SouFun shares lowered target share prices from 17 to 10

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

We will soufun stock rating from "overweight" to "neutral, mainly because of the housing market downturn led to SouFun's listing service prospects bleak." SouFun yesterday announced that, since June, its second-hand housing group products in the current discount on the basis of a further 60 percent, until the end of this year, to help real estate agencies through the current difficulties. We believe that the move in the short term to soufun adverse, but long-term is a good, because it will strengthen the relationship with real estate agents. In addition to deteriorating listings services, E-commerce Business may also continue to be sluggish in the next few quarters. Because in order to expand market Share, SouFun take-rate (deduct the ratio of the gross income after the marketing expenditure) or will continue to decline. We expect to affect SouFun's share price performance in the next few quarters as the market has lowered its soufun performance forecasts.

Three measures to deal with the agency: in order to deal with the recent boycott of real estate agencies, SouFun yesterday gave a detailed solution: 1 soufun Second-hand Housing group products in the existing discount on the basis of a dozen 60 percent, 2 wireless full range of products presented; 3 brokerage companies to promote financial support. The first two measures will bring economic benefits to the agency may be as high as 500 million yuan.

Adjustment of performance expectations: We will SouFun 2014 and 2015, the distribution of housing services revenue forecasts are reduced by 30% and 27% respectively, to reflect the impact of the three-point compensation measures. We expect 2014 SouFun listings to grow 2% and rebound to 25% next year. We will SouFun 2014 and 2015 operating profit margins were lowered by 5% and 4% respectively, because the listing service is a high profit margin business. Our estimates of SouFun earnings per share in 2014 and 2015 were 14% and 9% lower than Wall Street expectations respectively.

Valuation: We reduced the SouFun stock rating from "overweight" to "neutral" and lowered the target share price from $17 to $10. (Li Ming)