2008 年 9 月 9 日 振华港机(A) (600320.

SS)

2008 年 9 月 9 日

投资决策

卖出
振华港机(A) (600320.SS)
潜在回报： (18%)

需求疲软；A 股估值溢价较高；对 A/B 股的首次评级为卖出/中性(摘要)

建议理由 投资摘要：Zhenhua Port Machinery (A)

我们将振华港机首次纳入研究范围，对其 A 股和 B 股分别给予卖出和中性评级。 低 高
增长
我们基于贴现现金流得出的 A 股 12 个月目标价格为人民币 8.1 元（19%的下跌空
回报*
间），对 B 股的 12 个月目标价格为 0.94 美元（与当前股价一致）。我们估计， 估值倍数
公司的 2008–2010 年盈利年均复合增长率将从 2006-2008 年的 16.5%放缓至 波动性
5%， 主要受到集装箱起重机（占其 2008 年预期总销售收入的 78%）需求的潜 百分位 20th 40th 60th 80th 100th
600320.SS
在下行周期拖累。公司向重型设备制造商的转型应会在长期内改善其盈利能力，
亚太工业行业平均水平
但我们认为这项新业务在短期内不可能完全抵消其起重机业务疲软的负面影响。
* 回报 - 资本回报率 投资摘要指标的全面描述请参见本
报告的信息披露部分。

推动因素 主要数据
股价(Rmb)
当前
9.92
我们认为其股价可能受到以下潜在负面因素的影响：1) 集装箱起重机业务的利润 12个月目标价格(Rmb) 8.10
900947.SS 股价($) 1.00
率可能恶化，尤其是在 2009 年需求可能从 2008 年水平进一步下滑的情况下；2) 900947.SS 12个月目标价格($) 0.94
市值(Rmb mn / US$ mn)
全球贸易增长的回落以及集装箱吞吐量的下滑导致 2009 年起重机预期销售走 外资持股比例(%)
29,790.9 / 4,357.6
--
软；3) 2009 年销售增速低于预期，海上重型装备业务的利润率改善空间有限。 12/07 12/08E 12/09E 12/10E
每股盈利(Rmb) 0.62 0.68 0.69 0.75
每股盈利增长(%) 19.9 8.5 1.4 9.3
每股摊薄盈利(Rmb) 0.62 0.68 0.69 0.75
估值 每股基本盈利(Rmb) 0.62 0.68 0.69 0.75
我们认为，A 股当前股价较之全球同行企业的溢价是不合理的，因为预计其 2009 市盈率(X) 15.9 14.6 14.4 13.2
市净率(X) 2.9 2.5 2.2 2.0
年盈利增长率只有 1%，显著低于美国和亚洲同行 12%-16%的中值。A 股的 2009 EV/EBITDA(X) 24.9 11.9 10.6 9.5
股息收益率(%) 1.7 1.9 1.9 2.1
年预期市盈率分别较沪深 300 指数和全球同行中值高出 36%和 66%。B 股的 净资产回报率(%) 23.6 18.2 16.3 15.8
2009 年预期市盈率持平或略低于全球同行企业的中值。

股价走势图
主要风险 35 17,000
1) 集装箱需求的复苏速度快于预期；2) 人民币升值速度放缓。 30 15,000

25 13,000

20 11,000

15 9,000

*全文翻译将随后提供 10 7,000

5 5,000
Sep-07 Dec-07 Mar-08 Jun-08

Zhenhua Port Machinery (A) （左轴）

新华富时600指数 （右轴）

股价表现(%) 3个月 6个月 12个月

所属投资名单 绝对 (29.5) (48.1) (61.4)
亚太卖出名单 相对于新华富时600指数 14.0 13.6 (4.9)
资料来源：公司数据、高盛研究预测、FactSet（股价为9/08/2008收盘价）

行业评级: 中性
中国:
资本品

馮曉峰
+86(10)6627-3128 | michael.feng@ghsl.cn 北京高华证券有限责任公司
周刚 Franklin Chow, CFA
+86(10)6627-3012 | franklin.chow@ghsl.cn 北京高华证券有限责任公司
张科
+86(10)6627-3054 | adam.zhang@ghsl.cn 北京高华证券有限责任公司
北京高华证券有限责任公司及其关联机构与本研究报告所分析的企业存在业
务关系，并且继续寻求发展这些关系。因此，投资者应当考虑到本公司可能
存在可能影响本报告客观性的利益冲突，不应视本报告为作出投资决策的唯
一因素。有关分析师的申明，见本报告最后部分。其他重要信息披露见分析
师申明之后部分，或请与您的投资代表联系。

北京高华证券有限责任公司 投资研究
高华证券投资研究 1
September 9, 2008 Zhenhua Port Machinery (A) (600320.SS)

September 9, 2008

ACTION

Sell
Zhenhua Port Machinery (A) (600320.SS)
Return Potential: (18%)

Weak demand, lofty A-share premium; initiate Sell/Neutral on A/B

Source of opportunity Investment Profile: Zhenhua Port Machinery (A)

We initiate coverage on Zhenhua Port Machinery (ZPMC) A-shares with Low High

Growth Growth
Sell and B-shares with Neutral. Our 12-month DCF-based target prices are
Returns * Returns *
Rmb8.1 for the A-share (19% downside potential) and US$0.94 for the B- Multiple Multiple
share (inline with current market price). We estimate ZPMC’s earnings Volatility Volatility

CAGR (2008E–2010E) will slow to 5% from 16.5% (2006-2008E), mainly due Percentile 20th 40th 60th 80th 100th
600320.SS
to a potential demand downcycle in its container cranes (78% of total sales
Asia Pacific Industrials Peer Group Average
in 2008E). ZPMC’s transition to a heavy equipment maker should improve * Returns = Return on Capital For a complete description of the
investment profile measures please refer to
its profitability long term, but we think the new business is unlikely to fully the disclosure section of this document.
compensate for any negative impact from its cranes business near term.

Catalyst Key data

Price (Rmb)
Current
9.92
We see the following potential negative catalysts lowering the share price 12 month price target (Rmb) 8.10
900947.SS Price ($) 1.00
of ZPMC: 1) potential margin erosion in the container crane segment, 900947.SS 12 month price target ($) 0.94
Market cap (Rmb mn / US$ mn) 29,790.9 / 4,357.6
especially in 2009E as demand will likely further decline from 2008E levels; Foreign ownership (%) --
2) weaker crane sales in 2009E due to decline in global trade growth and 12/07 12/08E 12/09E 12/10E
EPS (Rmb) 0.62 0.68 0.69 0.75
container throughput; and 3) slower-than-expected sales expansion in EPS growth (%) 19.9 8.5 1.4 9.3
EPS (diluted) (Rmb) 0.62 0.68 0.69 0.75
2009E and limited margin improvement in the heavy marine equipment EPS (basic pre-ex) (Rmb) 0.62 0.68 0.69 0.75
segment in 2009E. P/E (X) 15.9 14.6 14.4 13.2
P/B (X) 2.9 2.5 2.2 2.0
EV/EBITDA (X) 24.9 11.9 10.6 9.5
Dividend yield (%) 1.7 1.9 1.9 2.1
Valuation ROE (%) 23.6 18.2 16.3 15.8

We believe the A-share’s current premium vs. global peers is unjustifiable

given its slower earnings growth in 2009E of only 1% vs. a median 12%-
Price performance chart
16% for its U.S. and Asian peers. The A-share is trading at a range of 36%-
35 17,000
66% premium to the CSI 300/global peers median on 2009E P/E. The B-
30 15,000
share is trading in line with or at a minor discount to its global peers’
25 13,000
2009E P/E medians.
20 11,000

15 9,000
Key risks
10 7,000
1) Faster-than-expected container demand recovery, 2) slower RMB
5 5,000
appreciation. Sep-07 Dec-07 Mar-08 Jun-08

Zhenhua Port Machinery (A) (L) FTSE Xinhua 600 Index (R)
Share price performance (%) 3 month 6 month 12 month
INVESTMENT LIST MEMBERSHIP Absolute (29.5) (48.1) (61.4)
Asia Pacific Sell List Rel. to FTSE Xinhua 600 Index 14.0 13.6 (4.9)
Source: Company data, Goldman Sachs Research estimates, FactSet. Price as of 9/08/2008 close.

Coverage View: Neutral

China:
Capital Goods

Michael Feng
+86(10)6627-3128 | michael.feng@ghsl.cn Beijing Gao Hua Securities Company Limited
Franklin Chow, CFA
+86(10)6627-3012 | franklin.chow@ghsl.cn Beijing Gao Hua Securities Company Limited
Adam Zhang
+86(10)6627-3054 | adam.zhang@ghsl.cn Beijing Gao Hua Securities Company Limited
Beijing Gao Hua Securities Company Limited and its affiliates do and
seek to do business with companies covered in its research reports. As
a result, investors should be aware that the firm may have a conflict of
interest that could affect the objectivity of this report. Investors should
consider this report as only a single factor in making their investment
decision. For analyst certification, see the end of the text. Other
important disclosures follow the Reg AC certification, or contact your
investment representative.

Beijing Gao Hua Securities Company Limited Investment Research

Gao Hua Securities Investment Research 1
 September 9, 2008 Zhenhua Port Machinery (A) (600320.SS)

Zhenhua Port Machinery (A): Summary financials

Profit model (Rmb mn) 12/07 12/08E 12/09E 12/10E Balance sheet (Rmb mn) 12/07 12/08E 12/09E 12/10E

Total revenue 21,005.5 23,804.5 27,502.0 30,144.7 Cash & equivalents 1,086.9 1,435.2 1,098.3 1,643.2
Cost of goods sold (17,860.4) (19,913.0) (23,103.4) (25,301.3) Accounts receivable 15,338.8 17,382.8 20,082.8 22,012.6
SG&A (518.9) (794.7) (918.1) (1,006.4) Inventory 1,640.6 2,879.2 3,326.8 3,630.7
R&D 0.0 0.0 0.0 0.0 Other current assets 639.4 639.4 639.3 639.3
Other operating profit/(expense) (97.1) (97.1) (97.1) (97.1) Total current assets 18,705.7 22,336.6 25,147.1 27,925.7
EBITDA 3,059.8 3,684.8 4,269.9 4,794.8 Net PP&E 8,640.8 11,203.4 12,651.2 13,034.1
Depreciation & amortization (530.9) (685.1) (886.6) (1,054.8) Net intangibles 1,603.0 1,594.7 1,586.5 1,578.3
EBIT 2,529.0 2,999.7 3,383.3 3,740.0 Total investments 46.4 (420.3) (420.2) (420.2)
Interest income 22.4 31.3 31.4 33.7 Other long-term assets 119.6 119.6 119.6 119.6
Interest expense (518.4) (257.8) (901.1) (962.1) Total assets 29,115.3 34,834.0 39,084.2 42,237.5
Income/(loss) from uncons. subs. 131.2 (466.7) 0.0 0.0
Others 18.1 118.4 0.0 0.0 Accounts payable 7,132.2 7,913.2 9,143.3 9,978.5
Pretax profits 2,182.3 2,425.0 2,513.6 2,811.6 Short-term debt 4,797.8 8,097.8 7,497.8 7,997.8
Income tax (170.8) (242.5) (301.6) (393.6) Other current liabilities 647.3 647.3 647.3 647.4
Minorities (6.9) (7.5) (7.6) (8.3) Total current liabilities 12,577.3 16,658.3 17,288.4 18,623.7
Long-term debt 5,226.2 5,226.2 7,226.0 7,225.7
Net income pre-preferred dividends 2,004.6 2,175.0 2,204.4 2,409.7 Other long-term liabilities 0.0 0.0 0.0 0.0
Preferred dividends 0.0 0.0 0.0 0.0 Total long-term liabilities 5,226.2 5,226.2 7,226.0 7,225.7
Net income (pre-exceptionals) 2,004.6 2,175.0 2,204.4 2,409.7 Total liabilities 17,803.5 21,884.5 24,514.3 25,849.4
Post-tax exceptionals 0.0 0.0 0.0 0.0
Net income 2,004.6 2,175.0 2,204.4 2,409.7 Preferred shares 0.0 0.0 0.0 0.0
Total common equity 11,113.9 12,744.0 14,356.9 16,166.8
EPS (basic, pre-except) (Rmb) 0.62 0.68 0.69 0.75 Minority interest 198.0 205.4 213.0 221.2
EPS (basic, post-except) (Rmb) 0.62 0.68 0.69 0.75
EPS (diluted, post-except) (Rmb) 0.62 0.68 0.69 0.75 Total liabilities & equity 29,115.3 34,834.0 39,084.2 42,237.5
DPS (Rmb) 0.17 0.18 0.19 0.20
Dividend payout ratio (%) 27.2 27.2 27.2 27.2 BVPS (Rmb) 3.47 3.97 4.48 5.04
Free cash flow yield (%) (4.3) (8.2) (6.0) (0.5)

Growth & margins (%) 12/07 12/08E 12/09E 12/10E Ratios 12/07 12/08E 12/09E 12/10E
Sales growth 25.0 13.3 15.5 9.6 ROE (%) 23.6 18.2 16.3 15.8
EBITDA growth 18.2 20.4 15.9 12.3 ROA (%) 8.2 6.8 6.0 5.9
EBIT growth 16.0 18.6 12.8 10.5 ROACE (%) 14.2 10.6 11.2 11.1
Net income growth 24.8 8.5 1.4 9.3 Inventory days 29.2 41.4 49.0 50.2
EPS growth 19.9 8.5 1.4 9.3 Receivables days 226.5 250.9 248.6 254.9
Gross margin 15.0 16.3 16.0 16.1 Payable days 114.3 137.9 134.7 137.9
EBITDA margin 14.6 15.5 15.5 15.9 Net debt/equity (%) 79.0 91.8 93.5 82.9
EBIT margin 12.0 12.6 12.3 12.4 Interest cover - EBIT (X) 5.1 13.2 3.9 4.0

Valuation 12/07 12/08E 12/09E 12/10E

Cash flow statement (Rmb mn) 12/07 12/08E 12/09E 12/10E
Net income pre-preferred dividends 2,004.6 2,175.0 2,204.4 2,409.7 P/E (analyst) (X) 15.9 14.6 14.4 13.2
D&A add-back 530.9 685.1 886.6 1,054.8 P/B (X) 2.9 2.5 2.2 2.0
Minorities interests add-back 6.9 7.5 7.6 8.3 EV/EBITDA (X) 24.9 11.9 10.6 9.5
Net (inc)/dec working capital (2,245.8) (2,501.6) (1,917.5) (1,398.5) Dividend yield (%) 1.7 1.9 1.9 2.1
Other operating cash flow 251.7 466.7 0.0 0.0
Cash flow from operations 548.2 832.7 1,181.2 2,074.3

Capital expenditures (2,969.6) (3,239.5) (2,326.2) (1,429.5)

Acquisitions 0.0 0.0 0.0 0.0
Divestitures 0.0 0.0 0.0 0.0
Others (958.5) 0.4 0.0 0.0
Cash flow from investments (3,928.1) (3,239.1) (2,326.2) (1,429.5)

Dividends paid (common & pref) 66.7 (545.3) (591.6) (599.6)

Inc/(dec) in debt 726.7 3,300.0 1,399.8 499.8
Common stock issuance (repurchase) 0.0 0.0 0.0 0.0
Other financing cash flows 2,946.8 0.0 0.0 0.0
Cash flow from financing 3,740.2 2,754.7 808.2 (99.9)
Total cash flow 360.2 348.3 (336.9) 544.9 Note: Last actual year may include reported and estimated data.
Source: Company data, Goldman Sachs Research estimates.

Analyst Contributors

Michael Feng
michael.feng@ghsl.cn

Franklin Chow, CFA

franklin.chow@ghsl.cn

Adam Zhang
adam.zhang@ghsl.cn

Gao Hua Securities Investment Research 2

September 9, 2008 Zhenhua Port Machinery (A) (600320.SS)

Table of contents

Container crane demand downcycle may extend into 2009E 3

A-share valuation premium not justified with slowing growth 6
Valuation methodology and comparison with consensus 10
Earnings growth: New marine business won’t cover slowing cranes 12
Risks to our view: RMB appreciation and demand recovery 14
Company profile: Top-tier player in the global port crane market 14
Disclosures 16

EXPECTED NEWS FLOW/EVENTS

DATE EVENT COMMENT

October 20, 2008 3Q08 results release We expect overall margin to be relatively stable along with
stronger overall sales growth.

Source: Company data, Gao Hua Securities Research.

The prices in the body of this report are based on the market close of September 4, 2008, unless otherwise indicated.

Container crane demand downcycle may extend into 2009E

We believe the current downcycle for container crane demand is likely to continue in the
near term — after the cycle peaked in 2005 with over 36% yoy growth — mainly due to
slower growth momentum in global container throughput and a weak outlook for global
trade. Our Economics team forecasts global imports/exports to grow 5.3%/6.1% yoy in
2009E versus growth of 9.5%/10.0% in 2006 (Exhibit 1). We forecast demand for container
cranes to slow to 3% CAGR between 2008E-2010E (Exhibit 2) following 10% CAGR from
2005–2008E.

Although we do see some positive factors developing, including: 1) potential replacement

activity due to the introduction of the latest generation vessels that have container capacity
of 10,000 TEU; 2) imbalance between container throughput growth and new port capacity,
and; 3) global port operators continue to purchase new cranes in order to improve their
operating efficiency. We believe these factors will be sufficient only to cushion any drop in
demand, rather than fueling dynamic growth in demand for the near term.

Our outlook is in line with our Transportation analyst Tom Kim’s cautious view on
container throughput, and we believe the downturn in the shipping industry will create
extra pressure on demand for container cranes.

Gao Hua Securities Investment Research 3

September 9, 2008 Zhenhua Port Machinery (A) (600320.SS)

Exhibit 1: We believe demand will be negatively affected by the weak outlook for global
trade
Global container throughput and global export/import growth, 2004-2009E

(%)
16 Exports of Goods and Services yoy
Imports of Goods and Services yoy
14 Global container throughput yoy
13.9

12.8 12.2
12
12.3 10.6 11.0
10.4
10 10.0
9.4
8.4 9.5
8 8.0
8.2 7.3
7.0 6.1
6

5.5 5.3
4
2004 2005 2006 2007E 2008E 2009E

Source: Drewry, Goldman Sachs Economics Research estimates.

We estimate total demand for port cranes —namely quayside and gantry — cranes will be
1,784 units and 4,745 units, respectively, for the five years 2006 to 2010E. This would
represent a 69% increase over the preceding five years.

Key assumptions in our demand model:

z We assume the growth in the number of containers a quayside crane

handles per year over 2007-2010E will remain the same the growth in 2006
—i.e., 2%. This would be slower than the growth rate in 2005, as we think
fewer new cranes will be installed as global trade slows, thus continuing the
demand downcycle.

z Replacement ratio: We assume replacement demand will gradually increase

over time as cranes age as port operators are using the current downcycle to
replace their older cranes.

Exhibit 2: We estimate 3% CAGR in demand for quayside cranes (2008E–2010E)

Industry demand model, 2005-2010E

2005 2006 2007E 2008E 2009E 2010E

Annual demand of new crane (Units) 191 240 276 270 246 229

YoY changes 61% 26% 15% -2% -9% -7%

Annual replacement demand (Units) 80 80 85 90 119 150

Replacement ratio 0% 2% 2% 2% 3% 3%

Total demand (Units) 270 319 361 360 365 379

YoY changes 36% 18% 13% 0% 1% 4%

Source: Drewry, OneStone Consulting Group, Gao Hua Securities Research estimates.

Gao Hua Securities Investment Research 4

September 9, 2008 Zhenhua Port Machinery (A) (600320.SS)

We believe margins may erode gradually as demand slows, although this erosion may not
be as great as that seen in the most recent trough in 2002

We believe the current down cycle in demand for container cranes will further narrow the
gross margin of manufacturers — including ZPMC, the largest container crane maker
globally — which is already under strong margin pressure due to RMB appreciation and
rising raw material costs. Although ZPMC’s gross margin for its crane business fell as low
as 9.2% during the last trough in 2002 from 13.1% in 1998, we do not think gross margins
will fall as low in the current down cycle. This is because we expect pricing discipline at
the company, underpinned by its 70%+ global market share which provides pricing power,
combined with its strong order backlog for its new “double 40ft” product (see Exhibit 4)
should help it to maintain margins. As such, we forecast the gross margin for ZPMC’s
crane business to decline to only 13.1% in 2010E from 14.6% in 2007.

Exhibit 3: We estimate the gross margin of ZPMC’s crane segment to decline to 13.1% in
2010E
ZPMC container crane segment’s revenue growth and gross margin, 1998-2010E

Revenue growth (LHS) Gross margin (RHS)

100% 16.0%
14.8%
14.6%
90% 14.7%
14.0%

13.1% 13.2%
80% 13.5%
12.4% 13.1%
12.3% 12.0%
70% 11.1%
9.5% 10.5% 66%
10.0%
60%
58%
9.2%
52%
50% 50% 8.0%

40% 40%
38% 6.0%

30%
26% 4.0%
28%
20%

10% 10% 2.0%

10%
3% 3%
4%
0% 0.0%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008E 2009E 2010E

Source: Company data, Gao Hua Securities Research estimates.

Gao Hua Securities Investment Research 5

September 9, 2008 Zhenhua Port Machinery (A) (600320.SS)

Exhibit 4: We believe ZPMC’s strong order backlog for its new product will help protect
its margins
List of orders made in the first ten months in 2007 for ZPMC’s newest product, the “double 40ft”,
as of October 2007

Client Country Units

Shanghai Yangshan port China 22
Shanghai Waigaoqiao China 1
Shenzhen Yantian China 19
Shenzhen Dachanwan China 12
Shenzhen Mawan China 4
Shenzhen Shekou China 4
Shenzhen Chiwan China 2
Ningbo gangwu China 8
Guangzhou Nansha China 5
Xiamen Songyu China 2
Qingdao Qianwan China 2
Dubai Phase I United Arab Emirates 10
Dubai Phase II United Arab Emirates 29
Hyundai Phase 1-2 (Busan) Korea 7
Hyundai Phase 2-2 (Busan) Korea 11
Busan Hanjin Korea 12
PSA Singapore Singapore 15
Hamburg HHLA CTB German 5
Ningbo Daxie China 2
Qingdao Qianwan China 4
PSA Singapore Singapore 16
Jida TUSDEER Saudi Arabia 8
Total 200

Source: Company data.

A-share valuation premium not justified with slowing growth

Slower-than-peer earnings growth does not support A-share valuation premium

In our view, the downcycle in demand for container cranes will extend into 2009E. Despite
our expectation of greater demand for heavy marine equipments, we expect ZPMC’s
earnings growth to slow down faster than its Asian and North American peers. In 2009E,
we estimate EPS growth of 1% for ZPMC, considerably less than the 16% EPS growth for
its Asian peers, and 12% for North American peers, but more than the 21% decline in
growth for European peers.

Asset injection of SPMP does not deserve valuation premium, in our view

If the announced asset injection of Shanghai Port Machinery Plant (SPMP) by CCCC, (the
parent company for both ZPMC and SPMP) into ZPMC is completed by the end of 2008, as
guided by management, we estimate the company’s 2008E–2010E earnings CAGR would

Gao Hua Securities Investment Research 6

September 9, 2008 Zhenhua Port Machinery (A) (600320.SS)

accelerate to only 7% from our current estimate of 5% (which excludes this potential
injection). Note that our base-case estimates do not reflect this pending asset injection.

SPMP is also focused on the port crane market, but makes all its sales domestically. As a
result, we forecast SPMP will achieve higher top-line growth than ZPMC — with our 15%
sales growth assumption based largely on the government’s strong ongoing investment in
port construction, with a 13% increase in the first seven months of 2008E over 2007.
Nevertheless, as domestic sales carry lower margins, we factor in a lower overall gross
margin vs. ZPMC, which makes 70% of its sales abroad.

In our view, any injection would likely improve ZPMC’s growth prospects, however,
despite the limited potential jump in earnings CAGR, by providing a more balanced and
diversified client base, and a broader product portfolio.

Unwarranted valuation premium of the A-share to: 1) the CSI 300 index; and 2)
global peers in terms of both P/E and P/B

Using 2009E P/E multiples, the A-share is trading at 15X EPS, a premium of 50%, 66%, and
36% to its U.S., European and Asian peer medians respectively. This is despite ZPMC’s 1%
EPS growth in 2009E being at the low-end of the range for international peers (12% median
growth for U.S. peers and 16% for Asian peers, and negative 21% for European peers). Its
premium to the CSI 300 index is 36%.

In terms of 2009E P/B, the A-share is trading at a 0%-22% premium to the Asian, U.S. and
European peer medians despite its 3-6 percentage point lower ROE.

The B-share is trading at a discount to both the MSCI index and peers

Using 2009E P/E multiples, the B-share is trading at 10X EPS, a 9% discount to the MSCI
index. Compared with international peer medians, the B-share is trading at discounts
ranging from 0% to 10% to U.S. and Asian peers, but an 11% premium to European peers.

We cross check our DCF using P/B and find the B-share’s current 1.5X 2009E P/B puts the
company at a 17%-32% discount to the medians of international peers, which we think is
justified given its lower ROE. We also note the B-share P/B has already approached its
historical trough level in 2002, so believe it would be unlikely to fall further (see Exhibit 7).

Gao Hua Securities Investment Research 7

September 9, 2008 Zhenhua Port Machinery (A) (600320.SS)

Exhibit 5: We believe ZPMC’s A-share premium to global peers is not justified, given its slower earnings growth
momentum
Comp table for global peers under GH and GS coverage
Market Avg. daily Div. yield
Stock cap Price trading vol. EPS (reporting currency) EPS yoy change (%) P/E (X) PEG (X) (%)
Company Ticker rating (US$bn) 4-Sep-08 (3-m, US$mn) 2008E 2009E 2010E 2008E 2009E 2010E 2008E 2009E 2010E (08-10E) 2009E
China Container machinery
Zhenhua Port Machinery (B) 900947.SS Neutral 4.4 US$ 1.01 3 0.68 0.69 0.75 9 1 9 10 10 9 1.9 2.8
Zhenhua Port Machinery (A) 600320.SS Sell 4.4 Rmb 9.97 17 0.68 0.69 0.75 9 1 9 15 15 13 2.8 1.9
Median 10 9 1 9 12 12 11 2.3 2.3

China Construction Machinery

Guangxi Liugong 000528.SZ Buy 1.0 Rmb 14.95 6 1.45 1.62 1.76 21 11 8 10 9 9 1.0 4.1
Sany Heavy 600031.SS Neutral 3.3 Rmb 14.98 26 1.02 1.19 1.25 (10) 16 5 15 13 12 1.4 0.2
Changsha Zoomlion 000157.SZ NC 2.5 Rmb 11.40 27 1.28 1.63 1.73 (19) 27 6 9 7 7 0.2 0.3
Shantui Construction Machinery 000680.SZ NC 1.0 Rmb 8.78 10 0.86 1.15 1.50 37 34 30 10 8 6 0.2 1.3
Xiamen Engineering Machinery 600815.SS NC 0.6 Rmb 5.57 3 0.61 0.88 1.20 165 44 36 9 6 5 0.0 NA
Median 10 21 27 8 10 8 7 0.2 0.8
Asia Capital Goods
Komatsu 6301 JP Neutral 17.6 JPY 1,922.00 319 204.88 217.35 228.41 24 6 5 9 9 8 1.6 2.5
Hitachi Construction Machinery 6305 JP Neutral 4.2 JPY 2,175.00 78 271.00 278.14 283.94 45 3 2 8 8 8 3.4 2.1
Kubota 6326 JP Neutral 8.2 JPY 678.00 53 52.80 61.94 70.46 (12) 17 14 13 11 10 0.8 2.1
Mitsubishi Heavy Industries 7011 JP Sell 15.9 JPY 515.00 174 18.27 18.71 20.55 25 2 10 28 28 25 NM 1.2
Keppel Corp KEP SP Buy 10.0 SGD 9.13 45 0.79 0.97 1.10 23 22 13 12 9 8 0.7 5.3
Sembcorp Marine SMM SP Neutral 4.9 SGD 3.41 16 0.24 0.27 0.31 35 16 14 14 12 11 1.0 6.0
Doosan Heavy Industries & Construction 034020 KS Sell 7.3 KRW 79,900.00 72 3,418.97 4,935.70 5,587.46 20 44 - 23 16 14 NM 0.8
Median 72 24 16 11 13 11 10 1.0 2.1

North American Capital Goods

Caterpillar, Inc. CAT US Neutral 40.6 US$ 63.94 552 6.31 6.73 7.88 14 7 17 10 10 8 0.9 2.8
Terex Corp. TEX US Neutral 3.8 US$ 38.02 143 6.51 6.06 6.49 12 (7) 7 6 6 6 NM NA
AGCO Corp. AG US Buy 5.1 US$ 53.42 116 4.15 5.32 6.16 56 28 16 14 11 9 0.6 NA
Deere & Co. DE US Neutral 27.3 US$ 63.50 446 4.97 5.98 6.64 23 20 11 13 11 10 0.8 1.9
Eaton Corp. ETN US Buy 11.0 US$ 69.27 204 7.91 8.75 9.38 19 11 7 9 8 8 1.0 3.1
Tyco International Ltd. TYC US Sell 20.0 US$ 40.94 149 3.02 3.43 3.84 55 14 12 14 12 11 1.1 1.4
Median 176 21 12 11 12 10 9 0.9 2.3

European Capital Goods

Volvo VOLVB SS Sell* 21.3 FRF 69.75 16 8.83 6.97 6.95 20 (21) (0) 8 10 10 NM 7.9
MAN AG MAN GY Buy* 13.1 SEK 61.64 1 10.44 8.19 7.15 27 (22) (13) 6 8 9 NM 5.7
Scania SCVB SS Neutral 11.2 EUR 89.00 34 13.21 10.52 10.03 24 (20) (5) 7 8 9 NM 6.7
SBM Offshore SBMO NA Neutral 3.4 EUR 16.45 52 1.57 1.99 2.48 (14) 27 24 15 12 10 0.6 4.2
Median 25 22 (21) (2) 7 9 9 0.6 6.2

China MSCI Index 435.5 20 20 13 11

CSI 300 442.9 22 21 14 11
Notes: 1) *This stock is on our Conviction List.
2) For dual-listed stocks, the financials are based on the financial reporting for H-shares.
3) Market cap is calculated based on the trading price of the share type (H-shares or A-shares) we cover times the total number of shares outstanding.
4) Cash earnings = net income + depreciation + amortization.
5) Free cash flow yield = (NOPLAT + depreciation - capex + change in working capital + change in other assets + net interest expense after tax) / (market cap + minority interest).
6) Net debt / equity: we include minority interest in the calculation of equity in our forecast and the valuation table above; however, the firmwide database does not in certain cases.
7) Benchmarks for H-shares, A-shares and Hong Kong shares are MSCI-China Index, China Shanghai-Shenzhen 300 Index and Hong Kong Hang Seng Index, respectively.
8) Relative share price performance is calculated as: [(price of stock on the printed day/price of stock on base day) / (price of index on the printed day/price of index on base day) - 1]
x 100%.
9) NMs for PEG denote outlier values.
10) EPS estimates are computed without non-recurring items and using basic weighted average shares outstanding.
For important disclosures, please go to http://www.gs.com/research/hedge.html.

Source: Company data, Reuters, DataStream, Goldman Sachs Research estimates, Gao Hua Securities Research estimates.

Gao Hua Securities Investment Research 8

September 9, 2008 Zhenhua Port Machinery (A) (600320.SS)

Exhibit 6: We believe ZPMC’s A-share premium to global peers is not justified, given its slower earnings growth
Financial summary of global peers under GH and GS coverage
P/B P/cash FCF EV / Net debt / Net margin ROA ROE Share price performance (%)
(X) earnings yield (%) EBITDA (X) equity (%) (%) (%) (%) Absolute Relative
Company 2009E 2009E 2009E 2009E 2009E 2009E 2009E 2009E 1-m 3-m 12-m 1-m 3-m 12-m
China Container machinery
Zhenhua Port Machinery (B) 1.5 7 (8.9) 8 94 8 6 16 (28) (39) (54) (19) (25) (44)
Zhenhua Port Machinery (A) 2.2 10 (6.0) 11 94 8 6 16 (17) (30) (61) 2 10 (7)
Median 1.9 9 (7.4) 9 94 8 6 16 (22) (35) (58) (9) (7) (25)

China Construction Machinery

Guangxi Liugong 2.1 8 4.7 6 4 6 14 25 (27) (43) (62) (11) (10) (9)
Sany Heavy 2.8 11 1.9 8 1 12 13 25 (28) (39) (60) (12) (4) (3)
Median 2.5 9 3.3 7 2 9 13 25 (28) (41) (61) (12) (7) (6)

Asia Capital Goods

Komatsu 1.8 6 3.7 5 30 8 10 22 (18) (42) (44) (12) (30) (25)
Hitachi Construction Machinery 1.3 5 (0.2) 4 33 6 7 17 (13) (42) (48) (7) (29) (30)
Kubota 1.2 8 11.1 6 26 7 5 12 9 (25) (21) 17 (9) 6
Mitsubishi Heavy Industries 1.2 8 (1.6) 10 77 2 1 4 4 (13) (26) 11 5 (0)
Keppel Corp 2.2 9 8.1 8 (1) 13 9 25 (18) (27) (34) (11) (13) (16)
Sembcorp Marine 3.4 11 5.4 11 (15) 11 11 28 (18) (29) (23) (10) (16) (3)
Doosan Heavy Industries & Construction 3.1 13 1.6 15 41 9 8 23 (13) (35) (11) (5) (16) 18
Median 1.8 8 3.7 8 30 8 8 19 (13) (29) (34) (7) (16) (16)

North American Capital Goods

Caterpillar, Inc. 3.5 7 5.7 6 48 7 11 38 (5) (22) (17) (5) (14) (6)
Terex Corp. 1.3 5 13.1 4 52 5 8 21 (13) (46) (54) (12) (41) (48)
AGCO Corp. 1.6 8 4.8 5 (10) 5 8 17 (3) (8) 22 (2) 2 38
Deere & Co. 3.0 9 1.0 6 (2) 9 12 31 (3) (21) (8) (2) (13) 4
Eaton Corp. 1.3 5 9.3 5 28 8 8 18 1 (27) (27) 2 (19) (17)
Tyco International Ltd. 1.1 7 8.0 6 9 8 5 10 (7) (9) (8) (6) 2 10
Median 1.8 5 7.2 6 25 8 8 19 (3) (16) (15) (2) (7) (1)

European Capital Goods

Volvo 1.5 5 10.0 5 110 4 4 16 (2) (26) (41) (4) (18) (33)
MAN AG 1.3 6 7.2 4 (2) 7 7 18 (2) (36) (43) (2) (27) (22)
Scania 2.4 6 14.6 5 124 10 8 31 (2) (22) (42) (4) (13) (34)
SBM Offshore 2.2 4 (2.2) 7 95 8 6 19 18 (36) (39) 9 (31) (12)
Median 2.2 4 7.3 6 37 7 7 25 (2) (23) (41) (4) (18) (22)
Notes: See Exhibit 5 for footnote to this exhibit.
For important disclosures, please go to http://www.gs.com/research/hedge.html.

Source: Company data, Reuters, DataStream, Goldman Sachs Research, Gao Hua Securities Research estimates.

Exhibit 7: Forward P/B for the B-shares is already close Exhibit 8: We believe the A-share premium in terms of
to its last trough level in 2002 P/B is unjustifiable
ZPMC-B P/B band since 2001 P/B vs. ROE in 2009E

4.0 6x
(USD)

(P/B)
3.5
5x 3.0 Doosan
Sany
3.0

4x
2.5
2.5

SBM offshore
2.0 3x ZPMC A Keppel
2.0 Liugong
1.5 Komatsu
2x AGCO
1.0 1.5
Volvo
ZPMC B Hitachi
1x Kubota Terex
0.5 Eaton MAN AG (ROE)
Tyco
1.0
0.0 5% 10% 15% 20% 25% 30%
03-01 08-01 02-02 07-02 01-03 07-03 12-03 06-04 11-04 05-05 10-05 04-06 09-06 03-07 08-07 02-08 07-08

Source: Company data, DataStream, Gao Hua Securities Research estimates. Source: DataStream, Goldman Sachs Research estimates, Gao Hua Securities
Research estimates.

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September 9, 2008 Zhenhua Port Machinery (A) (600320.SS)

Valuation methodology and comparison with consensus

We use DCF to derive our 12-month target prices as we believe DCF captures both
the upfront capex and the long-term earnings profiles of the companies in this industry.
We use a 5% risk-free rate and a 4.5% equity market premium for the A-shares (5% and 6%
for the B-shares, respectively) as estimated by our Asia-Pacific Strategy team. We assume
terminal growth rate of 3% for both the A- and B-shares. We estimate a beta of 1.0X for the
company.

Exhibit 9: Our 12-month target price for ZPMC A is Rmb8.1

ZPMC A DCF valuation

FY end 2010E 2011E 2012E 2013E 2014E 2015E

Years ahead 1 2 3 4 5 6
Discount rate 0.92 0.85 0.79 0.73 0.67 0.62
EBIT (Rmb mn) 3,740 4,132 4,384 4,616 4,971 5,344
Tax rate 14% 16% 20% 25% 25% 25%
EBIT*(1-Tc) (Rmb mn) 3,216 3,471 3,507 3,462 3,728 4,008
Depreciation & Amortization (Rmb mn) 1,055 1,192 1,316 1,437 1,560 1,689
Capex (Rmb mn) (1,430) (1,510) (1,596) (1,686) (1,781) (1,985)
Net (inc)/dec working capital (Rmb mn) (1,399) (1,293) (1,061) (1,034) (1,144) (1,202)
Free Cash Flow (Rmb mn) 1,443 1,859 2,167 2,179 2,362 2,510
Growth rate (%) 29% 17% 1% 8% 6%
PV of FCF (Rmb mn) 1,332 1,584 1,704 1,582 1,583 1,552
#DIV/0! 7.9% 1.0% -1.3% 7.7% 7.5%
Valuation A share #DIV/0! 29% 17% 1% 8% 6% -100%
PV of FCF (2010E-2020E) (Rmb mn) 9,336 Valuation sensitivity analysis
PV of terminal value (Rmb mn) 29,941 Terminal growth starting 2015E
LT growth rate of FCF 3.0%
Enterprise value (Rmb mn) 39,278 A share 8.10 2.0% 2.5% 3.0% 3.5% 4.0%
Adj. net cash(debt) at year-end 2009 (Rmb mn) (12,986) 7.3% 8.7 9.7 11.0 12.7 14.8
Minority interest (Rmb mn) 213 7.8% 7.5 8.4 9.4 10.7 12.3
WACC

Net present value (Rmb mn) 26,078 8.3% 6.6 7.3 8.1 9.1 10.4
Shares outstanding (mn) 3,207 8.8% 5.8 6.4 7.1 7.9 8.9
Share target price (Rmb) 8.1 9.3% 5.1 5.6 6.1 6.8 7.6

China market risk premium 4.5%

China risk-free return 5.0%
Beta value (X) 1.0
Cost of equity 9.5%
Avg. cost of debt 6.5%
Effective tax rate 25.0%
After-tax cost of debt 4.9%
Long-term debt-to-capital ratio (%) 25.0%
WACC 8.3%

Source: Bloomberg, Gao Hua Securities Research estimates.

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September 9, 2008 Zhenhua Port Machinery (A) (600320.SS)

Exhibit 10: Our 12-month target price for ZPMC B is US$0.94

ZPMC B DCF valuation

FY end 2010E 2011E 2012E 2013E 2014E 2015E

Years ahead 1 2 3 4 5 6
Discount rate 0.91 0.83 0.76 0.70 0.64 0.58
EBIT (Rmb mn) 3,740 4,132 4,384 4,616 4,971 5,344
Tax rate 14% 16% 20% 25% 25% 25%
EBIT*(1-Tc) (Rmb mn) 3,216 3,471 3,507 3,462 3,728 4,008
Depreciation & Amortization (Rmb mn) 1,055 1,192 1,316 1,437 1,560 1,689
Capex (Rmb mn) (1,430) (1,510) (1,596) (1,686) (1,781) (1,985)
Net (inc)/dec working capital (Rmb mn) (1,399) (1,293) (1,061) (1,034) (1,144) (1,202)
Free Cash Flow (Rmb mn) 1,443 1,859 2,167 2,179 2,362 2,510
Growth rate (%) 28.8% 16.5% 0.6% 8.4% 6.3%
PV of FCF (Rmb mn) 1,318 1,551 1,652 1,517 1,503 1,459
#DIV/0! 7.9% 1.0% -1.3% 7.7% 7.5%
Valuation B share Valuation sensitivity analysis
PV of FCF (2010E-2015E) (Rmb mn) 9,000
PV of terminal value (Rmb mn) 23,220 Terminal growth starting 2015E
LT growth rate of FCF 3.0% B share
Enterprise value (Rmb mn) 32,220 0.94 2.0% 2.5% 3.0% 3.5% 4.0%
Adj. net cash(debt) at year-end 2009 (Rmb mn) (12,986) 8.5% 1.02 1.12 1.24 1.40 1.59
Minority interest (Rmb mn) 213 9.0% 0.89 0.97 1.08 1.21 1.35

WACC
Net present value (Rmb mn) 19,021 9.5% 0.78 0.86 0.94 1.05 1.16
Shares outstanding (mn) 3,207 10.0% 0.69 0.75 0.83 0.91 1.02
NPV per share (Rmb) 5.90 10.5% 0.61 0.65 0.72 0.80 0.88
Share target price (USD) 0.94

HK market risk premium 6.0%

HK risk-free return 5.0%
Beta value (X) 1.0
Cost of equity 11.0%
Avg. cost of debt 6.5%
Effective tax rate 25.0%
After-tax cost of debt 4.9%
Long-term debt-to-capital ratio (%) 25.0%
WACC 9.5%

Source: Bloomberg, Gao Hua Securities Research estimates.

Comparison with Consensus

Our Sell call on the A-share is well out of consensus, as is our Neutral call on the B-share.
Similarly, our 12-month target prices are substantially below the consensus as are our
earnings forecasts.

Exhibit 11: Our 12-month target price is considerably below consensus

Our rating/target price vs. consensus (US$ for B shares, Rmb for A shares)

Target Prices Current price Upside/ (downside) Range of % of "Buys" in

Company GH Consensus Difference 04/Sep/08 potential Consensus TPs GH Rating Consensus
Zhenhua B 0.94 1.40 -33% 1.01 -7% 1.30-2.40 Neutral 100%
Zhenhua A 8.1 23.2 -65% 10.0 -19% 18.0-39.9 Sell 90%

Source: Bloomberg, Gao Hua Securities Research estimates.

Exhibit 12: We are more conservative than the consensus on Zhenhua’s growth
Our forecast vs. consensus (Rmb for EPS)

GH EPS estimates Consensus EPS Difference (%) Difference in growth (pp)

Company 2008E 2009E 2008E 2009E 2008E 2009E 2008E 2009E
Zhenhua B 0.68 0.69 0.80 1.05 (10%) (35%) (21) (31)
Zhenhua A 0.68 0.69 0.81 1.09 (16%) (37%) (22) (32)
Note: Difference in growth is in percentage points.

Source: Bloomberg, Gao Hua Securities Research estimates.

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September 9, 2008 Zhenhua Port Machinery (A) (600320.SS)

Earnings growth: New marine business won’t cover slowing cranes

Container crane equipment (78% of total revenue in 2008E): Although we believe
ZPMC should be able to maintain its dominance in the global market for the next few years,
we forecast the company’s units sales for quayside cranes to increase only mildly from 266
units in 2008E to 280 units in 2010E, which would be only 4%-9% higher than the 2007
level. We also forecast the gross margin in this segment to decline by 160bp from 2008E to
2010E.

Exhibit 13: We think ZPMC should be able to maintain its 74% market share dominance in
global port cranes
ZPMC crane forecast model, 2004-2010E

2004 2005 2006 2007E 2008E 2009E 2010E

Global sales
Quayside container cranes (Units) 198 270 319 346 360 365 378
Yoy change 36% 18% 8% 4% 1% 3%
Gantry container cranes (Units) 733 840 856 928 966 980 1,014
Yoy change 15% 2% 2% 2% 2% 2%

ZPMC sales units

Quayside container cranes (Units) 109 181 236 256 266 270 280
Gantry container cranes (Units) 264 336 445 482 507 534 553
Market share
Quayside container cranes (Units) 55% 67% 74% 74% 74% 74% 74%
Gantry container cranes (Units) 36% 40% 52% 52% 53% 55% 55%

Source: Company data, Gao Hua Securities Research estimates.

We believe the heavy marine equipment segment (7% of the total revenue in 2008E)
will be still be unable to fully cover the potential slowdown in the container crane segment,
even though we forecast the segment may reach 85% sales growth over 2008E to 2010E.

Exhibit 14: Floating cranes have become the new growth driver for ZPMC
Order backlog for floating cranes

Client Weight (tons) Contract value (Rmb mn) Expected completion year
Iran IOEC 4,400 1,776 2008-2009
USA gulf bridge 1,700 322 2008-2009
Oil project 7,000 1,200 2008-2009
India 1,600 280 2008-2009
Self used 4,000 700 2008-2009
Self used 7,000 1,200 2008-2009
Others 600 2008-2009
Total 25,700 6,078

Source: Company data, Gao Hua Securities Research estimates.

Asset injection of SPMP should have limited impact on ZPMC’s earnings growth

We forecast the combined sales of ZPMC and SPMP in 2009E would reach Rmb31.7 bn,
with only a 13% contribution from SPMP. Although over the long term, we believe the
asset injection should strengthen ZPMC’s position in the global port crane market with a
more diversified and balanced client base by adding more domestic clients, and will allow
it to further expand its product portfolio.

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September 9, 2008 Zhenhua Port Machinery (A) (600320.SS)

Exhibit 15: We estimate SPMP would represent 13% of revenue and 3.6% of EPS of the
combined entity
Comparison between ZPMC and ZPMC+SPMP (Rmb mn for revenues/net profits, Rmb for EPS)

Revenues Net profits EPS

2008E 2009E 2010E 2008E 2009E 2010E 2008E 2009E 2010E
ZPMC 23,805 27,502 30,145 2,175 2,204 2,410 0.68 0.69 0.75
ZPMC+SPMP 31,659 34,924 2,287 2,499 0.71 0.78
SPMP as % of total 13.1% 13.7% 3.6% 3.6% 3.6% 3.6%

Source: Gao Hua Securities Research estimates.

Forecasts of main business segments

We expect ZPMC to deliver a top-line CAGR of 13% between 2008E-2010E, driven by 3%

growth from the container crane segment, 85% growth from the heavy marine equipment
segment, and 15% growth from the bulk material handling segment. We estimate the
company’s EPS CAGR over the same time period to reach 5%, even though we believe the
faster growing higher-margin heavy marine segment is unlikely to fully compensate for
potential margin erosion at the slower-growing container crane segment.

Exhibit 16: We believe ZPMC’s growth momentum will slow down in the near term
ZPMC’s revenue, gross profit, gross margin by product, 2007-2010E
2007 2008E 2009E 2010E
Container cranes
Revenue(RMB mn) 16,878 18,633 19,251 19,925
Growth rate 10% 10% 3% 3%
Gross profits 2,459 2,731 2,593 2,619
Gross margin (%) 14.6% 14.7% 13.5% 13.1%
Heavy marine equipment
Revenue(RMB mn) 1,419 1,708 4,218 5,840
Growth rate 20% 147% 38%
Gross profits 332 471 1144 1548
Gross margin (%) 23.4% 27.6% 27.1% 26.5%
Others
Revenue(RMB mn) 2,708 3,464 4,033 4,381
Growth rate 83% 28% 16% 9%
Gross profits 383 723 700 719
Gross margin (%) 14.1% 20.9% 17.3% 16.4%
Total
Revenue(RMB mn) 21,005 23,805 27,502 30,145
Growth rate 25% 13% 16% 10%
Gross profits 3,174 3,925 4,437 4,885
Gross margin (%) 15.1% 16.5% 16.1% 16.2%
Note: We do not include the sales related tax in calculating the total gross margin in this exhibit, therefore it is different
from the Quantum-generated number in the summary financials.

Source: Company data, Gao Hua Securities Research estimates.

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September 9, 2008 Zhenhua Port Machinery (A) (600320.SS)

Exhibit 17: Container crane still the largest contributor Exhibit 18: ...and in terms of gross profit
to sales… Gross profits breakdown(%), 2007-20010E
Sales breakdown (%), 2007-20010E

Container cranes Heavy marine equipment Others Container cranes Heavy marine equipment Others

100% 100%
13% 15% 15% 15% 13% 16% 14%
18%
7% 7% 10%
80% 15% 80%
19% 12%
26% 32%
60% 60%

40% 80% 78% 40% 77%

70% 66% 70%
58% 54%
20% 20%

0% 0%
2007 2008E 2009E 2010E 2007 2008E 2009E 2010E

Source: Company data, Gao Hua Securities Research estimates. Source: Company data, Gao Hua Securities Research estimates.

Risks to our view: RMB appreciation and demand recovery

Slower-than-expected RMB appreciation: As over 70% of the company’s revenue is
derived from international markets, slower-than-expected RMB appreciation would be a
positive for margin recovery.

Faster-than-expected demand recovery: Any demand recovery triggered by better-

than-expected growth in global trade and container throughput could pose upside risks to
our weak demand outlook.

Company profile: Top-tier player in the global port crane market

Dominant player in the global port crane market

In less than two decades, ZPMC has emerged as the top player in the global port
equipment market with 74% and 52% shares in the quayside and gantry crane market in
2006, according to World Cargo News statistics. Its container cranes products are used at
most major ports in the world and its clients include major ports operators, such as
Hutchison Port Holding, APM Terminals and PSA.

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September 9, 2008 Zhenhua Port Machinery (A) (600320.SS)

Exhibit 19: We believe ZPMC will maintain its Exhibit 20: …as well as in the gantry crane market
dominance in the global quayside crane market… Global gantry crane market share in 2006
Global quayside crane market share in 2006

Other
companies
26%
ZPMC
Other 52%
ZPMC companies
74% 48%

Source: World Cargo News, Cargo Systems. Source: World Cargo News, Cargo Systems.

China Communication Construction (CCCC) held 43% of ZPMC’s shares at the

end of 2007

Exhibit 21: ZPMC’s shareholder structure

(2007)

State-owned Assets Supervision and

Administration Commission

100%

China Communications Construction Group

70.13%

China Communications Construction Co. Ltd.

100% 100%

Zhen Hua Engineering Co. Ltd. Hong Kong Zhen

Zhen Hwa
Hua Harbour
Harbour Construction
Construction Co.
Co. Ltd. Macau
Macau Others

17.98%
18.71% 24.94%
24.19% 0.34%
0.36% 56.74%

Shanghai Zhen Hua Port Machinery Co. Ltd.

Source: Company data.

Gao Hua Securities Investment Research 15

September 9, 2008 Zhenhua Port Machinery (A) (600320.SS)

Reg AC
I, Michael Feng, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or
companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific
recommendations or views expressed in this report.

Investment profile
The Investment Profile provides investment context for a security by comparing key attributes of that security to its peer group and market. The four
key attributes depicted are: growth, returns, multiple and volatility. Growth, returns and multiple are indexed based on composites of several
methodologies to determine the stocks percentile ranking within the region's coverage universe.
The precise calculation of each metric may vary depending on the fiscal year, industry and region but the standard approach is as follows:
Growth is a composite of next year's estimate over current year's estimate, e.g. EPS, EBITDA, Revenue. Return is a year one prospective aggregate
of various return on capital measures, e.g. CROCI, ROACE, and ROE. Multiple is a composite of one-year forward valuation ratios, e.g. P/E, dividend
yield, EV/FCF, EV/EBITDA, EV/DACF, Price/Book. Volatility is measured as trailing twelve-month volatility adjusted for dividends.

Quantum
Quantum is Goldman Sachs' proprietary database providing access to detailed financial statement histories, forecasts and ratios. It can be used for
in-depth analysis of a single company, or to make comparisons between companies in different sectors and markets.

Disclosures

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

Michael Feng: China Capital Goods, China Industrials.
China Capital Goods: China Infrastructure Machinery, Dongfang Electrical Corporation (A), Dongfang Electrical Corporation (H), Guangxi Liugong,
Harbin Power Equipment, Sany Heavy, Shanghai Electric Group.
China Industrials: China Communications Construction (H), China International Marine Containers (A), China International Marine Containers (B),
China Railway Construction (A), China Railway Construction (H), China Railway Group (A), China Railway Group (H), Singamas, Zhenhua Port
Machinery (A), Zhenhua Port Machinery (B).

Company-specific regulatory disclosures

The following disclosures relate to relationships between Goldman Sachs Gao Hua Securities Company Limited ("Goldman Sachs Gao Hua") and
companies covered by the Investment Research Division of Beijing Gao Hua Securities Company Limited ("Gao Hua Securities") and referred to in
this research.
There are no company-specific disclosures for: Zhenhua Port Machinery (A) (Rmb9.92) and Zhenhua Port Machinery (B) ($1.00)

Ratings, coverage groups and views and related definitions

Buy (B), Neutral (N), Sell (S) -Analysts recommend stocks as Buys or Sells for inclusion on various regional Investment Lists. Being assigned a Buy
or Sell on an Investment List is determined by a stock's return potential relative to its coverage group as described below. Any stock not assigned as
a Buy or a Sell on an Investment List is deemed Neutral. Each regional Investment Review Committee manages various regional Investment Lists to
a global guideline of 25%-35% of stocks as Buy and 10%-15% of stocks as Sell; however, the distribution of Buys and Sells in any particular coverage
group may vary as determined by the regional Investment Review Committee. Regional Conviction Buy and Sell lists represent investment
recommendations focused on either the size of the potential return or the likelihood of the realization of the return.
Return potential represents the price differential between the current share price and the price target expected during the time horizon associated
with the price target. Price targets are required for all covered stocks. The return potential, price target and associated time horizon are stated in
each report adding or reiterating an Investment List membership.
Coverage groups and views: A list of all stocks in each coverage group is available by primary analyst, stock and coverage group at
http://www.gs.com/research/hedge.html. The analyst assigns one of the following coverage views which represents the analyst's investment outlook
on the coverage group relative to the group's historical fundamentals and/or valuation. Attractive (A). The investment outlook over the following 12
months is favorable relative to the coverage group's historical fundamentals and/or valuation. Neutral (N). The investment outlook over the
following 12 months is neutral relative to the coverage group's historical fundamentals and/or valuation. Cautious (C). The investment outlook over
the following 12 months is unfavorable relative to the coverage group's historical fundamentals and/or valuation.
Not Rated (NR). The investment rating and target price, if any, have been removed pursuant to Gao Hua Securities policy when Goldman Sachs Gao
Hua is acting in an advisory capacity in a merger or strategic transaction involving this company and in certain other circumstances. Rating

Gao Hua Securities Investment Research 16

September 9, 2008 Zhenhua Port Machinery (A) (600320.SS)

Suspended (RS). We have suspended the investment rating and price target, if any, for this stock, because there is not a sufficient fundamental basis
for determining an investment rating or target. The previous investment rating and price target, if any, are no longer in effect for this stock and
should not be relied upon. Coverage Suspended (CS). We have suspended coverage of this company. Not Covered (NC). We do not cover this
company. Not Available or Not Applicable (NA). The information is not available for display or is not applicable. Not Meaningful (NM). The
information is not meaningful and is therefore excluded.

Ratings, coverage views and related definitions prior to June 26, 2006
Our rating system requires that analysts rank order the stocks in their coverage groups and assign one of three investment ratings (see definitions
below) within a ratings distribution guideline of no more than 25% of the stocks should be rated Outperform and no fewer than 10% rated
Underperform. The analyst assigns one of three coverage views (see definitions below), which represents the analyst's investment outlook on the
coverage group relative to the group's historical fundamentals and valuation.
Definitions
Outperform (OP). We expect this stock to outperform the median total return for the analyst's coverage universe over the next 12 months. In-Line
(IL). We expect this stock to perform in line with the median total return for the analyst's coverage universe over the next 12 months. Underperform
(U). We expect this stock to underperform the median total return for the analyst's coverage universe over the next 12 months.
Coverage views: Attractive (A). The investment outlook over the following 12 months is favorable relative to the coverage group's historical
fundamentals and/or valuation. Neutral (N). The investment outlook over the following 12 months is neutral relative to the coverage group's
historical fundamentals and/or valuation. Cautious (C). The investment outlook over the following 12 months is unfavorable relative to the coverage
group's historical fundamentals and/or valuation.
Current Investment List (CIL). We expect stocks on this list to provide an absolute total return of approximately 15%-20% over the next 12 months.
We only assign this designation to stocks rated Outperform. We require a 12-month price target for stocks with this designation. Each stock on the
CIL will automatically come off the list after 90 days unless renewed by the covering analyst and the relevant Regional Investment Review
Committee.

General disclosures
This research is disseminated in China by Gao Hua Securities.
This research is for our clients only. This research is based on current public information that we consider reliable, but we do not represent it is
accurate or complete, and it should not be relied on as such. We seek to update our research as appropriate, but various regulations may prevent us
from doing so. Other than certain industry reports published on a periodic basis, the large majority of reports are published at irregular intervals as
appropriate in the analyst's judgment.
Goldman Sachs Gao Hua, an affiliate of Gao Hua Securities, conducts an investment banking business. Gao Hua Securities, Goldman Sachs Gao
Hua and their affiliates have investment banking and other business relationships with a substantial percentage of the companies referred to in this
document.
Our salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies to our clients and our
proprietary trading desks that reflect opinions that are contrary to the opinions expressed in this research. Our proprietary trading desks and
investing businesses may make investment decisions that are inconsistent with the recommendations or views expressed in this research.
Gao Hua Securities and its affiliates, officers, directors, and employees, excluding equity analysts, will from time to time have long or short positions
in, act as principal in, and buy or sell, the securities or derivatives (including options and warrants) thereof of covered companies referred to in this
research.
This research is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be
illegal. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of
individual clients. Clients should consider whether any advice or recommendation in this research is suitable for their particular circumstances and,
if appropriate, seek professional advice, including tax advice. The price and value of the investments referred to in this research and the income from
them may fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may
occur. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments.
Certain transactions, including those involving futures, options, and other derivatives, give rise to substantial risk and are not suitable for all
investors. Investors should review current options disclosure documents which are available from Gao Hua sales representatives or at
http://www.theocc.com/publications/risks/riskchap1.jsp. Transactions cost may be significant in option strategies calling for multiple purchase and
sales of options such as spreads. Supporting documentation will be supplied upon request.
Copyright 2008 Beijing Gao Hua Securities Company Limited
No part of this material may be (i) copied, photocopied or duplicated in any form by any means or (ii) redistributed without the prior
written consent of Beijing Gao Hua Securities Company Limited.

Gao Hua Securities Investment Research 17