1H17 earnings declined 11.0%, in line

Beijing Bashi announced its 1H17 results: revenue+16.4% YoY to Rmb1.81bn and net profit attributable toshareholders -11% YoY to Rmb45.31mn or Rmb0.06/share, inline with expectations. Gross margin -2.9ppt YoY, mainly due tothe higher proportion of auto distribution revenue;selling/administrative expense ratios fell 0.4/0.8ppt, mainly dueto the rapid revenue growth of 4S stores.

Trends to watch

Advertisement business declined slightly, watch fornew contracts.

Auto service business saw solid growth.

Electric bus charging stations have startedoperation.

Driving school business may recover in the summer.

Earnings forecast

Due to slower than expected charging station construction, wecut our 2017/18 EPS forecasts by 5%/15% toRmb0.16/0.20.

Valuation and recommendation

The stock is trading at 41/33x 2017/18e P/E. Based on the SOTPmethod, we shift to 2018 target market cap of Rmb6.52bn, andraise TP by 0.3% to Rmb8.08 （dividend & ex-rightsadjusted）， implying 23.6% upside. Maintain BUY.

Risks

Slowdown in charging station construction; decline of grossmargin due to new advert contracts.