Ctrip.com Assumed Bullish At Credit Suisse

Credit Suisse assumes coverage of Ctrip.com International, Ltd. (ADR) CTRP with an Outperform rating after cost controls led to better-than-expected results at the travel service provider.

Ctrip reported second-quarter net revenue grew 75 percent to Rmb4.4 billion at the high end of the guided range but inline with consensus. However, non-GAAP net profit of Rmb57 million beat consensus estimate of Rmb40 million net loss, mainly on lower sales and marketing expenses.

The company expects third quarter revenue growth of 70–75 percent and 13–15 percent operating margin expansion. Further, the company's guidance of 90–95 percent growth from the ticketing business in the third quarter should ease investor concerns over the impact of recent airline commission structure change.

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"With near-term concerns about air ticket commission cut easing, we believe investors will gradually have their focus back on Ctrip's long-term structural growth potential story," analyst Kenneth Fong wrote in a note.

The analyst believes Ctrip's OTA model has been able to fill up the gaps left by the open platform model (largely banned under the new policy) to keep the volume while cross-selling efforts continue to offer support to overall take-rate at 4–5 percent.

"We believe the continued strength in top-line growth and efficiency enhancement should put the company on track to achieve the long-term target of 20–30 percent non-GAAP OPM," Fong added.

Fong set a new price target of $58 (up from $48 previously), while ADRs of Ctrip closed Thursday's regular trading at $48.96.

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