Days Hao Capital published research report today, maintain Ctrip buy rating

Summary: View the latest quotes Beijing time, August 1 morning news, Days Hao Capital published research report today, the Ctrip (NASDAQ:CTRP) stock rating to maintain the same, and its target price from 66 U.S. dollars to 72 U.S. dollars. The following is a summary of the report on the latest market Beijing time August 1 morning news, Days Hao Capital published a study today, the Ctrip (NASDAQ:CTRP) stock rating maintained in the "buy" (purchase) unchanged, and its target price from 66 U.S. dollars to 72 U.S. dollars.

The following is a summary of the contents of the report:

Are there any other options besides investment? Maintain a "buy" rating and raise the target price

-We believe that in order to maintain the leading position in the rapidly evolving China tourism market, Ctrip has no choice but to invest in the brand and product, otherwise it will be surpassed by the market competitor. It is worth noting that Ctrip has a good track record in investment enforcement. In the recent period, including the second quarter of fiscal year 2014, Ctrip's investment opportunities have made a significant improvement in its business.

Ctrip's second-quarter results in fiscal 2014 exceeded the company's own expectations and Wall Street analysts ' average expectations, but margins were far below the same period last year. We believe that, as Ctrip has decided to continue investing for at least the remainder of 2014, it is likely to achieve better performance in fiscal year 2015, when both revenue and profitability will rise. Based on this, we keep the Ctrip stock rating unchanged at "buy" and raise its target price to $72.

-Investment to stay ahead:

China's tourism market is evolving rapidly, so it is necessary for Ctrip to invest in new areas to maintain its leading position. In the case of brands, tourism is becoming popular in lower-line cities, while Ctrip's brand awareness in these cities is still low.

Based on our analysis of the 136,139 hotels (both domestic and foreign) that are available for booking at Ctrip Station as of July 19, 2014, the total number of five-and four-star hotels is only 10.5%, but the contribution of customer reviews (with a great correlation with hotel guest room nights) accounts for 38.3. % of the total number of No star hotel in the proportion of 40%, but the contribution of the hotel guest room night only accounted for 1%. Ctrip needs to invest in the brand to infiltrate hotels in lower-line cities.

According to data released by China Internet Information Center, only 29% of internet users in China use online travel booking service in 2013, and only 9% of mobile internet users use mobile devices to book travel services. In the second quarter of fiscal year 2014, the total number of users in the Ctrip was only 35 million, and there was a lot of room for development in the future.

-from Ctrip's previous record of implementation, positive investment activities are likely to lead to long-term growth and profitability:

The result of Ctrip's investment in product development and branding was that its second-quarter operating margin, which did not follow us GAAP, fell to 12%, down from 25% in the same period last year and flat against the previous quarter.

Investment activities also brought another important result: Ctrip's hotel bookings in the second quarter grew 47% from a year earlier, while transportation booking business revenues grew 39% year-on-year. At the same time, the second quarter of Ctrip business booking volume has achieved a higher growth, of which hotel bookings increased 64% year-on-year, transport booking volume of growth of 83%. As Ctrip says it will continue to invest in products and brands in the second half of the year, we think its margins may not improve, but based on Ctrip's previous record, revenues are likely to grow strongly.

Ctrip's hotel marketing activities in the third quarter of fiscal year 2012 and the airline booking offers that were taken in the first quarter of fiscal year 2013 have resulted in fairly good results. After a hotel marketing campaign in the third quarter of fiscal year 2012, hotel bookings in Ctrip reached a growth rate of 41% to 55% in 2013 years, up to more than 60% in the first half of 2014, compared with 21% to 36% in 2012. In the first quarter of fiscal year 2013, the rate of ticket bookings for Ctrip increased to 26% to 29% in 2013 years, and the first half of 2014 rose to 40%, compared to 10% to 24% in 2012.

-The second-quarter results are far more than expected, and future bookings are likely to continue to grow rapidly:

Ctrip's net revenue for the second quarter was $277.6 million trillion, exceeding the upper limit of the company's previous expected range (USD 270.3 million), The average Wall Street analyst expected $269.3 million trillion and our previous forecast of $266.9 million trillion, with a yield of $0.14 per share, and a higher than the average Wall Street analyst's expected $0.11 trillion.

The main driving force for performance improvement is the accelerated growth of core business bookings: Hotel bookings grew 64% year-on-year, and transport bookings increased by 83% per cent year-on-year. Ctrip Management forecasts that net revenue in the third quarter of fiscal year 2014 grew 30% to 35% (322.9 million to 235.3 million US dollars) year-on-year, with a value of 329.1 million dollars, roughly the same as the average Wall Street analyst's expected $334.3 million trillion. Ctrip also predicts a strong year-on-year increase in the volume of business bookings in the third quarter, which is expected to grow 60% to 70% per cent year-on-year.

-Adjustment of performance expectations:

After the Ctrip released its second-quarter earnings, we adjusted for its performance expectations. For the third quarter of fiscal year 2014, We've lowered our net revenue forecast from 338.3 million to 331.3 million dollars, earnings per share are expected to fall from USD 0.31 to $0.20; for the 2014 fiscal year, we are expected to reduce net revenue from 1.1769 billion US dollars to 1.173 billion U.S. dollars per share, from 0.70 US dollars to 0.64 US dollars, and not according to US GAAP per share Earnings are expected to fall from $1.19 trillion to $1.11.

For fiscal year 2015, we lowered its net revenue forecast from $1.5529 billion to $1.5505 billion, and earnings per share were expected to rise from 1.29 US dollars to 1.33 US dollars, not to 1.80 US dollars per share of U.S. general accounting standards.

Valuation：

Ctrip is in good position, will be able to seize China's leisure tourism market and mobile tourism market growth opportunities. Therefore, we maintain the "buy" rating of the Ctrip stock and raise its target price from USD 66 to $72. This 18-month target price is calculated on the basis of our latest estimate of Ctrip earnings per share in the 2016 fiscal year (not in accordance with US general accounting standards) of 2.86 US dollars multiplied by 25 times multiples.

-Key risks:

1 The competition is fierce: every business in Ctrip is facing competition from its peers. If the competition becomes more intense, the company's business growth and profitability are likely to be under pressure.

2 tourism demand is weaker than expected: our Ctrip valuation is highly dependent on the positive Chinese tourism market prospects, especially the development of China Mobile tourism market. However, the growth of tourism may be limited by external factors such as infrastructure, supply capacity of tourism resources, weather, government regulation, travel habits and even foreign relations between China and tourism destination countries. If tourism demand is growing more slowly than expected, the upside potential of Ctrip shares will be adversely affected.

3. Implementation risk: We set the Ctrip stock target price based on the expected 2014 fiscal year earnings per share (not in accordance with U.S. General accounting standards) will fall 23%, followed by the 2015 fiscal year growth of 51%. If the company management cannot achieve this level of growth through good execution, its target price may be under pressure.

-Other risks:

1) macroeconomic risks, 2 natural disasters and epidemics, 3 regulatory risks. (Tangfeng)