HMIN will be added to the NASDAQ China Index. A reconfirmation of increasing price and trading volume.

1) The NASDAQ OMX Group announced the results of the annual re-ranking of the NASDAQ China Index (CHXN). Home Inns is one of the 6 stocks that will be added to the Index with effective date on Monday, March 22, 2010. However, there are 6 stocks will be removed from the Index. Details of relevant stocks listed in the Table-1.

2) CHXN is a modified market capitalization-weighted index, designed to track the performance of a set of U.S. listed companies that are headquartered in China (including Hong Kong). The index groups a total of 30 largest Chinese companies that are listed and actively traded on one of the three major U.S. stock exchanges. (Full list of the weighing are listed in Table-2) It began with a base value of 150.00 On May 7, 2007 and ended 181.01 on Mar 16, 2010.

3) Although CHXN is just one of the nearly 2000 diverse indexes maintained by NASDAQ OMX that has no publicly traded derivatives, according to our knowledge, we still think the nomination received by HMIN reconfirmed the stock’s increasing trading volume and stock price in the past one year. As shown in Figue-1, the average close price in 2010YTD is US$33.62/ADS vs. US$28.24/ADS in the same period in 2008, and the trading volume in 2010YTD is 0.56m ADS vs. 0.40m ADS. That calculates a 20% price increase and a 40% volume lift.

IPO of competitors, not really big threat. Strengthened relationship with existing and new alliances.

1) The hottest issue in the China budget hotel industry these days, is that China Lodging Group (HTHT US) seeking IPO in NASDAQ. HTHT is better known as Hanting Inns and Hotels, the 5th market share holder in Mainland China running a 236 hotel chain (173 self-operated and 63 franchised). Hanting, offering 9m ADSs, has set a price range US$10.25 to US$12.25 for a deal size between US$92.25m and US$110.25m. If the 15% greenshoe is exercised in full, the total proceeds could increase to as much as $126.8m.

2) Ctrip (CTRP US), the No. 1 travel booking service provider in China and the biggest shareholder of Home Inns (holding 18.2%), raised US$200m just in this month. It has announced to subscribe and purchase a total of ~8% shares of Hanting after its IPO with about US$50m-58m cash, or up to US$59m if greenshoe exercised in full. In addition, Ctrip entered into an agreement to acquire a 15% equity interest in BTG-Jianguo Hotels & Resorts with an option to acquire another 10% within one year. The target is a subsidiary of Beijing Tourism Group, an SOE and the third largest shareholder of Home Inns (holding 17.5%).

3) We think the listing of the peers, Hangting and 7Days (listed in Nov.09) hotels can benefit the trading volume of the company. Hotel and lodging is a well-known business among investors and the fact that there are two clear comparables to benchmark the Company’s No.1 position against could be helpful. Moreover, the acts taken by Ctrip actually make Hanting an alliance rather than rival to the company. We believe Home Inns is still a very important member in the more closely-related and strengthening Ctrip-BTG league.

It is time to Accumulate. Budget hotel chains are still underrepresented in China if compared with data in developed countries. We believe there is enough room in Mainland China for all the major players to expand in the next 3-5 years alongside with the policy-supported and inevitable consumer rising in China. Home Inns is still the largest budget hotel chain in China with a clear leading position. The closing price at US$31.61/ADS on 16 Mar, 2010 reflecting 12.3x Price/EBITDA according to our FY10 estimates and 13.5x consensus estimates. We think it is a good time to Accumulate. Maintain TP at US$37.00/ADS.

DISCLAIMER

This Research Report does not constitute an invitation or offer to acquire, purchase or subscribe for securities by Guotai Junan Securities (Hong Kong) Limited ("Guotai Junan"). Guotai Junan and its group companies may do business that relates to companies covered in research reports, including investment banking, investment services and etc. (for example, the placing agent, lead manager, sponsor, underwriter or invest proprietarily).

Any opinions expressed in this report may differ or be contrary to opinions or investment strategies expressed orally or in written form by sales persons, dealers and other professional executives of Guotai Junan group of companies. Any opinions expressed in this report may differ or be contrary to opinions or investment decisions made by the asset management and investment banking groups of Guotai Junan.

Though best effort has been made to ensure the accuracy of the information and data contained in this Research Report, Guotai Junan does not guarantee the accuracy and completeness of the information and data herein. This Research Report may contain some forward-looking estimates and forecasts derived from the assumptions of the future political and economic conditions with inherently unpredictable and mutable situation, so uncertainty may contain. Investors should understand and comprehend the investment objectives and its related risks, and where necessary consult their own financial advisers prior to any investment decision.

This Research Report is not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation or which would subject Guotai Junan and its group companies to any registration or licensing requirement within such jurisdiction.