Chanjet's 1H16 results missed our expectations due to a rise in employee benefit trust expense and R&D costs. Excluding the employee trust benefit expense in 1H16, Chanjet would have record a net profit of RMB57.8 million (down 11% yoy)。 The Company did not issue interim dividend.
Revise down FY16-FY18 software revenue estimations by 4.8%/ 6.8%/ 7.5%, respectively. 1H16 sales of software grew by 21.6% yoy, which is slightly lower than expected due to the late launch of service fees to mobile applications.
Higher R&D expenses to launch new cloud applications, new upgrades and electronic payment systems to boost cloud platform user growth. We revise up FY16-FY18 R&D expenses by 27.7%/ 42.0%/ 53.7%, respectively.
Maintain the Company's investment rating of “Buy” and cut the TP from HK$18.00 to HK$11.00. Due to the revisions to revenue and R&D expenses estimations, we trim FY17-FY18 EPS by 7.8%/ 8.4%, respectively. The new TP represents 97.6x FY17 PER and 14.7x FY18 PER.