BofA Merrill Lynch to raise target price to 41 USD

Sina Science and technology news Beijing time of August 1 night, BofA Merrill Lynch released a study today to maintain the "buy" rating of Ctrip (NASDAQ:CTRP) shares, and raised the target share price to 41 U.S. dollars.

The following is the full report:

With the normalization of coupon competition and the rebound in industry from last year's nadir, Ctrip's performance growth and profit margins have continued. In addition, two major long-term trends to make Ctrip income: 1 Outbound travel business. The business currently accounts for more than 10% of Ctrip's booking revenue, while the annual growth rate reached 50% to 100%. 2 mobile business. The business currently accounts for 15% to 20% of Ctrip's booking revenue. These two factors will enhance the market entry threshold and help Ctrip improve long-term profitability. Therefore, we will be Ctrip's 2015 earnings per share increase forecast by 5%, operating profit is expected to increase by 10%, and will be based on the DCF valuation method to raise the target price to 41 U.S. dollars, including 2 dollars ctrip to such as home and other companies equity investment value.

Given the limited menu space for mobile devices, users often download big-brand apps, which often offer richer services. The mobile business also requires additional research and development investments, so small online travel companies have a disadvantage in this regard. Ctrip also found that mobile users often use services many times, has a slightly higher conversion rate, the demand for offline customer service is also less. Therefore, mobile business will help Ctrip better manage the cost of marketing and customer service, in the long run will become a better profit margin channel.

Outbound travel requires an online travel company with a wider range of hotel and flight coverage and a better customer service level. For small companies, the cost of the business is too big and challenging. While there is a need to share revenue with hotel reservation services such as Booking.com, and back-end processes such as transactions and payments are more complex, the long-term profitability of outbound travel will be better than that of domestic travel because the revenue from each order is usually higher. We estimate that outbound travel orders will account for 5% to 10% of Ctrip's total orders, but the share of revenue is larger and will grow at a higher double-digit rate. (D-Gold)