1H17 results were stable. Half-year revenue rose 27.4% YoY to RMB27,615mn, while shareholders’ profit rose 2.1% YoY to RMB987.6 mn, missingmarket consensus. Freight forwarding （“FF”） operations grew amid tradeboom. Sea FF volume rose 6.5% YoY with an increase in returning routes. AirFF volume rose 16.5% YoY as Sinotrans tightened cooperation with Airlines.
　　JV DHL-Sinotrans underperformed amid early recognition of rising networkexpense. We are confident on Sinotrans’ FF and express delivery segments.
　　CML injection has caused worries on its profit sustainability, while webelieve that long-term synergy will outweigh. The RMB5,450 mnconsideration implied a 1.46x 1H17 PBR and a 8.8x 2016 PER. The decisionto issue H-shares was optimal, which will not affect Sinotrans’ cash balance,yet the injection dilutes Sinotrans' 2017 EPS. CML’s operating lines will becomplementary for Sinotrans and we expect more synergies to be realized.
　　We reiterate our view that cross-border e-commerce logistics will beSinotrans’ next profit generator. Based on our understanding, Sinotranshas comparative advantages in customs clearance and business scale, asboth are the industry’s high entry barriers for competitors. As the industry sizeis projected to expand over 20% YoY, we expect Sinotrans to seize thechance and build up its strength especially among the import-bound routes.
　　Reiterate "Buy" rating and TP at HK$5.00. The effect of 2017 EPS dilutionwill be temporary. CML will not only raise the curtain for Sinotrans’ epitaxialM&As, but also enhance the Company’s long-term profitability, yieldingadditional upward potential for Sinotrans' valuation. Our TP reflects 12.1x,10.7 x and 8.2x 2017-2019 PER.