Morgan Stanley to give Dangdang "hold-see" rating

Beijing time February 24 Morning News, Morgan Stanley published a study today to give Dangdang (Nyse:dang) Stock "wait-and-see" (Equal-weight) rating, the target price set at 7 U.S. dollars.

The following is a summary of the report:

Dangdang net revenue rose 73% in the fourth quarter of 2011, to 1.23 billion yuan, more than our expectations and the company's own expectations are 5% higher. Net loss of 130 million yuan, higher than our estimated 94 million yuan.

Positive factors: 1 sales of books and media products rose 33% year-on-year, compared with a 27% increase in the third quarter. Commodity sales rose 210% Year-on-year, the proportion of total sales reached 39%, while the same period last year accounted for 22%; 2 new users of the number of innovative high, up to 2.1 million, year-on-year growth 59%,arpu (per user average income) year-on-year increase of 27%, which mainly benefited from the increase in consumer spending; 3) Dangdang expects sales to rise 60% in the first quarter of this year.

Adverse factors: Net loss from the third quarter of the RMB 73 million to expand to the fourth quarter of the RMB 130 million: 1 Gross profit fell to 10.5%, the chain down 330%, this is because the proportion of the site sold to increase the percentage of daily necessities, and the lower profit margins; 2 sales and promotion costs accounted for 5.6 of the Revenue %, the quarter-on-quarter increase of 70%, the third quarter accounted for 4.4%, the same period of 3% last year, because Dangdang's brand promotion campaign, launched in mid-September last year, has had an impact on revenue throughout the quarter.

Profitability is still very low predictability: Dangdang is still in the additional investment, including the expansion of the type of commodity services, the distribution capacity of the upgrade, the electronic book distribution channels for the construction. Dangdang launched its ebook platform last December, with more than 50,000 books, with discounts of 70% to 80% higher than paper books. That is to say, the competition pressure that Dangdang faces may be reduced, because the main competitor has recently narrowed down to the user's delivery discount intensity. In addition, some of the key online advertising channels (such as paid search) rates may be more reasonable this year. Some of the electronic business site facing the difficulty of financing increased.

We give Dangdang stock "wait-and-see" (Equal-weight) rating, based on the cash Flow discount method (DCF) valuation method, the Dangdang's target price set to 7 U.S. dollars, industry outlook is "attractive."

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