Action

We downgrade both JMC-A & JMC-B to HOLD and cuttheir target prices to Rmb20 and HK$20.

What’s changed?

1Q17 continued to see rising revenue, but falling netprofit. Revenue rose 52.7% YoY to Rmb8.16bn, but netprofit tumbled -44.7% YoY to Rmb229mn as gross margindipped 3.3ppt YoY to 20.7% due to changing product mix.

Weakening PV market to increase competitivepressure. The sluggish PV market in 1Q17 led to a rapidsequential decline in the sales volume of Yusheng S330.

CVs likely to see falling gross profit due to Transitupgrade; new HDT in 4Q17 may also drag profit. The4Q16 upgrade of Transit led to clear sequential weakeningin JMC’s gross margin and it will take time for the newTransit to ramp up.

How do we differ from the marketAs competition in theEuropean-brand van market intensifies, JMC will likely recordrising revenue, but flat profit growth. Besides, increasingcompetition in the PV market may make it hard for the YushengS330 to ramp up rapidly, thus dragging profit.

Potential catalysts: sales volume of new Transit beatsexpectations.

Financials and valuation

We cut our 2017/18e earnings forecasts by 28%/21.3%to Rmb1.4bn/1.8bn.

We downgrade JMC-A/-B to HOLD and cut their TPs by43%/20% to Rmb20/HK$20 （12.3x/11x 2017e P/E）。

Risks

Sales volume of Yusheng and Transit misses expectation.