神州租车（00699） 　　CAR Inc., the largest auto rental company in China, provides vehicles to U-Car, apartner providing chauffeured car services in China. 3Q16 results show slow fleetgrowth and falling daily rental rates offset by a higher-than-expected utilizationrate of 66%. Prospects remain uncertain, in our view, as competition from onlinecar hailing services remains intense, and we expect CAR to wait until regulationof such services is clarified before making any decisions to add significantly to itsrental fleet. We lower our Dec-17 PT to HK$9.40. 　　Still struggling to find growth. With very low growth in the rental fleet, CARInc. managed to grow sales 23% Y/Y due mainly to lifting utilization rates.However, daily rental rates and GPM deteriorated as CAR struggled to competeagainst cheap online car hailing services. We see a reacceleration addingvehicles to the rental fleet as the next catalyst, but believe this is unlikely tooccur until the regulation of online car services is cleared up by mid-2017. 　　Lowering sales and margins estimates. We expect slow total fleet growth of6% per year for the next three years (previously 8%). We also lower ourestimate of the average rental rate by 2% for 2017 and ensuing years. Overall,we lower our FY16E sales by 2.5% and FY17E sales by 6.2%. Given higherrepair and maintenance costs for 3Q16, we lower our overall GPM estimate by0.6% for FY16 and 0.7% for FY17. We lower our DCF-based Dec-17 PT toHK$9.40 (from HK$11.20) to factor in the slower long-term fleet growth andlower GPM. Our revised adjusted EPS estimates (adding back gains and FXlosses) are 5% and 10% lower than consensus for FY16 and FY17, respectively. 　　Price, valuation and risks. Our DCF-based Dec-17 price target of HK$9.40implies a CY18E P/E of 18x and P/B of 2x. Key downside risks includeeconomy volatility, price wars, lower-than-expected operating efficiency andold-vehicle disposal risk.