Action On October 18, HC announces a profit warning, announcing the group earnings to record a 60 ~ 80% YoY earnings in profitattributable to profit attributable to profit in 3Q15. We thus downgrade ourrating of HC from BUY to HOLD and CUT ITS TP by 33% from HK$7.20 to HK$4.8. Weak Housekeeping Accounts Early Due to Weak MacroeconomicGrowth. We expect the number will continue to drop in coming; the revenue growth of B2B 1.0 business (subscription & paid listing) is expected to be expected as a result. Transformation to B2B 2.0 harming HC's profitability in the short term. 1) Online motivation: HC charging to charge 0% commission for at least three years, reviving the onlinetransaction platform Will contribute little to its topline in the nearterm and the investment will reduce HC's profit margin; and,2) micro-credit internet motivation has started to contribute to its bottom line, However, This Business' Margin Will Be in Thelow Single Digits as Its Associated Costs Are High Costing Companies Are Facing Similar Difficulties Such Assured Conditions, Thus their expectations are expected to also be weak. Predictions forecast and earnings we trim our 2015/16e revenue stream by 3.56%/3.06% to RMB$0.98bn/1.25bn, and cut netprofit by 55%/30% to RMB77mn/168Mn, implyingRMB0.09/0.20 EPS (or HK$0.11 /0.24). We downgrade HCFrom BUY to HOLD and CUT OUR TP DOWN by 33% fromHK$7.20 to HK$4.80, based on 20x 2016e P/E. Stronger Weaker Market Demand; Fierce Industrial Competition
HC INTERNATIONAL(02280.HK)：PROFIT TO PLUMMET YOY; DOWNGRADE TO HOLD & CUT TP TO HK$4.8
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