Goldman maintains neutral rating on Ctrip

The following is the full report:

Since mid-November, Ctrip and the Arts dragon have strengthened the user discounts for mobile terminals. These initiatives have increased the use and volume of mobile applications, while creating greater pressure on profitability. To reflect this change, we will be ctrip in the fourth quarter of 2013 to reduce earnings per share forecast by 6%, the 2014 and 2015 earnings per share forecast cut by 5% and 6% respectively. We believe that the "double 12" promotion will be the next catalyst for the profitability trend of Ctrip, taking into account the rich activities of various operating departments.

At the beginning of 2013, Ctrip designed the ticket discount project in a clever way. With the flexibility of sales, the move proved to be beneficial to profits. However, we believe that this optimistic trend has not been extended to the new Mobile Hotel reservation project. Relative to the air ticket booking, Ctrip in the hotel booking market leading edge is not too obvious, the ratio of the two to the art Dragon is more than 10 times times and 1.5 times times respectively. This affects the ability of Ctrip to dominate the competitive situation, and it is not conducive to the impact of consumer behavior. In response to the art-dragon discount, Ctrip's defensive stance has left the company with uncertainty about its future profit margins, especially after entering a depressed winter. In the third quarter, mobile bookings accounted for 30% of the total number of Ctrip hotel bookings. We expect the ratio to rise to 35% in the fourth quarter and rise to 50% in 2015. Our channel survey shows that nearly 80% of Ctrip's mobile hotel booking prices include discounts, and coupons face value of half the agent commission, that is, 15% of the price. Considering the inconvenience of coupon exchange, we estimate that the coupon exchange rate will be 60%. Our assumption means that Ctrip's quarterly revenue will be reduced by $8 million trillion, further reducing the operating profit margin by 3.7%.

We will carry Ctrip's 12-month target share price from 49 U.S. dollars to 44.5 U.S. dollars to reflect the lower profit expectations, and still give Ctrip 0.9 times times the market surplus growth ratio (PEG). We maintain a "neutral" rating on Ctrip's stock.