Morgan Stanley to maintain the outlook on the stock of the target price 19.3 dollars

In the morning of August 1, Beijing time, Morgan Stanley released a study today to keep Nasdaq:tour's stock rating at the Equal Weight, while lowering its target price to $19.50 to $19.30.

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

Outlook for the second quarter of fiscal year 2014: Mobile business trends are good, but recent weakness in profit margins

We expect the second-quarter earnings growth to be sound, but margins are weak because of the company's increased investment in the area of mobile and network expansion. We kept the stock rating of the bull in the "hold-see" unchanged and adjusted its target price to $19.3. We will reassess the valuation of Dang cattle when visibility increases in profitability.

Changes：

Target price raised from 19.3 dollars to 19.5 dollars

-We are expected to raise the total revenue of the second quarter of fiscal year 2014 to 657 million yuan (up 69%), mainly because of the promotional activities and the growth of revenue from the mobile business.

In the second quarter of fiscal year 2014, we expected to raise the operating loss of 16% to 128 million yuan, mainly because of its operating expenses exceeding expectations. The reason for operating expenditure exceeding the forecast is as follows: 1 active brand marketing and mobile promotion measures, 2 mobile team expansion, 3 Service center expansion, 4 equity incentive expenditure growth. We are also expected to raise the net loss in the second quarter of fiscal year 2014 by 7%.

-The rapid growth in the second quarter of the mobile business was driven by promotions and the rise in the mobile adoption rate of the flash-purchase channel:

The mobile business currently accounts for 40% of its total traffic, up from 25% in May, according to passers-by. In addition, the contribution of mobile to the total order has reached 40%, but the transaction value of each order is lower. In addition, the rise of people's tolerance in the flash-purchase channel has also played a role in pushing up mobile traffic because users tend to view flash-purchase information more and more on mobile devices.

-Through the expansion of the Offline service center and the introduction of the latest online distribution platform to the way, the business continues to the low line of the city penetration:

Passers-bull recently opened five new offline service centers in lower-line cities to improve user experience and improve penetration rates. In the June 2014, it released an online distribution platform that enhanced the bargaining power of the value chain and accelerated the rate of penetration in lower-line cities.

-The flash-buy channel attracts new users and more traffic, but in the long run it may depress profitability:

The current share of the total turnover has reached 5% per cent, the Bulls said. We believe that the flash-purchase deal will continue to attract more new users and traffic, but the impact could be offset by lower margins.

-Waiting margin Visibility:

Because of the higher than expected operating expenses of the cattle, we will increase the net losses in fiscal 2014 and 2015 for the 4% and 2% respectively, and reduce its target price from 19.5 US dollars to 19.3 US dollars. We are still optimistic about the leading position of the pedestrian in the leisure tourism market, the development of the mobile business and the strategy of penetrating into the low-line cities; If the profit margin of the bull is improved, we will be more optimistic about its prospects.

-Investment Theme:

1 According to the expected sales in the 2014 fiscal year, the ratio of the enterprise value to the adjusted sales is 13.7 times times, and 6.7 times times the expected sales in the 2014 fiscal year, compared with Ctrip (NASDAQ:CTRP) 6.2 times times.

2) is a leading online tourism intermediary agency, in the past 8 years has been the focus of business in the leisure tourism market. China's leisure tourism industry is growing rapidly, its 2013-year growth rate of 53%, but the online penetration rate is still low. The pedestrian will be able to use the growth of online leisure tourism market to achieve profitability;

3 The pedestrian is still in the investment cycle, its recent profitability visibility is low;

4 The competition situation in the online travel intermediary industry is increasingly fierce, which brings more uncertainty to the cattle.

-Main value driving force:

1 total turnover with group tour and self-help tour;

2 Operating profit margin driven by scale, supplier pricing capability and cost control measures.

-Potential irritant factors:

1 The market demand is strong, online tourism service is accelerated by the adoption of the increase in market share and accelerate the growth of its total turnover;

2 operating leverage and robust cost control measures to accelerate the expansion of profit margins.

-Target price risk:

1 higher than expected operating expenditure may lead to a decline in profitability visibility;

2 The increase of competition pressure and softening of market demand may lead to slower sales growth;

3) Uncontrolled events or government policy changes in leisure tourism have led to fluctuations in sales. (Tangfeng)