78% -367% 0.02 -0.06 1,015.1 n.m. 65.1 13.6 893.7 5,543.4 6.4% -3.6% 3.3% -1.6% 0.31 0.06 69.77 381.37 2010A 309 17% -4 -73% 14 -130% 0.02 1,256.6 13.4 540.5 1.1% 0.4% 0.24 92.51 2011E 521 69% 72 -1693% -5 -137% -0.01 n.m. 13.5 103.0 -0.4% -0.1% 0.54 40.73 2012E 2013E 2,590 10,556 397% 308% 1,092 4,656 1424% 326% 302 1,547 -6183% 412% 0.39 1.99 56.5 11.0 10.9 5.6 18.0 5.4 19.2% 50.6% 3.7% 11.4% 1.23 3.99 17.81 5.49
Coal-to-MEG test-run going well, earnings taking off as expected Investment theme in the mid-/long-term (1~2 years): ? The coal-to-MEG project at Tongliao GEM Chemical is running well. Our estimates show the company’s MEG production cost is Rmb4,500/t, implying a gross margin of 42%, much higher than the traditional naphtha-based process. Construction has started on Tongliao GEM Chemical’s 0.4mt/yr phase II project and Henan Yongjin Chemical’s 5x0.2mt/yr project. The completion of these two projects will take the company’s equity production capacity to 0.6mt/yr. We expect a significant increase in its production and sales after technical hurdles are cleared. MEG demand is growing steadily thanks to the rapid expansion of domestic polyester production capacity. At the same time, growth of the world’s traditional-process MEG production capacity is slowing. The domestic MEG market will continue to face a long-term supply shortage.
?
Share information A-Share 600844.CH RMB21.93 7.51 RMB24.48/13.55 779 585 14,146 Jiangsu Danhua Group(18.85%) China Energy Power Financial Co., Ltd (5.78%) Bloomberg code Share price Daily turnover (mn shs) 52wk high/low Issued shares (mn) Free float (mn) Mkt. Cap (mn) Major shareholders (%) B-Share 900921.CH US$1.072 1.32 US$1.288/0.728 779 194 14,146 Jiangsu Danhua Group(18.85%) China Energy Power Financial Co., Ltd (5.78%)
?
Recent price performance [600844.SH] [SHASHR Index] Last week +0.83 +0.12 1m +8.46 -3.65 3m +12.75 -8.78 YTD +44.56 -15.11
52wk performance 160 Relative Value(%)
Catalysts in the short-term (3-6 months): Danhua Chemical Technology SHASHR Index
? ?
Further cost reductions thanks to breakthroughs in coal-to-MEG technologies. Rebound in MEG prices due to improved economic outlook.
140 120
100 80 2010-11-28
Factors the share price is sensitive to: ? 2011-2-28 2011-5-28 2011-8-28 2011-11-28
Stability of the coal-to-MEG production process. Financial and operating data.
?
Source: Company data, Bloomberg, CICC Research
Valuation Our 2011/2012/2013 EPS forecasts are Rmb -0.01/0.39/1.99 respectively. We maintain our BUY rating considering Danhua's enormous growth potential after it overcomes technical barriers. Risks Failure to raise the load of its MEG facilities; a fall in commodity prices; a valuation de-rating for the broader market.
Please read carefully the important disclosures at the end of this report 12

CICC Research: November 29, 2011 Figure 18: Danhua’s shareholding structure Sharewin equity fund 5.14% Jiangsu Danhua Group 18.85% CPFC 5.78% Others 70.23% Danhua Technology (600844 SH)
Coal-to-MEG Sector
75% Danhua Acetic anhydride
54.01% Tongliao Jinmei Coal Chemical 50% Tongliao MEG, 20+40kt/a Yongjin Chemical investment Henan MEG 5x200kt/a Henan Coal Chemical 50%
Source: Company data, CICC Research
Figure 19: Breakdown of Danhua’s sales volume, sales revenue and gross margin by product 2,000 '000 tonnes
Sales volume MEG Oxalic acid
14,000
Rmb Mn
Revenue MEG Oxalic acid
5,900 4,700 3,500
Rmb Mn
Gross profit MEG Oxalic acid
Acetic anhydride 1,500
Acetic anhydride 10,500
Acetic anhydride
1,000
7,000 2,300
500
3,500
1,100 (100) 2008 2009 2010 2011E 2012E 2013E 2008 2009 2010 2011E 2012E 2013E
0 2008 2009 2010 2011E 2012E 2013E
0
Source: Company data, CICC Research
Figure 20: Danhua’s coal-to-MEG projects Company Tongliao Jinmei Chemical Project Tongliao I Tongliao II Xinxiang Anyang Yongcheng Puyang Luoyang Planed Capacity Share% '000 tonnes/year 200 54% 400 54% 200 200 200 200 200 1,600 27% 27% 27% 27% 27% Shareholders' interest in capacity '000 tonnes/year 108 216 54 54 54 54 54 594 Estimated time of production 2011 2013 2012 2013 2013 2013 2013
Yongjin Chemical investment
Total
Source: Company data, CICC Research
Please read carefully the important disclosures at the end of this report 13

CICC Research: November 29, 2011 Figure 21: Price movement and spread of MEG vs. ethylene 16,000 12,000 Rmb/tonne
8,000 4,000 Oct-02 Apr-04 Oct-05 Apr-07 Oct-08 MEG Apr-10 Oct-11 MEG-Ethylene spread Ethylene
Source: Chinaiol, baiinfo, CICC Research
Figure 22: Danhua’s historical and forecast financial data, earnings forecast assumptions & revisions P&L (RMB mn) Revenue Gross profit Selling expenses G&A Financial expenses Operating profit Tax Minority interest Net income Cash Flow Operating Cashflow Investing cashflow Financing cashflow Cash and cash equivalents change Balance Sheet Current Assets Fixed Assets Current liabilities Long-term liabilities Shareholder's equity Total asset Financial Ratio Gross margin EBIT margin Net margin ROE ROA Debt ratio Debt to equity Current ratio Quick ratio AR turnover days Inventory turnover days Dividend payout ratio 2008A 490 53 10 18 30 -8 -11 6 17 96 -162 43 -23 97 565 418 147 262 935 10.8% 4.4% 3.4% 6.4% 1.8% 60.4% 215.4% 0.23 0.16 26 21 0.0% 2009A 263 -17 8 18 22 -71 -14 -11 -45 22 -1,563 1,835 295 940 2,162 731 581 1,260 3,453 -6.4% -18.6% -17.1% -3.6% -1.3% 38.0% 104.2% 1.29 1.23 725 52 0.0% 2010A 309 -4 7 19 17 -48 -2 -11 14 185 -613 322 -106 593 420 572 1,159 1,273 3,991 -1.5% -10.1% 4.4% 1.1% 0.3% 43.4% 135.9% 1.04 0.98 386 41 0.0% 2011E 521 72 8 13 79 -29 3 22 -5 419 -2,495 1,948 -128 193 5,284 617 2,115 1,268 5,808 13.7% 9.7% -1.0% -0.4% -0.1% 47.0% 215.4% 0.31 0.27 33 20 0.0% 2012E 2,590 1,092 91 78 149 775 116 357 302 958 -1,995 2,361 1,324 1,821 6,939 837 4,515 1,570 9,088 42.2% 35.7% 11.7% 19.2% 3.3% 58.9% 340.8% 2.18 2.00 33 20 0.0% 2013E 10,556 4,656 380 422 206 3,647 547 1,554 1,547 3,108 -1,995 2,159 3,272 6,264 8,441 1,436 6,815 3,057 15,028 44.1% 36.5% 14.7% 50.6% 10.3% 54.9% 269.9% 4.36 3.95 33 20 20.0%
Assumption of sales volume Kt/year Acetic anhydride MEG Oxalic acid Assumption of ASP Rmb/tonne (After VAT) Acetic anhydride MEG Oxalic acid 2010 65 2011E 70 20 10 2012E 70 220 100 2013E 70 1,000 500
2010 5,446
2011E 5,000 9,000 8,000
2012E 5,000 9,000 7,000
2013E 5,000 9,000 6,000 2012E After 2,590 1,495 1,092 91 78 149 302 0.39
(RMB mn) Before Revenue 692 Cost 490 Gross Profit 202 Selling expenses 17 G&A 35 Financial expenses 89 Net profit -8 EPS(Yuan) -0.01
2011E After 521 449 72 8 13 79 -5 -0.01
+/-% -24.69% -8.24% -64.54% -54.81% -62.35% -11.20% -37.99% -37.99%
Before 4,795 2,073 2,718 120 240 149 595 0.76
+/-% -45.99% -27.87% -59.81% -24.39% -67.59% -0.03% -49.22% -49.22%
Source: Company data, CICC Research
Figure 23: Danhua’s P/E and P/B bands 30 RMB
PE band of Danhua
32 24
RMB
PB band of Danhua
20
16
10 8
Nov-05 -10
Nov-06
Nov-07
Nov-08
Nov-09
Nov-10
Nov-11
Nov-05
Nov-06
Nov-07
Nov-08
Nov-09
Nov-10
Nov-11
Px Last
10X
20X
30X
35X
Px Last
1X
2X
3X
7X
Source: Bloomberg, Company data, CICC Research
Please read carefully the important disclosures at the end of this report 14

CICC Research: November 29, 2011
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Disclosures applicable to the companies included in this compendium can be found in the latest relevant published research. Distribution of ratings is available at http://www.cicc.com.cn/CICC/english/operation/page4-4.htm. Explanation of stock ratings: “BUY” indicates analyst perceives absolute return of 20% or more within 12 months; “ACCUMULATE” 10%~20%; “HOLD” -10%~10%; “REDUCE” -20%~-10%; “SELL” -20% and below. Copyright of this report belongs to CICC. Any form of unauthorized distribution, reproduction, publication, release or quotation is prohibited without CICC’s written permission.
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Shanghai China International Capital Corporation Limited – Shanghai Branch 32nd Floor Azia Center 1233 Lujiazui Ring Road Shanghai 200120, P.R. China Tel: (86-21) 5879-6226 Fax: (86-21) 5888-8976
Hong Kong China International Capital Corporation (Hong Kong) Limited 29th Floor, One International Finance Centre 1 Harbour View Street Central, Hong Kong Tel: (852) 2872-2000 Fax: (852) 2872-2100
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Hangzhou Jiaogong Road Branch 1st Floor, Euro American Center 18 Jiaogong Road Hangzhou 310012, P.R. China Tel: (86-571) 8849-8000 Fax: (86-571) 8735-7743
Nanjing Zhongshan Road (North) Branch 2nd Floor, Greenland Plaza 1 Zhongshan Road (North) Nanjing 210008, P.R. China Tel: (86-25) 8316-8988 Fax: (86-25) 8316-8397
Guangzhou Tianhe Road Branch 40th Floor, Teemtower 208 Tianhe Road Guangzhou 510620, P.R. China Tel: (86-20) 8396-3968 Fax: (86-20) 8516-8198
Chengdu Binjiang Road (East) Branch 1st & 16th Floors, Shangri-La Center Block 9B, Binjiang Road (East) Chengdu 610021, P.R. China Tel: (86-28) 8612-8188 Fax: (86-28) 8444-7010
Xiamen Lianyue Road Branch 4th Floor, Office Building, Paragon Center 1 Lianyue Road, Siming District Xiamen 361012, P.R. China Tel: (86-592) 515-7000 Fax: (86-592) 511-5527
Qingdao Middle Hongkong Road Branch 11th Floor, Shangri-La Center Block 9, Hongkong Road (M), South District Qingdao 266071, P.R. China Tel: (86-532) 6670-6789 Fax: (86-532) 6887-7018
Wuhan Jiefang Road Branch 4th Floor, New World Centre Tower 634 Jiefang Road, Qiaokou District Wuhan 430032, P.R. China Tel: (86-27) 8334-3099 Fax: (86-27) 8359-0535
Chongqing Honghu Road (West) Branch 1st & 10th Floors, Ourui Lanjue Center Block 9, Honghu Road (W), New North District Chongqing 401120, P.R. China Tel: (86-23) 6307-7088 Fax: (86-23) 6739-6636
Changsha Chezhan Road (North) Branch 3rd Floor, Annex Building, Securities Tower 459 Chezhan Road (North), Furong District Changsha 410001, P.R. China Tel: (86-731) 8878-7088 Fax: (86-731) 8446-2455
Foshan Jihua 5th Road Branch 12th Floor, Trend International Business Building 2 Jihua 5th Road, Chancheng District Foshan 528000, P.R. China Tel: (86-757) 8290-3588 Fax: (86-757) 8303-6299
Tianjin Nanjing Road Branch 10th Floor, Tianjin Global Trading Center 219 Nanjing Road, Heping District Tianjin 300051, P.R. China Tel: (86-22) 2317-6188 Fax: (86-22) 2321-5079
Dalian Jinma Road Branch 128B Jinma Road Economic-Technological Development Area Dalian 116000, P.R. China Tel: (86-411) 8755-5088 Fax: (86-411) 8801-7568

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