Rub up Ctrip rating to overweight: 55 USD for target price

Beijing time January 15 Morning news, JPMorgan released a study today, the Ctrip (NASDAQ:CTRP) 's stock rating from "neutral" (Neutral) to "overweight" (overweight), and its target price from 50 U.S. dollars to 55.

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

-face a painful situation in the short term, but will benefit in the long term; will enter into a multi-year investment phase;

We expect the Ctrip to enter a major investment phase in 2014 years. We believe that this will bring about a short-term painful situation, but would benefit in the long term. We believe that the rate of bookings for Ctrip services will accelerate in the next three years because of the fact that its past record on implementation has been proven.

We believe that the recent fall in Ctrip share prices is a factor that takes into account the possible decline in ctrip earnings in 2014, but ignores the medium to long-term profitability. We raised the Ctrip stock rating to "overweight".

-Investments made between 2011 and 2013 have yielded results but not enough

In our view, Ctrip's low user penetration rate (which we forecast to be the equivalent of 3.4% of China's internet population by Ctrip for 2013 years, and a 1.5% share of the total population in China) suggests that the company has significant room for growth.

On the other hand, Ctrip competitors, such as Where to go (NASDAQ:QUNR) and Nasdaq:long, will also achieve user growth. Although in the past three years Ctrip in the hotel and ticket booking market has achieved the growth of service bookings, but relative to the competitors in the leading edge is weakened. We believe that the company's strategy to accelerate user growth and maximize market share is appropriate.

-The tourism market is very large; Ctrip has more shares to grab

We estimate that the penetration rate of China's high-end tourists has reached a level similar to that of the US market, because the passport penetration level of both countries is 4%. So far, Ctrip in China's high-end tourist market penetration rate of only 30% to 40%, in the middle-end tourist market share is very small. We believe that the true addressable user base of Ctrip provides 3 to 7 times times the growth opportunity.

-Performance expectations: short-term exposure to painful situations that will benefit in the long run

We are expected to cut the operating profit of 2014 (not in accordance with US GAAP) by 22% per cent, while Ctrip its 2016 operating profit (not in accordance with US GAAP) by 3%.

Our net profit forecasts for 2014 and 2015 were 18% and 20% lower than the average Wall Street analyst Ctrip, but the net profit forecast for 2016 Ctrip was 21% higher than average Wall Street analyst expectations.

-We have raised the Ctrip stock rating to "overweight", with a target price raised from $50 to $55.

Our target price for Ctrip shares is based on the assumption that the company's earnings per share in 2014 (not in accordance with US general accounting standards) is 1.57 USD, the composite annual growth rate of 41% for fiscal year 2014 to 2016, and the peg value of 0.9% times (market surplus ratio).