Action
　　We upgrade Chanjet from HOLD to BUY and lift our TP by42% from HK$12 to HK$17.
　　Reasoning
　　Solid rebound in traditional software after upgradingits traditional software line and revising pricing. In 1H16,software sales jumped 23% YoY, up 21ppt from 1H15. Webelieve Chanjet is gaining back market share. Software salesexpected to keep strong growth of 16.1%/15.6% YoY -in2016/17, and more significantly better profitability.
　　Cloud products rising in revenue after launch. Initialinvestment has completed and new products launched. Weexpect 2016 & 2017 segment revenue to reach Rmb10mn &Rmb32mn. Chanjet proposes selling 56% of ChanjetPayment to Yonyou in 2017 (bringing its holding from 71%to 15%), which would reduce a net loss of ~Rmb30mn peryear; share-based compensation cost will dramaticallydecrease from 2017 by >50%, and improve margins further.
　　Change valuation method to SOTP to better gauge theintrinsic value of different segments. We only valuetraditional business, giving it a 15x 2016e P/E (net profit isRmb155mn), adding net cash. Our TP expects 48% upside.
　　How do we differ from the marketFast rebound infinancials. Sales of traditional software growing much higherthan consensus. Drastic drop in investments and share-basedcompensation expense brings more positive financials in 2017e.
　　Potential catalysts: Sale of Chanjet Payment and decline infinancial pressures give Chanjet more resources for traditionalbusiness R&D. Cloud service market share gain fast after launch.
　　Financials and valuation
　　Revenue forecast raised by 14%/29% to Rmb418mn/Rmb520mnfor 2016/17. We expect net losses to be Rmb161mn/Rmb14mn.
　　We upgrade Chanjet from HOLD to BUY and lift TP by42% from HK$12 to HK$17 based on SOTP valuation.
　　Risks: Weak market demand, fiercer competition.