Earnings in lineIn 1H15, revenue rose 26.17% YoY to Rmb474mn while net profit attributable to shareholders climbed 30.58% YoY toRmb86.56mn, mainly driven by the consolidation of Shenzhen Liqun in May 2015.

Trends to watchSmooth ramp-up of cloud printing. Materwork started the official operation of cloud printing in April 2015, whichgenerated sales revenue of Rmb2.09mn/Rmb19.08mnin 1Q15/2Q15 (~Rmb210,000/day). Considering the visibleramp-up of cloud printing, we remain positive that the company can achieve Rmb100mn revenue target in 2015.

Affected by the transfer to Heidelberg, the printing equipment business dropped 11.7% YoY in 1H15with backlog of Rmb252mn, flat YoY; 2015 is still likely to see positive growth (+10%). Domestic market: withsmart printing equipment at the core, the company maintains stable equipment sales and is expected to become asmart solution supplier for printers. Overseas market: as the transfer of distribution channels for export business hasbeen largely completed, the impact should wear off in July; renminbi deprecation is expected to fuel overseas revenue.Cigarette packet printing to remain steady in 2015 as the restructuring of Liqun and acquisition of Brilliant Circlehelped understand the demand of tobacco sector. In the future, Masterwork is expected to take the lead in shifting fromcigarette printing to digital plants and smart printing.

Earnings revisionsWe maintain 2015/16e EPS earnings at Rmb0.67/Rmb0.88, implying 47.7x/36.1x P/E.Valuation and recommendationGiven 2014 EPS of Rmb0.17 from its equity stake in Brilliant Circle, we expect its EPS to be Rmb0.84 for 2015 andRmb1.05 for 2016. The stock is now trading at 38.0x/30.4x 2015/16e P/E. Maintain Conviction BUY and keep TPat Rmb42.5, implying 63x 2015e P/E (not considering its equity stake in Brilliant Circle).

RisksSlower-than-expected recovery in equipment business; goodwill risks stemming from the acquisition of Liqun.