Revenue/NP slightly below expectations, but OpCF beat
   
H116 revenue declined 6% YoY, among which toll revenue +3% YoY, ancillary services-12% YoY, property -94% YoY, and advertising -15% YoY. Despite Rmb902m in presalesbooked in H116, property development booked a mere Rmb14.15m (-94% YoY)in revenue. H116 net profit retreated 10% YoY but recurring net profit rose 10% YoYto Rmb1.56bn, 2% below our expectation. However, H116 OpCF jumped 41% YoY toRmb2.9bn on strong property pre-sales, representing 74% of our full-year estimate.
   
Toll road margin expanded; growth on new expressways better than guidance。
   
We attribute the 2.89ppt YoY toll road gross margin expansion in H116 to: disposal ofloss-making G312 and a 59% YoY drop in maintenance expense (high base to preparefor the National Examination on maintenance of mainlines in 2015). Furthermore, thedecline in truck traffic on the Shanghai-Nanjing Expressway (SNE) narrowed from 6.2%/4.6%/5.1% YoY in Q215/Q315/Q415 to 4.6% YoY in H116. The newly acquiredNingchang Expressway improved its toll revenue by 20% YoY in H116, better than theguidance provided 1.5 years ago.
   
Management is positive on H216 and 2016 outlook
   
July's toll road traffic performance was generally better than in H116, both in terms ofPVs and trucks, especially for the newly acquired Ningchang, Zhenli and XiyiExpressways. Management expects the above-mentioned newly acquired expresswaysto gradually become the company's profit growth drivers. Furthermore, managementexpects more property development revenue/profit booking in H216 and continuouslowering of interest expenses to support H216 profit growth.
   
Valuation: Reiterate Buy; Rmb10.10 price target
   
Our DCF-based price target of Rmb10.10 assumes WACC of 7.1%. We expect apositive reaction to the strong H116 OpCF and positive H216 outlook.