The recent decline in the Company's share price was mainly due tonegative sentiment brought by the ongoing Sino-U.S. trade war. Marketconcerns that the trade war might yield negative impact on freight forwarding（"FF"） can be viewed as two aspects: volume and freight; yet we expect theoverall impact to be limited. Firstly, current U.S. FF volume accounts for only10% of the total. Secondly, the second round of tariffs did not include themajor underlying transport goods （mostly low value-added consumerproducts） of Sinotrans' FF division. Thus, negative impact of the trade warshall not be significant in our view.
Except the FF segment, other branches of the Company progressedsteadily in 1H18 and DHL-Sinotrans' growth is expected to remain high.
International parcel volume of the domestic express delivery industry grew43.0% YoY in 1H18, while DHL-Sinotrans' contributed profit rose 22.6% YoY.
The Sino-Europe trade bond may tighten in 2H18. Meanwhile, domesticconsumption upgrades might drive up demand for European-made consumergoods. DHL-Sinotrans, with main routes as European-bound expressdelivery, is expected to continue to benefit from the trend. We estimateDHL-Sinotrans' contributed profit to grow around 21.0% YoY for 2018,accounting for 25.1% of our projected Sinotrans 2018 profit before tax.
Sinotrans' valuation remains attractive. As the leading domestic B2Blogistics firm, Sinotrans will still benefit from stable consumption upgrade toachieve stable profit growth. Implementation of the Company's A-share listingplan lagged our expected time schedule. On the other hand, a RMB800 mnA-share secondary market repurchase plan was proposed by ultimate parentcompany China Merchants Group, in case Sinotrans’trading price falls belowthe initial price after listing. This may help boost confidence when marketexpectations are unstable. Overall, we maintain "Buy" rating but revise downTP to HK$4.00, corresponding to 8.3x/ 7.5x/ 7.0 2018-2020 PER.