Aegis capital down Ctrip to hold target price of 66 USD

Beijing time August 1 Evening News, Aegis Capital released a study today, will carry Ctrip (NASDAQ:CTRP) 's stock rating from "buy" down to "hold", and to give the target price of 66 U.S. dollars.

The following is the full report:

Revenue and profit exceeded expectations, downgrade

Earlier this week, Ctrip reported the results for the second quarter of 2014. Net revenue is 277.6 million dollars, more than our estimated 267.1 million dollars. This is mainly due to the continued growth of booking and traffic ticket sales. Operating profit margin of 5.3%, Ctrip is continuing the previous strategy, that is, to strengthen product development and marketing spending to increase market share. Although this operating profit margin is far below 15.7% in the second quarter of 2013, it still meets our expectations. Diluted ads per share revenue of 0.14 U.S. dollars, higher than our estimated 0.07 U.S. dollars.

Ctrip Management forecast, 2014 third quarter revenue will increase 30% to 35% year-on-year. We currently expect Ctrip's 2014 and 2015 revenues to be 1.171 billion and 1.471 billion, with operating margins of 6% and 10.6% respectively. We anticipate that Ctrip's shares of ads for 2014 and 2015 are 0.55 and 0.85 dollars respectively for each share.

As a result of this expected adjustment, and taking into account the current stock price of Ctrip, we will carry Ctrip's rating from "buy" to "hold" and give US $66 for 12-month target share price.

Strong growth, lower profit margins

We believe that in the foreseeable future, Ctrip is probably the only profitable company in China's online travel service market. We anticipate that in the airline booking, as well as the possible hotel reservation market, Ctrip will continue to face the competition where to go. Where to go. This area is being strengthened. Expedia recently said in a filing to the Securities and Exchange Commission (SEC) the company noted that some Chinese media reported inaccurate rumours about the company's majority stake in the Art Dragon, which "will remain the long-term investor of the Art Dragon and will support the art Dragon as China's leading travel site". Therefore, the art dragon is unlikely to disappear from the market in the short term and will continue to compete with Ctrip in the hotel reservation field.

To combat the profitability of all competitors, Ctrip has invested heavily in product development and marketing, thereby seizing as much market share as possible. Ctrip has also made strategic investments that will focus on some specific travel market competitors into partners, such as the same network and the use of cattle investment. We anticipate that Ctrip will continue to adhere to this strategy in the future. Therefore, although we anticipate that 2015 Ctrip's operating profit margin will increase, but such promotion will not be too big. Ctrip needs to prove that the company can gradually increase profitability while maintaining the highest level of revenue growth in the history.

Valuation

After comparing and analyzing, we conclude that Ctrip's business value is 9.8 billion U.S. dollars, which is equivalent to 66 dollars per share. We believe that the current stock price reflects the inherent potential of ctrip and the risks faced, so close to fair value. At $64 a share, the current price-earnings ratio of Ctrip has reached 75 times times, and the prospective earnings ratio for 2015 is 47 times times higher. (D-Gold)