Investment bank JG Capital launches research report today

Investment bank JG Capital today released a study that reiterated Ctrip's NASDAQ:CTRP "overweight" (overweight) rating, while maintaining a 70 dollar target share price unchanged.

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

Due to the positive industry trends, moderate hotel promotions, we believe that Ctrip in the first quarter of the 2014 fiscal year revenue and diluted earnings per share will be increased. Based on the 24 times-fold forecast earnings ratio for the 2015 fiscal year, and a 30% per cent increase in revenue, we believe that Ctrip's current share price is undervalued. In view of the strong growth of China's online travel market, we are bullish on Ctrip stock.

China's aviation market remains strong: The latest figures from China's Civil Aviation Authority show that passenger traffic in the first quarter of this year rose 15% Year-on-year, compared with 10% in the previous two months. During the Lunar New Year holiday, passenger traffic increased 15.5% year-on-year, compared with 12.9% a year earlier. Based on historical data, the data of the Civil Aviation Bureau and Ctrip are highly correlated.

Hotel bookings continue to grow: STR global data show that China's hotel occupancy rate rose 6.3% in the first two months of this year, compared with a year-on-year gain of 1.7% in the fourth quarter, and a 0.4% per cent year-on-year increase in the third quarter. The average room income (RevPAR) was raised by 4.3% per cent year-on-year, compared with 0.3% and 2.9% in the fourth and third fiscal quarter of last year.

Moderate Hotel Reservations: Our data show that the strength of Ctrip's hotel promotions in the first and second-tier cities of this year's February and March has slipped 100 to 150 basis points compared to last December and this January.

Adjusted performance expectations: We expect the first quarter of Ctrip 2014 revenue will reach 247.8 million U.S. dollars, an increase of 30%. The company's guidance is expected to grow 25% to 30% year-on-year, with Wall Street expected to grow 27% per cent year-on-year. Based on non-US GAAP, we expect operating margins to reach 11.1%, while the company's guidance is expected to be 10%.

Valuation: We reaffirm Ctrip's "overweight" rating, while maintaining a 70 dollar target share price unchanged.