Ctrip.com (CTRP): Raising PT After Margin Improvement - Instinet
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Instinet analyst, Jialong Shi, reiterated his Buy rating on shares of Ctrip.com (NASDAQ: CTRP), after Ctrip’s 3Q diluted EPS beat consensus of CNY0.78 on better margins.
The company posted in-line 26% YoY revenue growth to CNY5.6bn. Its operating margin improved 18pp YoY to 18%, backed by both cost savings and operating leverage. Ctrip trimmed headcount at its call centre by 16% YoY in 3Q as a result of increased adoption of tech-powered service. Ctrip reiterated its longterm operating margin target of 20-30% and GMV target of CNY1.2-1.4tr by 2020. It guided in line19-22% YoY revenue growth for 4Q16F.
By segment, transportation ticketing revenue grew 34% on a pro forma basis, driven by increased monetization for the rail and bus ticketing business which accounted for 10-15% of its total transportation revenue. Air ticketing was resilient, with faster-than-industry volume growth (10% YoY) despite shifting from 3P to 1P model. Reported hotel booking revenue grew 8% YoY. Excluding the effects of VAT and the merchant-model revenue, the growth would be 27%. Packaged tour revenue rose 37%, driven by GMV growth.
Ctrip’s gross profit of CNY4.3bn was 8% ahead of consensus forecasts. GPM of 78% was 5pp higher than Street estimates. The better-than-expected GPM was driven primarily by seasonality and strong top-line growth. Non-GAAP operating margin was 18%, up significantly from 4% in 2Q16 and ~0% in 3Q15 on a pro forma basis, backed by both cost savings and operating leverage. Meanwhile, according to the company, Qunar (QUNR US, NR) for the first time recorded positive non-GAAP OPM in 3Q16 vs -26%/-41% in 2Q16/3Q15 respectively.
The price target of $58 inches up from $57 based on higher estimates using the same DCF assumptions.
Shares of Ctrip.com closed at $40.99 yesterday.
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