What happened

Beijing Bashi announced plans to renew the cooperation agreements on advertising and media biz. The cooperationagreement signed between Beijing Bashi and Hainan White Horse Advertising, Gallop Outdoor China and BeijingColourful Media in 2010 will expire by end 2016. The firm plans to continue cooperation with the three companies andextend their advertising & media cooperation to December 31, 2017. Meanwhile, the company will introduce ShanghaiMind Horse as a new biz partner to jointly operate BRT advertising & media biz.

Comments

Continuing cooperation to maintain stable growth of advertising & media biz. The firm has cooperated withWhite Horse, Gallop Outdoor China and Colourful Media since 2010, with the three partners operating sales and relatedbus body media biz under the marketing branch of Beijing Bashi’s advertising subsidiary. As there is a one-year gapbetween the expiry of their cooperation agreement and Beijing Bashi’s 10-year bus body advertising biz contract, thefirm extends the cooperation agreement with the three companies for one more year to secure the stable growth of itsadvertising & media biz before signing new bus body advertising contract.

Cooperating with Mind Horse to explore new marketing model. The firm will work with Mind Horse to operateBeijing BRT advertising & media biz （including bus body advertising, bus shelter light box media and bus station signs）in 2017. Mind Horse, which started outdoor advertising biz in tier-1 cities in 2011, boasts rich marketing experience. Thecooperation indicates that Beijing Bashi is to proactively pursue new advertising models. This will also help it betterprepare for future advertising tendering. BRT advertising will likely contribute revenue next year.

AFV charging biz has huge potential. Beijing Public Transport is to put a large number of electric buses into servicenext year. Charging biz will begin to expand in 2017 and grow at a faster pace in 2018. By 2020, the firm will havebuilt >2,000 new EV chargers to serve Beijing Public Transport’s ~1,2000 electric buses. We expect the charging biz topost a CAGR of 74% over the next four years. Charging biz will account for 34% of Beijing Bashi’s net profit in 2020 andbecome its core profit source.

Keep 2016/17/18e EPS unchanged at Rmb0.24/0.40/0.51. Maintain BUY and TP at Rmb15.85 （40x 2017e P/E）。

Risks

New advertising & media contracts cause sharp decline in GM; promotion of electric buses slows; decrease in drivingschool enrollments.