Deutsche Bank to maintain Ctrip to buy rating target price reduced to 73 U.S. dollars

Beijing time July 31 Evening News, Deutsche Bank today issued an investment report to maintain the NASDAQ:CTRP "buy" rating, the target share price from 74 U.S. dollars to 73 dollars.

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

Revenue exceeded expectations: Ctrip 2014 in the second quarter net revenue of 1.7 billion yuan, the year-on-year growth of 38%, the chain growth of 9%, exceeding the company's guiding expectations of the upper limit (up 35%), higher than our expectations 1%, higher than the Wall Street expected 3%. Diluted earnings per share of 0.26 dollars, 32% higher than Wall Street expectations, but 18% lower than our expectations. With 100 million active mobile users, the second quarter of the mobile platform contributed to the hotel booking volume of 40%, ticket booking volume of 30%, train ticket booking volume of 80%. As a result of restarting our investment plan to maintain market share, we expect Ctrip's profit margin to be postponed to the second half of this year. But the investment will bring more operational leverage in 2015, so we continue to maintain the "buy" rating of the Ctrip stock.

Operating profit margins are low: in the second quarter, Ctrip's operating profit margin was only 11.7%, the chain fell 0.5%, the year-on-year growth of 13%, compared to Wall Street's expected low 50 basis points, lower than our expectations 140. Ctrip also restarted investment plans, including 1000 new employees in the second quarter. Although operating costs are higher than expected, we think the second half will be significantly compressed and will bring significant operational leverage in fiscal year 2015. To this end, we will carry Ctrip in the 2014 and 2015 fiscal year operating margin expectations to be lowered to 13% and 18.7%.

The new strategy has a positive effect: we have noticed some positive effects of Ctrip's new strategy: 1 accelerating expansion to lower-level cities: the addition of 40,000 domestic hotels has led to increased local sales force. 2 new Category: Train/Car ticket booking volume increased by 35% to 4.2 million, 80% from mobile platform.

Adjustment of performance expectations: We will carry Ctrip in the 2014 fiscal year and 2015 per share of diluted earnings forecasts are lowered by 18% and 7% to 1.2 U.S. dollars and 2 U.S. dollars respectively.

Valuation: We continue to maintain the "buy" rating of Ctrip, which will reduce the target share price from 74 US dollars to $73. (Li Ming)