1H17 results in line with expectation
　　Chanjet announced 1H17 results: revenue was Rmb279.7mn, up20% YoY, in line with expectations; net profit was Rmb47.2mn,or Rmb0.23/sh, turning around due to striking margin expansion.
　　Trends to watch
　　Traditional business retaining solid growth. Software salesrevenues increased 5% YoY in 1H17, impacted by marketingpolicy adjustment & a high base in 1H16. T1/T+ growthremained strong at 70%/20%. We expect traditional business tomaintain 20% growth in 2017/18 due to stable market growth.
　　Cloud growth to accelerate in 2H. Revenues of cloud servicerose 20% to Rmb5mn in 1H and we expect Rmb15mn in 2017,still in the early stage. Chanjet continues to establish offlinechannels for cloud products, educate dealers & clients, &improve product quality. It just launched a T+ cloud inearly-2017, integrating cloud with ERP product.
　　Margins continuing to improve. Chanjet has turned aroundin 1H17 and reported net profit of Rmb47mn, mainly due todramatic declines in share-based compensation, and cost savingson marketing and R&D. We believe it can continue this marginexpansion trend, and expect it to spin off its payment business in2H to save related net loss (Rmb2mn in 1H), further improvingprofitability and bringing a one-off gain of Rmb170mn in 2017.
　　Earnings forecast
　　We fine tune our 2017/18 revenue forecast by +0.2%/+0.2% toRmb532mn/642mn, and revise up net profit to Rmb64mn/69mndue to effective cost savings and noticeable margin expansion.
　　Valuation and recommendation
　　The stock is at HK$10.76. Maintain BUY rating and TP ofHK$17, based on SOTP (12x 2017e P/E on traditional business).
　　Risks
　　Fiercer competition, lower cloud growth.