FY15 preliminary results were below our expectations. Due to higher R&Dexpenses and employee trust benefit scheme expense, Chanjet’s FY15earnings guidance fell short of our expectations.
Revise down FY15-17 total revenue estimations by 2.6%/ 4.7%/ 9.2%,respectively, due to lower than expected cloud business contributions andadoption.
Due to higher R&D expenses and stronger market competition, werevised down FY15-17 net profit margin estimations to -17.2%/ 13.1%/19.1%, respectively. We cut FY16-17 gross profit margin by 1.8 ppt/ 5.0 pptto 91.7%/ 90.0%, respectively, due to stronger market competition with thealliance between e-commerce companies and Kingdee (00268 HK).
Maintain the Company’s investment rating as “Buy” and cut the TP fromHK$25.00 to HK$20.00. Based on the Company’s FY15 preliminary resultsguidance, we revised down FY15 net profit from RMB5 million to -RMB59million. FY16-17 EPS is revised down by 26.2%/ 27.3%, respectively. Thenew TP represents 78.3x FY16 PER, 42.6x FY17 PER and 3.3x FY16 PBR.We maintain the Company’s investment rating as “Buy”.