Deutsche Bank maintains Ctrip's target price cut to 77 USD

Beijing time September 29 afternoon news, Deutsche Bank released a study today to maintain the "buy" rating of Ctrip (NASDAQ:CTRP) shares, and cut the target share price to 77 U.S. dollars.

The following is the full report:

Market share growth has brought confidence, but profit margins will still take time

Last week, we met with Ctrip's management in a trading-related roadshow in Europe. We have a more constructive view of the strategic focus of Ctrip, including: 1 comprehensive product line, as well as the development of the "Baby Tiger" project, 2 open platform initiatives, as well as cooperation with partners to promote the promotion of 3 active branding, thereby infiltrating the lower-line cities. However, as a result of the massive investment and marketing campaigns (in response to competition), we expect that margins will rise at a limited rate as revenue grows strongly. We cut our target share price by 4% and maintain a "buy" rating.

Mergers and acquisitions: working with Priceline rather than choosing bat

Ctrip Management reiterated that the company is inclined to work with travel industry companies to achieve the replenishment of inventory and cooperative procurement, rather than with a simple "source of traffic" to cooperate, because Ctrip's own flow is enough. In addition, we anticipate that Ctrip and Priceline will strengthen cooperation in the areas of payment, settlement and branding. Priceline's stake in Ctrip will be limited to 10% (5% from the open market, 5% from the convertible bond) and an observer seat on the Ctrip board (without voting rights). We expect that in the short term Priceline will not be much help to Ctrip's international hotel business, but the fiscal year 2015 will gradually strengthen.

Cruise ship acquisition: A strategy to move towards heavy assets

We believe that the recent acquisition of a cruise ship is likely to be a one-off strategic project. In view of the lack of experienced cruise ship operators in China, Ctrip hopes to gain a head start in this fast-growing area through such a move, but will not move towards a business model of heavy assets. Ctrip is currently looking for senior operators for the exquisite Century (celebrity Century), including the Royal Caribbean International Cruise and Carnival Cruise. We expect that by the middle of 2015, Ctrip will reduce the proportion of Skysea shares held to less than 50%, thus becoming a small shareholder of the company.

Target share price cut 4% to $77 to maintain "buy" rating

According to the adjusted profit margin Outlook, we will be in the year 2014, 2015 and 2016, the U.S. general accounting standards operating profit margin is expected to cut down 50 basic points, 1% and 1%, to 12.5%, 18% and 22%, while maintaining the current revenue outlook. Accordingly, we will cut the corresponding earnings per share by 2%, 4% and 3% respectively. The 77-dollar target share price is based on a 1.1 times-fold annual compound growth rate of 2014 to 2016 of the net profit for fiscal year 61% (before 62%), which is the equivalent of 2015 per cent forecast earnings for the fiscal year 40 times. Maintain a "buy" rating. Key risks: Market landslides, increased competition. (D-Gold)