Deutsche Bank to maintain Ctrip buy rating to 80 U.S. dollars

On the evening of August 7, Beijing time, Deutsche Bank released its research report today to maintain a "buy" rating on Ctrip and to raise its target share price from 73 to 80 NASDAQ:CTRP.

The following is the full report:

Ctrip and Priceline cooperation: potential win

Ctrip and Priceline announced today that they will expand their partnership. (Previously, two companies reached an agreement in August 2012.) According to the agreement at that time, Ctrip can book the Booking.com website in more than 235,000 cooperative hotels worldwide through Ctrip's platform. ) Two companies will: 1 mutual open range of larger, complementary hotel inventory, 2 mutually provide only for members of the preferential price, 3 cross to promote each other's travel services, such as OpenTable and car rental services. In this new partnership, Priceline will receive 10% per cent of Ctrip's shares (including a 500 million-dollar convertible bond issue, as well as an open market takeover of shares over the next 12 months). Ctrip said the conversion price of the convertible bond was more than USD 80 (the conversion price of the convertible bond issue in October 2013 was $78.4). As a result, the maximum dilution of the current shareholder stake in the convertible bond issue will be limited to about 5% per cent.

Potential synergies will benefit hotel bookings and outbound travel services

China's outbound travel market is growing rapidly, with a total of more than 98.2 million outbound trips in 2013, up from 57.4 million in 2010, and an annual compound growth rate of 20%. Although synergistic effects are two-way, we expect the company to benefit from it, including: 1 large expansion of global hotel inventory, 2 hotel cross-selling growth, 3 priceline other travel services for Ctrip, For example, ticket bookings for overseas travellers and promotional support for local life services. At the same time, user bookings will still be carried out within the autonomous platform of Ctrip, and Ctrip will take the mode of revenue-sharing for these bookings. At present, the volume of Ctrip's overseas hotel bookings (about 50% from Priceline) accounts for less than 5% of the total hotel bookings. We expect a significant increase in Ctrip's outbound travel and overseas inbound travel, which will be reflected in tourism and hotel bookings. On the other hand, where to go will still get Priceline Hotel inventory information, while the International hotel booking volume accounted for less than 10% of the total number of hotels.

The change of the competition situation, the strong is stronger

Compared with other participants in the industry, Ctrip has established a clear competitive advantage. Ctrip is still seeking opportunities for development in other markets and other categories (such as the mindeducation of overseas travel services and the investment of student travel market leaders). We estimate that Ctrip will hold 2.2 billion dollars in cash after this transaction. We believe that the combination of the two travel service giants will bring a price advantage to Ctrip and a favorable inventory.

Target share price up 9% to $80 to maintain "buy" rating

We will increase the revenue forecast for 2015 and 2016 respectively, 4% and 7%, and maintain the revenue forecast for fiscal year 2014. As a result of the share dilution effect, we will carry Ctrip for the 2014 fiscal year earnings forecast per share cut 1% to 1.2 U.S. dollars. We will increase the earnings per share of the 2015 and 2016 for the financial year 1% and 6% respectively, to 2.0 U.S. dollars and 3.1 U.S. dollars. Our new target share price of 80 US dollars is 1.1 times times more than the market growth ratio (PEG), and the annual compound growth rate of 2014 to 2016 fiscal year per share is 61.7% (higher than previous 56.2%). Maintain the "buy" rating of Ctrip stock. The main risk is back-end consolidation. (D-Gold)