神州租车(00699) 　　3Q16 in line with expectation 　　CAR Inc. announced 9M16 results: rental revenue wasRmb3,837mn, up 19% YoY; recurrent net profit was Rmb703mn,up 1% YoY, or Rmb0.30 per share. 3Q rental revenue +12% andadjusted profit -15%, largely in line with our estimates. 　　Short-term rental revenue +19% in 3Q. Rentalrevenue (excluding ~10,000 cars rented to UCAR) grew by32% YoY. RevPAC remains solid at Rmb 172. 　　Long-term rental revenue +4% in 3Q: 94% of the fleetwas rented to UCAR and it did not expand fleet size in 3Q. 　　Recurrent net margin to rental revenue -5ppt to16.7% due to higher depreciation expenses. 　　Trends to watch 　　Rental business growth is accelerating, driven by strongleisure travel demand, less cannibalization from subsidized carsharing business and the company’s growth initiatives.New car sharing regulation is visibly cutting the supplyof low-end vehicles in C2C platforms such as Didi andYidao, while creating opportunities for UCAR to expand marketshare. UCAR’s development will benefit the company by potentialgrowth in fleet rental demand. 　　Earnings forecast 　　We revise down 2016e/17e adjusted net profit by4.7%/2.1% to Rmb955/1,111mn. 　　Valuation and recommendation 　　The stock is trading at 15x 2017e P/E. We maintain ourBUY rating, but lower our TP by 3.4% to HK$9.57,implying 21.3% upside room from the currentprice, based on 18x 2017e P/E. 　　Risks 　　Weak performance of RevPAC, tougher competition.