All lines miss, disappointing 1H17results    CYTS's core earnings were flat in 1H17, while its top line was down 4.3% yoy. Thisis below consensus and our expectations. While Wuzhen and Gubei sustaineddouble-digit growth in both earnings and top line, exhibition business revenue/earnings fell 17%/30% yoy. We adjust down our full-year 2017core earnings by17% and 2018earnings by 19% on the back of the earnings miss. In addition,as we believe the exhibition business is unstable and unpredictable, we reduceour growth assumption for this business in 2017to negative 17%, from 12%previously. We downgrade CYTS to Hold with a new target price of RMB20, downfrom RMB26previously.    Gubei's growth trend starting to slow down    Gubei Town's total traffic in 1H17was 1.2million, up 28% yoy. Total revenue wasRMB434m , up 43% yoy. We believe Gubei's highest traffic growth was seen lastyear, at 56% yoy. Given that total tourist traffic is approaching total capacity, webelieve growth will be driven more by ASP than by tourist traffic. With our 2017Etraffic growth of 30% yoy unchanged, we now forecast 2017E ASP growth of11.5% yoy (vs. previous 8%) to match its 1H17ASP growth (11.5%).    Wuzhen traffic seems to have reached a bottleneck    Wuzhen Town's total traffic in 1H17was 5.12million, up 7.28% yoy. Totalrevenue was RMB784m, up 11.4% yoy. We believe Wuzhen's traffic is alreadyapproaching its bottleneck, which we estimate to be c. 10million every year.ASP changes will largely depend on total hotel room capacity in the West Zone(more people choosing to stay there should lift the ASP mix). We now forecastWest Zone 2017E traffic growth of 6%, vs. our previous 15%, to reflect a trafficslowdown in 1H17(+7.7% yoy in 1H17vs. +17% yoy in 1H16).    Downgrading to Hold on rich valuation    We derive our target price from a DCF-based valuation. Our key assumptionsremain unchanged, with a WACC of 8.1%, beta of 0.91, CoE of 9.0%, and terminalgrowth rate of 3%. We believe the current risk/reward profile for CYTS is notjustified. CYTS is trading at 32x/27x our 2017/18E PER, which we believe isrich given its slowing growth (its peers average 26x/21x 2017/18E PER). Keyupside risks include faster-than-expected growth of travellers. Key downside risksinclude a tourism industry slowdown and delays/uncertainties in ancient townnew projects. See page 5for details.

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