1~3Q6 results in line with expectations
　　Chanjet Information Technology announced its 1~3Q16results: revenue was Rmb284.71mn (+16% YoY) and recurrentnet profit was Rmb13.5mn (-76% YoY) or Rmb0.06/share. Thedecrease in net profit was due to rising investment in cloud.
　　Trends to watch
　　Traditional business realized strong growth. Due to risingdemand on enterprise management software and the successfulintegration of traditional software & cloud, software salesrevenue rose by >10% YoY in 1~3Q16. Since 3Q is the lowseason, Chanjet has focused on building channels & trainingdistributors instead of sales promotion; we expect 4Q will seebetter growth.
　　Cloud business revenue ramps up quickly. Chanjet’s cloudproduct lifted its popularity after launch. Revenue realized hypergrowth of 1,500% YoY. Chanjet leverages its advantages indistribution channels and O2O operating experience to speed upuser base expansion. Enterprise users +131% from BOY.
　　Financials will see sound rebound. Chanjet reported a netloss of Rmb111mn including Rmb125mn of share-basedcompensation costs, which will see a drastic decline according toits amortization schedule. In addition, fast-growing revenue fromcloud will also improve its margins and help financials realize astrong rebound in 2017.
　　Earnings forecast
　　We maintain our 2016/17 earnings forecasts: revenueto be Rmb418mn/520mn (+21%/24%) and net losses tocontinue shrinking to -Rmb161mn/-14mn.
　　Valuation and recommendation
　　The stock is trading at HK$10.38. We maintain our BUYrating and HK$17.00 target price, implying 63.78% upsideroom and based on a SOTP valuation.
　　Risks
　　Fiercer market competition; development of cloud business fails.