Sina's stock rating remains on the sidelines (equal-weight) unchanged

Changes：

Target price raised from 62.1 dollars to 74.1 dollars

Sina's second-quarter performance was solid, mainly due to improved commercialization of micro-blogging and operating leverage that boosted profit margins.

-Earnings exceeded expectations: Sina's second-quarter sales were 157.5 million U.S. dollars, up 20% from a year earlier, compared with the upper limit of Sina's previous range and our previous expectation of 4% to 5%, mainly because of the steady pace of the commercialization of microblogs and the revenue from one-time MVAs (mobile value-added services) sales. Not in accordance with U.S. general accounting standards, Sina's second quarter diluted earnings per share of 0.21 U.S. dollars, higher than our expected 0.15 U.S. dollars and Wall Street analyst average expected 0.12 U.S. dollars, mainly thanks to operating leverage.

Favorable factors:

1 Sina's second-quarter sales from Weibo were 37.7 million U.S. dollars, up 170% from a year earlier, while the share of the total revenue in Sina's second quarter was 24%, up from 10% in the same period last year;

2 The growth of microblogging user activity, the number of active users in June up to 54 million people, increased by 8% than in the previous quarter; users spend more than 14% on mobile platforms;

3 not in accordance with the United States General accounting standards, Sina's second-quarter operating profit margin than last year's growth of 6%, mainly because of improved advertising performance, and benefited from operating leverage;

4 The third quarter of Sina performance Outlook stable. Sina expects net sales in the third quarter to rise 19% to 22% from a year earlier, with advertising sales rising 25% to 27% from a year earlier.

Advances in microblogging commercialization: We have raised Sina's target price to $74.1 on the basis of cash flow discounting, a move that reflects the expectation that Sina's earnings growth, cash balance growth and capital spending will fall. Weibo still holds a majority in the advertising sales of Sina's brand advertisers, but its new advertising services may help broaden its user base to small businesses and e-commerce customers, which could provide a measure of action for Sina in the next few quarters.

Investment theme:

-Sina is the second-highest online portal in the Chinese market, and is ranked second in the network brand advertising sales;

-microblogging commercialization through advertising and paid services could be the driving force behind Sina's new sales growth. We expect Weibo revenue to be 20% to 30% of its total revenue in the 2013 fiscal year.

Key value drivers:

-Number of advertisers and average revenue per customer growth;

-Mobile value-added services sales revenue steadily increased;

-Blogs, micro blogs, video sharing, and paid search services generate additional revenue streams.

Potential irritant momentum:

-Increase in advertising costs;

– A stronger recovery in the advertising market;

-Rapid commercialization of microblogs.

Main risks:

-Regulatory risks in the Chinese media industry, especially the tightening of control measures for online audio and video content;

-Competition from major portal sites;

-China's advertising market is growing more slowly than expected. (Tangfeng)