Ticker Symbol: 2633

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Taiwan High Speed Rail Corporation 1Q 2018 Operating Results

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Copyright © 2017 Taiwan High Speed Rail Corporation. All Contents Confidential.
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Disclosures

The information contained in this presentation and its accompanying announcements, including content relating to business outlooks, financial operations, and business forecasts, is based on information derived from internal corporate data and external economic developments as a whole.
The Company's actual operations, financial conditions, and operational performance may differ from forecasted information; this may be due to various factors including but not limited to market demand, changes in policies and regulations and overall economic conditions, and other factors or risks beyond the Company’s control.
The information provided in this presentation reflects the Company's current views about the future; correctness, completeness, or reliability of said views are not explicitly or implicitly expressed or warranted. The Company is not responsible for updating or amending changes or adjustments made to the contents of this presentation, if such changes or adjustments should occur in the future.
For the convenience of readers, this presentation has been translated into English from an original Chinese version. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, information in the Chinese-language presentation shall prevail.

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AGENDA

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I、 BUSINESS OVERVIEW II、 FINANCIALS OVERVIEW III、MARKET OVERVIEW

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I、BUSINESS OVERVIEW

1. Operational Bases 2. Operational Performance

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Taipei
Banciao
Nankang
Taoyuan
Hsinchu Lioujia Depot
Miaoli
Wurih Depot
Taichung
Changhua
Yunlin
Taipao Depot
Chiayi
Tainan
Yanchao Main Workshop
Zuoying
Zuoying Depot
N
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1 、 Operational Bases

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2 、 Operational Performance

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1. Train Frequency

(Daily Frequency)

WEEKEND

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WEEKDAY
 The weekly frequencies will be increased by 15 since 7/2018.
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2. Ridership

(‘000/day)

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7.3%
11.6%
5.3%
1.1%
6.9%
6.7%
12.7%
14.2%
6.1%
96.1%
 Five Year (’13~’17) CAGR： +5.0%
 1~4’18 Ridership: +5.3% YoY growth
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3. Loading Factor

(%)

 Long-term stable growth in loading factor. (vs JR Central: 63.9% @FY’16)

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Operational
Performance 2007.1.5 ~ 2018.4.30
Train Services 529,913
Reliability 99.60%
Punctuality 99.47% (delay<5 min)
0.22min
Avg. Delay Time
(vs JR Central: 0.4 min @FY’16)
Accidents resulting
0
in Liabilities
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II、FINANCIALS OVERVIEW

1. Financial Performance

2. Financial Risk Management

3. Earnings Distribution

4. Corporate Credit Rating & Market Cap 5. Recent Major Events and Activities

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1 、 Financial Performance

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1. Income Statement 1) 1Q’2018 vs 1Q’2017

(NT$mn)	1Q’2018	1Q’2018	1Q’2017	1Q’2017	Variance Amount	Variance %
Operating revenues	11,039	100.0%	10,805	100.0%	234	2.2%
Operating costs	(6,004)	-54.4%	(5,868)	-54.3%	(136)	2.3%
Gross Profit	5,035	45.6%	4,938	45.7%	98	2.0%
Operating expenses	(265)	-2.4%	(227)	-2.1%	(38)	16.7%
Net Operating Income	4,770	43.2%	4,710	43.6%	60	1.3%
Non-operating income and expenses
Interest expenses	(1,666)	-15.1%	(1,950)	-18.0%	284	-14.6%
Stabilization reserve	(1,164)	-10.5%	(798)	-7.4%	(366)	45.8%
Others	69	0.6%	(10)	-0.1%	79	789.2%
Net Income before Tax	2,010	18.2%	1,952	18.1%	57	2.9%
Income tax	389	3.5%	(332)	-3.1%	721	-217.3%
Net Income	2,399	21.7%	1,621	15.0%	779	48.0%
EPS	0.43		0.29

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1. Income Statement

2) 2017 vs 2016

(NT$mn)	2017	2017	2016	2016	Variance Amount	Variance %
Operating revenues	43,435	100.0%	40,611	100.0%	2,824	7.0%
Operating costs	(24,614)	-56.7%	(25,973)	-64.0%	1,360	-5.2%
Gross Profit	18,821	43.3%	14,638	36.0%	4,184	28.6%
Operating expenses	(1,066)	-2.5%	(938)	-2.3%	(128)	13.7%
Net Operating Income	17,755	40.9%	13,699	33.7%	4,055	29.6%
Non-operating income and expenses
Interest expenses	(7,463)	-17.2%	(8,376)	-20.6%	912	-10.9%
Stabilization reserve	(3,866)	-8.9%	(280)	-0.7%	(3,585)	1279.1%
Others	52	0.1%	(46)	-0.1%	98	213.7%
Net Income before Tax	6,479	14.9%	4,998	12.3%	1,481	29.6%
Income tax	(1,139)	-2.6%	(848)	-2.1%	(290)	34.2%
Net Income	5,340	12.3%	4,149	10.2%	1,191	28.7%
EPS	0.95		0.74

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2. Net Profits & Operating Revenues 1) Revenue Mix

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(NT$bn) 1Q’18 1Q’17 YoY
Railway revenues 10.7 10.5 +2.2%
Non-railway revenues 0.3 0.3 +1.9%
Total 11.0 10.8 +2.2%
1Q 2018 Revenue Mix 1Q 2017 Revenue Mix
Non-
Non-
railway
railway
revenue
revenue
(note)
(note)
2.8%
2.8%
Railway Railway
revenue revenue
97.2% 97.2%
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Note: Non-railway revenues mainly include rental incomes, advertising revenues, and onboard sales.

Strategy to Increase Revenues

Sustain Revenue Growth Drivers
Diversify Product Lineup to Increase Off-Peak Ridership and Revenues.
Apply Innovative Technology to Digitize Ticketing Channels and Provide Convenient Ticket Services.
Integrate Local Tourism Resources and Create a Mass Transit Tourism Environment Based on High-speed Rail.
Apply Big Data to Promote Membership Efficiency.
Assess the Development of Non-railway Investment Opportunities

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2. Net Profits & Operating Revenues 2) Operating Revenues and Net Income

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(NT$bn)
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5 Years 1Q’18
(’13~’17) Growth %
CAGR (YoY)
Operating
+3.8% +2.2%
Revenues
Net Income +10.1% +48.0%
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Note: Excluding $12.1billon of reimbursement of statutory discount tickets, revenues would have been $39.8 billion in 2015.

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3. Operational Performance ： EBITDA & EBITDA Margin

(NT$bn)

(%)

Build Autonomous and Innovative Operational Maintenance Capabilities

 Enhance Self-maintenance Capabilities

Cooperate with domestic universities and research institutions to establish railway equipment laboratories.
Cooperate with Japan Railways to accelerate technology transfer.
Establish electronics, machinery, welding and other factories to strengthen THSRC’s self-maintenance capabilities.

 Implement Material Localization

 EBITDA

5-Year CAGR (’13~’17) : +3.6%
1Q’18: YoY+1.3%

 EBITDA Margin

Over the last 5 years : 72%~75%
(vs JR Central _ Railway: 58.4% @FY’16)

Note: One-time compensation of $12.1bn on statutory discount tickets is excluded in the EBITDA for the year 2015.

THSRC works with national top R&D institutes to assist qualified local suppliers in carrying out HSR material development and technology transfers while maintaining standards of traffic safety. To shorten delivery period for materials, reduced procurement costs.
The current in-house maintenance ratio is over 80% and continues to grow.
The Company hopes to achieve railway materials localization ratios at 30% in 2022 (the current ratio is around 15%).

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4. Statement of Cash Flows

(NT$mn)	1Q’18	1Q’17	差異金額	2017	2016	差異金額
Cash & cash equivalents at the beginning of the period	7,188	237	6,951	237	2,146	(1,909)
Cash flows from operating activities	6,817	6,404	413	21,606	5,930[1]	15,676
Cash flows from investing activities	(2,764)	3,638	(6,402)	13,878	27,341	(13,462)
Cash flows from financing activities	(3,930)	(5,132)	1,202	(28,534)	(35,177)	6,643
Effects of exchange rate changes on the balance of cash held in foreign currencies	-	-	-	0	(3)	3
Net increase in cash & cash equivalents	123	4,910	(4,897)	6,950	(1,909)	8,859
Cash & cash equivalents at the end of the period	7,311	5,148	2,163	7,188	237	6,950

[1] Including one-time preferred shares compensation expenditure of $15.2bn.

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(%)

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2. Financial Risk Management

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 Considering L/T & S/T finance/operation funding demands and financial risks, make early . retirement of syndicated loans

Early Retirement of Syndicated Loans since ‘16 (NT$bn) Amount 4/’16及7/’16 21.0 3/’17 21.2 7/’17 20.0 Total 62.2

 Issue direct financial instruments (i.e., corporate bonds, commercial papers) to ensure appropriate L/T & S/T capital allocation and to enhance profitability.

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3. Earnings Distribution

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 Dividend Policy

Taking into consideration current and future developments, investment environments, funding demands, domestic and international competition, shareholder interests, and other relevant factors, the Company has adopted a stable and balanced dividend policy as summarized below:

The Company shall pay out at least 60% of the earnings available for distribution to shareholders.
Of this, cash dividends shall exceed 50% of total distribution in any given fiscal year.

 Dividend History

	2015	2016	2017
Cash dividend (NT$/share)	0.65	0.60	0.75
Cash dividend over earnings available for distribution (%)	98.5%	89.9%	81.8%

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4. Corporate Credit Ratings & Market Cap

(US$bn) Agency Long-term Short-term Outlook Taiwan Ratings twAA+ twA-1+ Stable Fitch AA+(twn) F1+(twn) Stable

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5. Recent Major Events and Activities

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Date	Event
Jul, 2017	Early retirement of syndicated loans totaling NT$20 bn.
Oct, 2017	Starting from the 9th year until the 30th year of the first drawdown
	date, the markup interest rates of syndicated loan were reduced
	from 1.08% to 0.92%.
Apr, 2018	Receive approval from the Ministry of Finance for exemption of
	enterprise income tax over a period of five years started from Jan.
	1, 2017.
	Be ranked top 5% in 2018 Corporate Governance Evaluation by
	Taiwan Stock Exchange
May, 2018	Hold 2018 general shareholders' meeting. The board of directors
	approved a proposal to distribute cash dividend of NT$0.75 per
	common share.

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III、MARKET OVERVIEW

1. Inter-city Transportation 2. Domestic Tourism Market 3. Domestic Railway Infrastructure Projects

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1 、 Inter-city Transportation

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Short Distance Medium Distance 2016 Long Distance (>200km) (20~100km) (100~200km) Weekday Weekend Data Source: Changes in the Market Shares for Intercity Public Transportation after the Operation of High Speed Rail (2016) ; Institute of Transportation, Ministry of Transportation and Communications; March 2018.

2. Domestic Tourism Market

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(mn) (mn)
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Over the last 5 years (‘12~’16) CAGR: +6.0%
Over the last 5 years (‘13~’17) CAGR: +6.0%
Year 2016: +6.6% YoY
Year 2017: +0.5% YoY

Source: Tourism Bureau, MoTC

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3. Domestic Railway Infrastructure Projects

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Broaden domestic rail network and industry value-chain.
HSR-related projects include enhancing connection and accessibility services.
A. Integrate the high speed rail and conventional rail systems.
B. Upgrade and improve conventional rail services in Eastern Taiwan.
C. Move rail tracks above- or under-ground to speed up commuter services.
D. Promote urban mass rapid transit.
E. Build tourism-oriented rail systems for Central and Southern Taiwan.

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Conclusion

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Vision： THSRC seeks to be a platform for progress and life improvement

Mission THSRC strives to be a top ten Taiwanese brand

Intelligent Innovative Localized in Sustained Strategy Transportation Technology Taiwan Social Care Strengthen station and Improve local development Build corporate train operating facilities capabilities and governance culture and Digitize ticketing channels and improve service equipment/material supply responsible for corporate quality ratio social responsibility Medium and long-term Promote environmental train procurement planning Apply big data to promote Promote the localization of protection, energy and ensure existing membership efficiency the rail industry conservation and carbon operational capacity reduction Integrate railway Provide a variety of Using information technology resources and products to increase the technology to strengthen Promote talents conduct reinvestment or off-peak ridership and operational services and cultivation technology export revenues increase efficiency assessment Strengthen equipment maintenance to ensure system stability, safety and reliability

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Appendix. Integrate Local Tourist Networks & Make THSR the Backbone of Transit Oriented Tourism

Hakka Romantic Avenue (the Provincial Highway 3): Old Town and New Experience https://www.youtube.com/watch?v=-l6ibC0UCok

Take Dual Rails (THSR & TRC) to JiJi: The Perfect Viewing Angle of the Trip https://www.youtube.com/watch?v=JQD2ef8vBAU

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Thank You For Your Attention

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AI assistant

THSRC — Interim / Quarterly Report 2018

52174_rns_2018-06-19_9841a83a-29cb-47fb-a0e9-e0c645b1e91a.pdf

Ticker Symbol: 2633

Taiwan High Speed Rail Corporation 1Q 2018 Operating Results

Disclosures

AGENDA

I、BUSINESS OVERVIEW

1 、 Operational Bases

2 、 Operational Performance

1. Train Frequency

(Daily Frequency)

WEEKEND

2. Ridership

(‘000/day)

3. Loading Factor

II、FINANCIALS OVERVIEW

1 、 Financial Performance

1. Income Statement 1) 1Q’2018 vs 1Q’2017

1. Income Statement

2) 2017 vs 2016

2. Net Profits & Operating Revenues 1) Revenue Mix

Strategy to Increase Revenues

2. Net Profits & Operating Revenues 2) Operating Revenues and Net Income

3. Operational Performance ： EBITDA & EBITDA Margin

(NT$bn)

 Enhance Self-maintenance Capabilities

 Implement Material Localization

 EBITDA

 EBITDA Margin

4. Statement of Cash Flows

2. Financial Risk Management

3. Earnings Distribution

 Dividend Policy

 Dividend History

4. Corporate Credit Ratings & Market Cap

5. Recent Major Events and Activities

III、MARKET OVERVIEW

1 、 Inter-city Transportation

2. Domestic Tourism Market

3. Domestic Railway Infrastructure Projects

Conclusion

Thank You For Your Attention

More from THSRC

THSRC Interim / Quarterly Report 2018