UBS: Zhaopin 'Well-Positioned,' Is A Buy With 20% Upside

In a report published Tuesday, UBS analyst Ming Xu initiated coverage of

with a Buy rating and $18 price target. With the stock trading at a discount to its domestic peer, the valuation is currently attractive with upside potential, going forward, given the company's strong core business growth. The analyst believes that Zhaopin is a "leading online career platform," and is well positioned as an industry leader in the Chinese online recruitment domain, given its significant traffic, scalable business and wide geographic coverage. "Zhaopin has proactively expanded its business by tapping into new markets and increasing product innovation. Its recent focus on SMEs and lower-tier cities has helped it record strong gains in its employer base," Xu stated. However, the analyst also believes that this focus could lead to continued ARPU dilution, as well as higher selling costs in FY16. At the same time, the company has been able to attract more customers and diversify its offerings with its new Hipin.com product, while also venturing into the mobile market with the launch of two new products. The analysts expect Zhaopin to post revenue CAGR of 18.6 percent, with stabilizing margins during FY15-19, while also expecting the company to continue to gain market share, despite tough competition.