Morgan Stanley keeps the target price of 15.5 dollars in the holding-watch rating

Beijing time August 15 Evening News, Morgan Stanley published a study today to maintain the "Nyse:dang" rating on Dangdang's shares, and to raise its target share price from 11.50 U.S. dollars to 15.50 U.S. dollars.

The following is the full report:

Stable second-quarter results

Total net revenue rose 31%, to 1.96 billion yuan, basically in line with the company's previous forecasts. Dangdang remained profitable for the third consecutive quarter, with a net profit of 23 million yuan and a net loss of 64 million yuan in the same period last year. The share gain for ads per share is 0.35 yuan (USD 0.06).

Total merchandise Sales (GMV) maintain healthy growth, third-quarter performance outlook is good

Total GMV (including proprietary and market operations) grew 49% to about 3.31 billion yuan. Books and media remain the largest commodity category, with GMV up 43% per cent year-on-year, up from 33% in the last quarter and 41% of the total GMV. The GMV of daily necessities, including proprietary and market operations, grew 54% per cent year-on-year. Dangdang forecast, the third quarter total revenue will increase 30% year-on-year, of which the market business GMV is expected to grow 80% year-on-year.

The promotion of gross profit margin

In the second quarter, Dangdang's gross profit margin was 18.3%, up from 18.2% in the previous quarter and 17.1% in the same period last year. This growth was mainly due to the expansion of books and media business and the GMV of market operations (up 82% per cent year-on-year).

Good user activity

In the second quarter, Dangdang total active users rose 12%, to 8.5 million, add 2.9 million. Despite a 100,000 per cent net decrease in the chain, we think this is mainly due to seasonal factors, and the number of users will rebound in the second half of 2014. The marketing cost of each new user is about 28 yuan, down 12% year-on-year. The total number of orders rose 10% to 16.5 million; average order prices rose 36% to 200 yuan a year.

The improvement of logistics efficiency

Total operating costs grew 7% year-on-year, operating margins rose to 0.7%, above 0.6% in the previous quarter and 5.3% in the same period last year. Due to the improvement of warehouse operation efficiency and the decrease of transportation cost, the proportion of logistics cost to revenue decreased 230 basic points. Since the promotion cost of the flash-purchase channel has decreased year-on-year, the marketing cost has dropped 100 basic points. Due to the increase in operational efficiency, technical costs and general management costs fell 70 basic points and 20 basic points respectively.

Maintain a "holding" rating

As a result of the improvement in earnings prospects, we have adjusted our performance forecasts for the first time in 9 months. We will be Dangdang 2014 and 2015 revenue expected to increase by 8% and 13% respectively, and the 2014 profit forecast from the net loss of 43 million yuan to profit 85 million yuan, the 2015 profit is expected to increase from 66 million yuan to 169 million RMB. We will raise our target share price from $11.5 to $15.5 based on the DCF valuation method. But the current valuation has reached its most recent peak, according to the method of corporate value versus revenue. Dangdang's share price has risen 50% to 60% since the beginning of June. We believe that the positive factors in the business have been reflected in the share price. (D-Gold)