Company Profile

Anhui Xinli Finance Co., Ltd., formerly ANHUI CHAODONG CEMENT CO., LTD, is principally engaged inthe manufacture and distribution of construction materials. The Company's major products arecement, including 42.5 grade and 32.5 grade cement, as well as clinkers.

Investment Highlights

Events:

Anhui Xinli Finance Co., Ltd released its major assets restructuring plan, stating that it was going topay CNY 2.38 billion for 100% stake in Hai Ke Rong Tong （HKRT） with newly‐issued shares and cash.

CNY 1.5 billion will be raised in parallel.

Comments:

Xinli Finance acquired HKRT for CNY 2.4 billion to penetrate into the third party payment service.

The company planned to buy 100% stake in HKRT via issuing share and paying cash. Total value of thetransaction reached CNY 2.38 billion, made up of CNY 1.18 billion shares and CNY 566 million cash.

Meanwhile, it privately offered CNY 1.5 billion new shares at the price of CNY 21.49 per share. HKRTpromised its earnings will be no less than CNY 100 million in 2016, CNY 195 million in 2017, CNY 270million in 2018 and CNY 335 million in 2019.

Twenty percent discount, cash payment accounted for a larger proportion compared with previous one.

Ever Larger Group previously planned to purchase HKRT with CNY 2.97 billion （CNY 306 million cash,taking up 10.3% of total payment）。 This new restructuring plan with Xinli Finance gave an 20%discount for total consideration, with 23.8% paid via cash, which translated into CNY 566 billion.

This acquisition will improve the Company's financial layout; thus business synergy is anticipatable.

The company made steady progress in spinning off its cement production facility. It started acquiringfinancial assets in leasing, small loan, pawn, guarantee and P2P fields in 2015. Once completing theacquisition, the company will enter into the third party payment field, which facilitates its furtherexpansion in finance field in broad sense and improve its financial layout. There will be a huge roomfor business synergy.

Earnings Forecast and Investment Grading:

Without taking HKRT into account, we forecast the company's net profit attributable to the parentcompany at CNY 180 million in 2016, CNY 204 million in 2017 and CNY 239 million in 2018, implyingEPS at CNY0.75 in 2016, CNY 0.84 in 2017 and CNY 0.99 in 2018 respectively. Reiterate Buy.

Potential Risk: failure of assets restructures, slower‐than‐expected expansion of financial business