A.I. Conference 2017: The Gift of Sound and Vision 2017/06...A.I. Conference 2017: The Gift of Sound...

See Disclosure Appendix of this report for important Disclosures and Analyst Certifications

A.I. Conference 2017: The Gift of Sound

and Vision Investment Opportunities from Application to Component

Jay Huang, Ph.D. • Senior Analyst • +852-2918-5746 • [email protected]

David Dai, CFA • Senior Analyst • +852-2918-5704 • [email protected]

Mark Li • Senior Analyst • +852-2918-5752 • [email protected]

October 16, 2017

mailto:[email protected]



ASIAN EMERGING TECHNOLOGIES, ASIAN SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT, ASIAN INDUSTRIAL TECHNOLOGY | 2

Panelists Today

David Dai

Asian Emerging Technologies

Mark Li

Asian Semis & Semicap

Jay Huang

Asian Industrial Technology


Comps table

Ticker Company Rating* Currency Bernstein TP 10/11/2017 Price

2454.TT MediaTek Inc O TWD 320.0 306.0

3034.TT Novatek Microelectronics Corp M TWD 105.0 114.0

2382.HK Sunny Optical Technology Group Co Ltd O HKD 134.0 127.5

6758.JP Sony Corp O JPY 5600.0 4,100.0

SNE Sony Corp O USD 51.0 36.6

002230.CH iFlytek Co Ltd M CNY 60.0 55.4

6861.JP Keyence Corp O JPY 63000.0 60,350.0

002415.CH Hangzhou Hikvision Digital Technology Co Ltd O CNY 40.0 34.6

6954.JP FANUC Corp O JPY 31000.0 24,310.0

Note: MXAPJ, MXJP and SPX closed at 544.87, 1005.39 and 2555.24 respectively as of Oct 11, 2017.

* O: Outperform, M: Market-Perform

Source: FactSet, Bernstein estimates. Prices as of Oct 11, 2017.


Agenda

• Overview - Jay Huang

• A.I. in Vision - Jay Huang

• A.I. in Sound - David Dai

• “Eyes & Ears” - Sensor, Lens, Microphone - David Dai

• “Brain” - Processor - Mark Li

• Conclusion - Mark Li

• Q&A


We focus on vision and voice as they are probably the most

important applications of A.I.

• As of July 2017, over 60% of the A.I. startups are working on Vision/Voice-related areas.

Source: Venture Scanner and Bernstein analysis

0 100 200 300 400 500 600

Speech to Speech Trans

Video Recognition

Context Aware Computing

Gesture Control

Recommendation Engines

Speech Recognition

Smart Robots

Virtual Assistants

Computer Vision Platforms

Computer Vision Apps

Machine Learning Platforms

Natural Language Processing

Machine Learning Applications

Number of A.I. Startups (Total: 1878)

61% of the A.I. startups are Vision/Voice-related

Startups that are related to Vision/Voice


Sensor (“Eyes & Ears”)

Application

There are investment opportunities in the supply chain

Processor (“Brain”)

Physical World

Data Info

$

Source: Wikimedia Commons, Hikvision, Sunny Optical, Bernstein analysis


Agenda







• Q&A


A.I. is driving the next stage of development for the video

surveillance industry and for Hikvision

Source: Bernstein analysis

Device /

Hardware

Surveillance Camera; Alarm; Access Control;

Elevator Control…

Database Information / Data Collection and Storage

Face Recognition

Automatic License Plate Recognition

Outdoor People and Vehicle Tracking

Left and Removed Item Detection

Indoor People Tracking

Crowd Detection…

Analytics

Device /

Hardware


Elevator Control…


Device /

Hardware


Elevator Control…


Product

Solution

Smart Analytics

Hardware Hardware + VMS (Solutions) Hardware + VMS +Analytics (“Smart” Solutions)

Video

Management

Software

Collects video from cameras and other sources

Records / stores that video to a storage device

Video

Management

Software



Face Recognition

Automatic License Plate Recognition

Outdoor People and

Vehicle Tracking

Left and Removed Item Detection

Indoor People Tracking

Crowd Detection…

Analytics

Video

Management

Software



Face

Recognition

Automatic License

Plate Recognition

Outdoor People

and Vehicle

Tracking

Left and Removed

Item Detection

Indoor People

Tracking

Crowd Detection…

Analytics

VSaaS

Device /

Hardware


Elevator Control…


Video

Management

Software



Face

Recognition

Automatic License

Plate Recognition

Outdoor People

and Vehicle

Tracking

Left and Removed

Item Detection

Indoor People

Tracking

Crowd Detection…

Analytics

Video Surveillance as a Service (VSaaS)

Hardware + VMS+ Analytics + Operation Service

Hikvision’s

current stage

from Analog to Network

Key trend

AI


Two approaches for A.I.: centralized or on the edge - Hikvision is

among the few that can do both

Object extraction and detection

Original Video

Recording

Front-End Data Collection

Object & Event

Analysis

Comparison of object /

behavior to database

Event analysis

Storing data to database

Back-End AI Analysis

Image Signal

Processing (ISP)

Example: Hikvision Traffic Surveillance System

PanoVu(鹰眼)

Blade(刀锋)

Object identification &

labelling

Source: Company; Bernstein analysis

Back-End AI Analysis

Original Video

Recording

Object

Extraction &

Detection

Background modeling/

noise elimination

Object extraction and

detection

Object

Identification &

Labelling

Object characteristics

identification

Object labelling

Preliminary

Event Analysis

Simple behavior

recognition

Preliminary event

analysis

In-Depth

Analysis

Comparison of object/

behavior to database

In-depth event

analysis

Storing data to database

for future use

Front-End AI Processing

Image Signal

Processing

(ISP)

Example: Hikvision Human Analytics Surveillance System

DeepInview-Dual Lens(深眸-双目)

HikFace(脸谱)


The integrated hardware-software capability is a huge edge of

Hikvision in A.I.

ModelLaunch

TimeFunction Situation Key Specs Chip

Overall View

(全局)2016

Precise capture of

behavior and event4MP resolution

VPU

(Movidius

Myriad 2

Vision)

Dual Lens

(双目)2016

3D real-time analysis

of human

characteristics and

behavior

• 2 * 2MP-resolution cameras

• H.265/ H.264/ MJPEG video

coding

GPU

(NVIDIA

Jetson TX1)

2016Face analysis,

identity confirmation

Entrance & exit,

identity check

• 2MP resolution

• 10.1-inch display

2016• 6-7MP resolution

• H.264/MJPEG video coding

2016 16-channel analysis system

2016Face recognition,

human identification

• Human traffic

(transportation hub,

bank, school...)

• Commercial use

(customer analysis,

payment, attendance

check...)

• 64-channel system

• up to 32 pairs of face 1v1

analysis at the same time

2016

Information

extraction, storage

and search

All types of situation

(estate, school,

finance, city security…)

• 32 Mbps input bandwidth

• 32-channel system

• 1-8TB storage Network Video

Recorder

2015Video structuring

server160-channel 1080P system

2015Vehicle image

structuring server

Analysis of 3 million checkpoint

pictures per day per server

VPU/GPU

Blade

(刀锋)

GPU

Transportation,

security…

People & Identification

Matching

(人证比对)

Front-End

Transportation

(road, airport, highway,

gas station, port, bus

station...)

HikFace

(脸谱)

DeepInmind

(超脑)

Devine Captor

(神捕)

Back-End

Traffic incident

detection

Falcon

(猎鹰)

Large area with intense

human traffic

(transportation hub,

stadium, bank branch,

shopping mall...)

DeepInview

(深眸)

Source: Company; Bernstein analysis


Besides surveillance, A.I. and vision are also key enabling

technologies for next generation automation

Source: Wiki Commons; Bernstein analysis

Perception (visual input and

math models)

Identification (find the object)

Path planning (determine the

motion to approach

objects)

Grasp planning (determine grasp

position and angle)

Visual servoing (hand-eye

coordination)

A.I. involved


Agenda







• Q&A


Voice is an interface

Amazon Echo Google Home iFlytek/JD DingDongApple Homepod Tianmao JinglingX1Harman KardonInvoke

Voice

Input

Siri Lingxi

Source: Wikimedia commons, Twitter, company images with permission


More importantly, voice is a data collection tool

Structured medical records

Enter Medical Records

With Voice

Patient List

Medical Record

Handwritten medical records

Assisted diagnosis

Healthcare

Speech recognition and natural language processing

Analysis

Unable to analyze

Source: Wikimedia commons, company images with permission


Analyzing the data collected disrupts industries

Handwritten exam paper and homework

Personalized education

Education

Structured student answers

Scan Paper Text Recognition Score Given

Comments

Handwriting

Recognition

Automatic

Rating

Text recognition and natural language processing

Analysis

Unable to analyze

Source: Wikimedia commons, company images with permission


The global speech recognition industry grows at 21% CAGR

… but that doesn’t capture all the value from speech recognition companies

0

5

10

15

20

25

2011 2012 2013 2014 2015 2016 2017E 2018E 2019E 2020E 2021E

US

D b

n

Global Speech Recognition Software Industry

Source: MIIT, Research in China, Bernstein estimates and analysis.


Agenda







• Q&A


Camera lens

YTOT, 37%

Sunny Optical,

15%

RICOM, 13%

LIDA, 6%

Ev etar, 5%

Union, 4%

PHENIX, 4%

FujiFilm, 2%

Security Camera Lens Market Share by unit (2016)

Largan, 33%

Sunny Optical,

11%Kantatsu, 8%

Sekonix, 7%

Genius, 5%

Kolen, 3%

SEMCO, 2%

Others, 25%

Handset Lens Market Share by unit (2016)

Mobile phones,

78%

Security Camera,

13%

Vehicle, 9%

Lens Application % share by

Rev enue (2017E)

533

1,003

-

200

400

600

800

1,000

1,200

2015 2016 2017E 2018E 2019E 2020E 2021E

US

$ m

n

Security Camera Lens Rev enue

'16-'21E CAGR: 14%

3,218

4,867

-

1,000

2,000

3,000

4,000

5,000

6,000

2015 2016 2017E 2018E 2019E 2020E 2021E

US

$ m

n

Handset Camera Lens Rev enue

'16-'21E CAGR: 9%

285

768

-

200

400

600

800

1,000

2015 2016 2017E 2018E 2019E 2020E 2021E

US

$ m

n

Vehicle Camera Lens Rev enue

'16-'21E CAGR: 22%

Source: TSR, Strategy Analytics, Bernstein estimates and analysis

Sunny Optical,

37%

Nidec Sankyo, 15%Fujif ilm,

9%

Hitachi Maxell, 9%

Nidec Copal, 2%

Vehicle Lens Market Share by unit (2016)


Image Sensors

Mobile Phone,

73%

Vehicle, 6%

Security, 4%

Other, 17%

Image Sensor Application % share by revenue (2017E)

8,307

11,819

-

5,000

10,000

15,000

2015 2016 2017E2018E2019E2020E2021E

US

$ m

n

Handset Camera Image Sensor

Revenues

'16-'21E CAGR: 13%

323

850

-

200

400

600

800

1,000

2015 2016 2017E2018E2019E 2020E2021E

US

$ m

n

Vehicle Camera Image Sensor

Rev enues

'16-'21E CAGR: 21%

412

902

-

200

400

600

800

1,000

2015 2016 2017E 2018E 2019E 2020E 2021E

US

$ m

n

Security Camera ImageSensor

Rev enue

'16-'21E CAGR: 17%

Source: TSR, Strategy Analytics, Bernstein estimates and analysis

On Semi, 56%

Omniv ision, 19%

PixelPlus, 5%

Sony , 6%

Toshiba, 9%

Vehicle Camera Image Sensor Market Share by revenue (2017E)

Sony , 35%

On Semi, 27%

Omniv ision, 19%

SOI, 10%

PixelPlus, 3%

Security Camera Image Sensor Market Share by revenue (2017E)

Sony , 59%

Samsung, 28%

Omniv ision, 6%

Galaxy Core, 2%

SK Hy nix, 3%

Handset Camera Image Sensor Market Share by revenue (2017E)


Agenda







• Q&A


Not all applications have the same requirements

• Voice is much easier to process.

• Hence “smart speaker” is actually “dumb” as most of data, processing and hence

intelligence is in the cloud.

• Voice processors are mostly on legacy nodes such as 28nm or older.

• MediaTek is the leader in “smart speaker” & enjoys revenue growth.

• However the contribution will plateau in ~2 years as Chinese competitors enter the

market.

• Video processing is however much more demanding.

• Currently intelligence is mostly derived in servers.

• Gradually A.I. is emerging in edge devices too but often requires an expensive

dedicated chip.

• NVIDIA and Movidius (now Intel) are the examples of the dedicated chips found in

“smart camera” of surveillance.

• Apple, HiSilicon & Novatek are entering the market with SoCs that are more efficient

in cost & power.


And not all architectures are the same either

• Cloud/server – training & inference

Edge device – nearly all inference

• Edge device is much more resource-

constrained than the cloud/server.

• Cost

• Power

• Form factor

• Latency

• Etc.

Cost & Power/ Operation

Flexibility

ASIC/SoC

FPGA

GPU

CPU



GPU, FPGA & ASIC/SoC should have their spaces in A.I.

• CPU is being replaced “accelerator”

• “Accelerator” will be a combination of GPU, FPGA, ASIC/SoC.

• GPU – good for training broadly but for inference selectively

• FPGA – in between

• ASIC/SoC – prevailing arch for inference on edge devices

• IP vendors will expedite the adoption of A.I. in ASIC/SoC

Representative

Company Ideal Market

GPU NVIDIA Training & selective inference

FPGA Xilinx Selective training & selective inference

ASIC/SoC HiSilicon, Apple, Novatek Inference on “edge”

IP CEVA, Cadence, ARM Inference on “edge”



Agenda







• Q&A


Investment Opportunities

• Application

• Hikvision (Outperform, TP=CNY40)

• Sensor, Lens & Microphone

• iFlytek (Market-Perform, TP=CNY60)

• Sunny Optical (Outperform, TP=HK$134)

• Sony (Outperform, TP=JPY5600)

• Processor

• MediaTek (Outperform, TP=NT$320)

• Novatek (Market-Perform, TP=NT$105)


Q & A


Disclosure Appendix


Disclosure Appendix - Valuation Methodology


We value our Chinese Capital Goods names using the Fair P/B multiple, which we derive from each company's normalized ROE and cost of equity. This

method allows us to understand cyclical companies through the cycle.

We maintain dual A- and H-share ratings when stocks have both categories of shares listed on the relevant exchange. We derive our A-share target prices by

translating the H-share target prices from HKD to RMB. As a general matter, we then assign our rating for A-share stocks by comparing this translated price

to the current A-share price. Thus there will be situations where the H-share and A-share ratings on a related security may differ from one another.

We value Keyence and Cognex using DCF and triangulate with fair EV/IC (based on ROIC). We believe these two methods fit best with the companies' asset

structure with very light invested capital. Both methods allow us to treat operating and non-operating assets separately, therefore properly accounting for the

value of the companies' core operations.

We value FANUC and Hikvision using DCF and triangulate with P/E.

Hangzhou Hikvision Digital Technology Co Ltd

We value Hikvision using DCF and cross check with peer group forward P/E multiples.

Keyence Corp

We value Keyence and Cognex using DCF and cross check with fair EV/IC (based on ROIC). We believe these two methods fit best with the companies'

asset structure with very light invested capital. Both methods allow us to treat operating and non-operating assets separately, therefore properly accounting for

the value of the companies' core operations.

FANUC Corp

We value FANUC using DCF and triangulate with P/E and P/B multiples. We believe DCF better accounts for the long-term value, and allow us to see through

the cycles of FANUC's business. P/B and P/E inform us of FANUC's relative valuation versus global automation peers.


We value companies in our coverage using price to forward earnings. The P/E is determined by historical range, future growth rate, and as informed by our

DCF model.

The exceptions are Sony, for which we use sum-of-the-parts (SOTP), and HTC, for which we use DCF to determine the valuation.

Sony Corp

We value Sony on SOTP by applying forward P/E of its individual segments, and with 15% conglomerate discount. The EPS range used is 2Q18-1Q19, as it is

the NTM range for our one-year target price. For Sony’s portion of Sony Financial Holdings, we use its market value.

Sunny Optical Technology Group Co Ltd

We value Sunny Optical on a forward P/E basis. We use 22x target P/E ratio on 2019 EPS, and discount by 10% to get 2018 target price, as the 3D camera

contribution is not significant until 2019.

IFlytek Co Ltd

We value iFlytek using DCF to reflect the significant long term growth. Our target price is CNY60, which implies 92x 2019 EPS.

Asian Semiconductors and Semiconductor Equipment

We use Price to NTM tangible book value to value foundries and Price to One-Year Forward Earnings to value design, OSAT & equipment companies.

MediaTek Inc

We use Price to One-Year Forward Earnings as our valuation method for MediaTek as we believe it best captures the earnings growth momentum of a

fabless company and is easier to compare among peers. To determine a relevant multiple, we review the historical forward P/E multiples at the company

level and set our multiple at 15x One-Year Forward Earnings. Note that we exclude the gain from the transaction of selling Autochips to NavInfo as it is a one-


Disclosure Appendix - Valuation Methodology

off.

Novatek Microelectronics Corp

We use Price to One-Year Forward Earnings as our valuation method for Novatek as we believe it best captures the earnings growth momentum of a fabless

company and is easier to compare among peers. To determine a relevant multiple to apply, we review historical forward P/E multiples at the company level.

Novatek's P/E multiple has been hovering mostly in the range of 9~15x since 2005 and we set our valuation multiple at 11x, below the historical average, to

reflect Novatek's muted growth prospects.


Disclosure Appendix - Risks


Given the importance of retail investors to the A-share markets, A-share listed stocks may be relatively more volatile than their H-share listed counterparts.

Upside or downside risks could come from Chinese government policies as China looks to control the rate of growth of its economy in general, or capital

markets in particular. These policies may manifest in market rules that affect A- and H- shares differently.

The risks to Chinese companies under our coverage are mainly macroeconomic driven. Chinese government policies may also lead to increased or

decreased demand in the various end markets.

The risks to our Global Automation names (FANUC, Keyence and Cognex) are mainly associated with the global macro economy. In addition, there is

currency risk to these names.

Hangzhou Hikvision Digital Technology Co Ltd

Hikvision's core business in China has significant exposure to domestic infrastructure investment, and the risks are associated with China's macro cycles and

relevant government policies. Outside China, there is a certain degree of sensitivity using Chinese surveillance products. From this, political risks arise,

especially in countries like the U.S. For the new businesses in automation and others, the company is still at a very early stage, and demand from certain

segments (e.g. warehouse automation) is also nascent. Our estimates about market growth as well as the market share Hikvision can achieve may lead to

risks to either side.

Keyence Corp

The risks are mainly associated with the global macro economy. Our analysis shows that company's growth correlates with the overall utilization of

manufacturing capacity in the major economies. Fluctuations in utilization may lead to unexpected near term fluctuations in growth rates. A global recession

as severe as that of 2009 may even result in decline in Keyence's revenue. In addition, there is currency risk associated with the exchange rate of JPY.

FANUC Corp

FANUC's end user markets are cyclical in nature. The risks are mainly associated with the global macro economy and currency. Automotive and smartphone

demand and capex cycles are important drivers of FANUC demand. JPY exchange rates have translation impact on topline, and affect FANUC's margins.


Sector risks include the following:

Technology risk. Companies in our sector relies on evolution of technologies in the future. If the future technologies evolve in a faster or slower fashion, it

would present upside or downside risk to our companies.

Macro risk. A weak macro environment would depress consumer IT spending (e.g. smartphones and tablets) and impact our companies, and vice versa.

Product risk. Our companies supply consumer products directly or indirectly. Changes in demand of such specific products would affect the performance of

our companies.

FX risk. Many of our companies sell products priced in a different currency than its reporting currency. Significant moves of the exchange rate would impact

the financials of these companies.

Sony Corp

Downside risks to our price target for Sony include: slower VR adoption in its game consoles; share loss of game console to its key competitors, Microsoft and

Nintendo; lower demand of image sensors in consumer products, especially smartphones; lower demand of consumer electronics, such as cameras, TVs, and

speakers; lower box office of films carried by its studios; and weaker performance Sony Financial Holdings, a public company in which Sony has a majority

holding.

Sunny Optical Technology Group Co Ltd

Downside risks to our price target for Sunny Optical include: lower smartphone OEM shipment, especially from Chinese OEMs; slower dual camera and other



sensing camera penetration in smartphones; slower ADAS adoption in vehicles; and inability to gain market share from competitors.

IFlytek Co Ltd

Upside and downside risks to our price target for iFlytek include: faster or slower adoption of its education products in schools; faster or slower speech

recognition demand in consumer products; shorter or longer time taken to penetrate into newer markets such as healthcare.

Asian Semiconductors and Semiconductor Equipment

The Asian Semiconductors & Semiconductor Equipment sector is exposed to general macroeconomic risks which ultimately influence end-market demand

and can positively or negatively affect the entire electronics supply chain. In addition to the effects of macroeconomic factors, the semiconductor industry has

historically been subject to seasonal and cyclical demand fluctuations for its products or services. These industry downturns have been characterized by

diminished product demand, excess manufacturing capacity, subsequent erosion of average selling prices, etc. Any factors affecting the semiconductor

industry can impose an upside or a downside risk to our forecasts. We highlight some important risks below:

FX Risk. Exchange rate fluctuation poses substantial risk to Asian semiconductor companies' revenue and profit. This is because their products and services

are mostly denominated in US dollars but some of their cost components are denominated in NT dollars, Japanese yen or other domestic currencies. A

strong domestic currency and a weakening US dollar will impose pressure on the company's revenue and profitability and hence would affect earnings on the

downside.

Demand Risk. Macroeconomic environment will seriously affect the semiconductor industry as the industry is more volatile and cyclical in general. This risk

mostly manifests itself in a change in end market demand first and then gradually ripples throughout the electronics supply chain and eventually impacts the

upstream players such as foundry, OSAT or fabless companies. This can be either an upside or a downside risk to our forecasts.

Supply Risk. Disruption and imbalance in the electronics supply chain - either on a semiconductor company, on its suppliers/distributors, or on its customers -

will create a chain effect and impact the company's ability to fully utilize its capacity and deliver its financial performance as planned. This risk can be shown

in the raw material supply as it sometimes accounts for a large portion of the manufacturing costs and any supply shortage can lead to reduced shipments or

increased costs.

Technology Risk. Delay or acceleration in the development and commercialization of new technologies will impact the competitive landscape of the

semiconductor industry. For instance, some companies may lose or gain market share; the price premium or discount vs. competitors may narrow or widen.

Competition Risk. Competition, especially any accelerated capacity expansion, will lead to spare capacity in the semiconductor industry. As competitors may

cut price in order to grab demand to fill idle capacity, a company might suffer lower price and margin as a result. On the other hand, if the capacity expansion

from competitors takes place more slowly than expected, the company is likely to enjoy better price and margin, leading to an upside risk to our forecasts and

target price.

Product Risk. Any major delay in the company's new product launches can result in a downside risk to our forecasts. This risk is especially remarkable for IC

design companies as the market window for them is often very narrow. Missing the market window due to product delays can result in much smaller market

share and inferior pricing.



MediaTek Inc

There are a number of downside risks to our MediaTek target price:

(1) Stronger competitive pressure from Qualcomm in 4G market

(2) Competition in 3G market, mostly from Spreadtrum

(3) Weaker smartphone demand globally

(4) Slower diversification beyond smartphone

Novatek Microelectronics Corp

There are a number of risks to our Novatek target price:

(1) Faster/slower share gain in mid-/small-panel driver IC market

(2) Faster/slower ASP erosion in large-panel driver IC

(3) Unexpected entry/exit of competitors from the market

(4) The pace of integration between driver IC & touch controller IC


SRO REQUIRED DISCLOSURES

References to "Bernstein" relate to Sanford C. Bernstein & Co., LLC, Sanford C. Bernstein Limited, Sanford C. Bernstein (Hong Kong) Limited 盛博香港有限公司, Sanford C. Bernstein

(Canada) Limited, and Sanford C. Bernstein (business registration number 53193989L), a unit of AllianceBernstein (Singapore) Ltd. which is a licensed entity under the Securities and

Futures Act and registered with Company Registration No. 199703364C, collectively.

Bernstein analysts are compensated based on aggregate contributions to the research franchise as measured by account penetration, productivity and proactivity of investment ideas. No

analysts are compensated based on performance in, or contributions to, generating investment banking revenues.

Bernstein rates stocks based on forecasts of relative performance for the next 6-12 months versus the S&P 500 for stocks listed on the U.S. and Canadian exchanges, versus the MSCI

Pan Europe Index for stocks listed on the European exchanges (except for Russian companies), versus the MSCI Emerging Markets Index for Russian companies and stocks listed on

emerging markets exchanges outside of the Asia Pacific region, and versus the MSCI Asia Pacific ex-Japan Index for stocks listed on the Asian (ex-Japan) exchanges - unless otherwise

specified. We have three categories of ratings:

Outperform: Stock will outpace the market index by more than 15 pp in the year ahead.

Market-Perform: Stock will perform in line with the market index to within +/-15 pp in the year ahead.

Underperform: Stock will trail the performance of the market index by more than 15 pp in the year ahead.

Not Rated: The stock Rating, Target Price and/or estimates (if any) have been suspended temporarily.

As of 10/11/2017, Bernstein's ratings were distributed as follows: Outperform - 46.7% (0.3% banking clients) ; Market-Perform - 40.1% (0.0% banking clients); Underperform - 13.3% (0.0%

banking clients); Not Rated - 0.0% (0.0% banking clients). The numbers in parentheses represent the percentage of companies in each category to whom Bernstein provided investment

banking services within the last twelve (12) months.

This research publication covers six or more companies. For price chart disclosures, please visit www.bernsteinresearch.com, you can also write to either: Sanford C. Bernstein & Co. LLC,

Director of Compliance, 1345 Avenue of the Americas, New York, N.Y. 10105 or Sanford C. Bernstein Limited, Director of Compliance, 50 Berkeley Street, London W1J 8SB, United

Kingdom; or Sanford C. Bernstein (Hong Kong) Limited 盛博香港有限公司, Director of Compliance, Suites 3206-11, 32/F, One International Finance Centre, 1 Harbour View Street,

Central, Hong Kong, or Sanford C. Bernstein (business registration number 53193989L) , a unit of AllianceBernstein (Singapore) Ltd. which is a licensed entity under the Securities and

Futures Act and registered with Company Registration No. 199703364C, Director of Compliance, 30 Cecil Street, #28-08 Prudential Tower, Singapore 049712.

12-Month Rating History as of 10/11/2017

Ticker Rating Changes

002230.CH M (RC) 08/28/17 O (IC) 04/25/17

002415.CH O (IC) 04/20/17

2382.HK O (IC) 04/25/17

2454.TT O (RC) 06/06/17 M (RC) 05/04/15

3034.TT M (RC) 08/28/15

6758.JP O (IC) 04/25/17

6861.JP O (IC) 06/06/16

6954.JP O (IC) 09/26/17 O (DC) 06/30/17 O (IC) 03/09/16

SNE O (IC) 04/25/17

Rating Guide: O - Outperform, M - Market-Perform, U - Underperform, N - Not Rated

Rating Actions: IC - Initiated Coverage, DC - Dropped Coverage, RC - Rating Change

OTHER DISCLOSURES

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Bernstein has no policy or standard as to the frequency of any updates or changes to its coverage policies. Although the definition and application of these methods are based on generally

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CERTIFICATIONS

I/(we), David Dai, CFA, Jay Huang, Ph.D., Mark Li, Senior Analyst(s)/Analyst(s), certify that all of the views expressed in this publication accurately reflect my/(our) personal views about

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publication.

Copyright 2017, Sanford C. Bernstein & Co., LLC, Sanford C. Bernstein Limited, Sanford C. Bernstein (Hong Kong) Limited 盛博香港有限公司, and AllianceBernstein (Singapore) Ltd., subsidiaries of AllianceBernstein L.P. ~1345 Avenue of the Americas ~ NY, NY 10105 ~212/756-4400. All rights reserved.

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