中集集团(02039) 　　Action 　　We upgrade CIMC-A/H from HOLD to BUY, and raise ourTP for CIMC-A/H by 53%/43% to Rmb18.58/HK$12.86 　　Reasoning 　　Two short-term positives: 1) Container shipping marketsupply-demand gap, container industry to see both volumes andprices rise. 2) Oil paint will be banned and water paint will bepromoted, spurring purchasing.Two long-term positives: 1) Container shipping market willshow a weak recovery and Clarksons predicts container shiporders in 2017 will likely increase by 67% YoY. 2) Industry policyis positive to profitability. In November 2016, the new tax refundpolicy on exports will cut the company’s costs by 1.5~1.6%, andpre-tax profit is expected to increase Rmb600mn, which is 30%of our expected 2017 net profit. 　　Private placements bring safety margins: 1) A-share: inApril the company announced a private placement plan with aprice of Rmb13.64. 2) H-share: In 2015, the company issuednew H-shares at HK$13.48; the current price is at a 28%discount to that. 　　Biggest difference with the market: We believe containervolume growth will not only benefit from the short-termpositives, but also the industry recovery and the policy support.CIMC’s growth has strong certainty.Potential catalysts: Container shipments beat expectations;approval of the private placement.Earnings forecast and valuation 　　We lift 2016e & 2017e EPS by 15.7% & 53.6% to -Rmb0.14 &Rmb0.74. Lift TP for CIMC-A & CIMC-H by 53% & 43% toRmb18.58 & HK$12.86, or 25x & 15x 2017e P/E. 　　Risks 　　Trade protectionism drags container shipping market.