1——3Q16 EPS -25.5% YoY to Rmb0.16, below expectationsBeijing Electronic Zone Investment & Development （BEZ） announced 1——3Q16 results: Revenue was at Rmb510mn（-18.3% YoY） and net profit attributable to shareholders was at Rmb130mn （-25.5% YoY） or Rmb0.16/share.

Slowdown in settlements in 3Q16 with a slight expansion in GM. Revenue -18.3% YoY to Rmb510mn over1——3Q16 and -69.9% YoY to Rmb140mn in 3Q16 （vs. +123% YoY to Rmb370mn in 1H16）， due to slower settlementsthat were caused by the lack of completions. In 3Q16, after-tax blended gross margin +2.8ppt YoY to 46.9% （vs. 43.5%in 2015）。

Sales in 3Q16 were not very encouraging. The contracted sales/GFA of industrial park projects reachedRmb740mn/37,000sqm in 3Q16 and Rmb970mn/44,000sqm over 1——3Q16, implying an overall ASP of Rmb22,000/sqm.

Net cash. At end-3Q16, cash on hand +98.9% YTD to Rmb4.63bn, mainly driven by the Rmb2.4bn private placement.

Interest-bearing debt at end-3Q16 totaled Rmb560mn. BEZ is still enjoying a net cash position.

Trends to watch

Capital strength improved; projects outside Beijing to accelerate. The Rmb2.4bn private placement, whichwas completed in September, would further boost BEZ's capital strength, thus accelerating its projects outside Beijing（Tianjin and Shuozhou）。 Moreover, BEZ's strategic cooperation with Nanjing's Xuanwu District government, theHongshan Management Committee and Xiamen's Jimei District Government merits attention.

Earnings forecast

We lower our EPS forecast for 2016/17e by 5%/4%, from Rmb0.77/0.98 to Rmb0.73/0.94.

Valuation and recommendation

The stock is trading at 17.6x/13.8x 2016/17e P/E. We maintain our BUY rating and TP of Rmb14.

Risks

A larger-than-expected decline in the macroceonomy.