信利国际(00732) 　　3Q16 results miss expectations 　　Truly announced its 3Q16 results: revenue was HK$6.035bn(+21.4% YoY), beating our estimate by 9.8%; while GM wasslightly down QoQ at 10.1%, vs. 10.6% in 2Q16 and 9.4% in3Q15. Its equity earnings were HK$85mn vs. CICCe ofHK$50mn, thus net profit was HK$173mn (+22.9% YoY) orHK$0.06/share, 33% below both our and consensus estimates. 　　Trends to watch 　　We still expect >10% full year revenue growth. Afterdisappointing results last year and early this year, Truly hasmanaged to stabilize its slide and report 21.4% YoY top linegrowth in 3Q16 (vs. +3.8% YoY in 2Q16). Managementguide >10% revenue growth in 2016 on: 1) significant (>10x)sales growth of fingerprint recognition modules; and, 2) strongdemand in the non-smartphone segment (guide: >20% revenuegrowth in FY16). Management also guides >10% gross profitgrowth, which implies stable GPM. 　　AMOLED production line still ramping up. Truly’s newfactory in Huizhou (Capex: Rmb6.7bn) will manufacture AMOLEDpanels. It boasts a G4.5 production line with 30k monthlyproduction capacity �C split evenly between flat panels andflexible displays) and is expected to deliver sales ofRmb1.3bn/year. Production started at end-September; it isinitially shipping TFT-LTPS LCD, with AMOLED displays to ship inlate November. 　　Earnings forecast 　　We trim our 2016/17e EPS by 9.9%/3.6% fromHK$0.33/0.35 to HK$0.29/0.33, due to the lower equityearnings of its G4.5 AMOLED production line and higher tax rate. 　　Valuation and recommendation 　　The stock is trading at 15.8x 2017e P/E. We maintain ourHOLD rating, but lower our target price by 9.11% toHK$3.69 (11.2x 2017e P/E), implying 14.95% upside room 　　Risks 　　Improvements in AMOLED yield rate are slower than expected.