Ctrip.com International Ltd (CTRP) is China’s largest and the world’s second largest online travel agent by market capitalization. With over 300m users the company is a leading provider of online travel and related services, including accommodation reservation, transportation ticketing, package tours, in-destination services, and corporate travel management in China.[mepr-active membership=”1734″ ifallowed=”show” unauth=”message” unauth_message=”Please login or purchase a membership to view full text.”] Ctrip.com’s brands include Qunar, a leading online agency for budget travelers in China, Trip.com, an online agency for international travelers, and Skyscanner, a leading global metasearch travel site with nearly 70m monthly users. Furthermore, Ctrip.com invested in MakeMyTrip, India’s leading online travel agency.
Ctrip.com’s transportation ticketing segment accounted for 42 percent of the revenues and grew by 6 percent over the last year. Second largest business is the accommodation reservation segment which accounted for 37 percent of the revenues and increased by 21 percent over the last year. Packaged-tours accounted for 12 percent of the revenues and grew by 27 percent over the last year.
Chinese are one of the biggest travelers in the world with about 140m outbound trips in 2018. The China National Tourism Administration forecasts over 200m trips per year by 2020. And only 6 percent of the Chinese owns a passport so far with about 10m new documents issued every year. This gives plenty of room for growth.
Ctrip.com was founded in 1999 and is headquartered in Shanghai, China. The company is listed on the US Nasdaq exchange since 2003. Its shares can also be traded in Germany, Singapore, Mexico, Austria, and the UK. Major shareholder is Baillie Gifford & Co. with ownership of around 9 percent. Directors and senior management hold about 5 percent in the company. About 49 percent of the shares are in public hand.
With a workforce of about 40 thousand employees, Ctrip.com reported net revenues of 31bn RMB (4.6bn USD) and profits before tax of 1.9bn RMB (286m USD) over its fiscal year 2018. This is an increase in revenues of 16 percent while profit dropped about 45 percent respectively compared to the same period a year ago. In 2017, net revenues and profits increased by 39 and 299 percent respectively. The operating margin of 8 percent is still below industry average. Ctrip.com’s cash reserves increased by 18 percent to 21.5bn RMB (3.2bn USD), while debts increased by 31 percent to 59.6bn RMB (8.9bn USD) over the year 2018. The company shows a stable balance sheet with good profitability and financial strength. The equity ratio is at 48 percent and the gearing, defined here as total liabilities to total equity, at acceptable 109 percent. Moody’s daily credit risk score for Ctrip.com is 5, which stands for medium risk, based on the day-to-day movements in market value compared to the company’s liability structure. Next earning results will be announced on 21.May.
Ctrip.com’s shares have been in a downtrend since August 2017 and reached a bottom at around 25 USD last November. Since then, the shares gained more than 60 percent in value and crossed its upturning 200-day moving average recently, a bullish technical signal. Ctrip.com is currently priced at 157 times earnings, 1.8 times book value. The company pays no dividend. 23 out of 34 analysts have a ‘buy’ or ‘outperforming’ recommendation on the stock.
Our conclusion: Ctrip.com shows a healthy balance sheet with good profitability and financial strength. However, the valuation looks currently very high due to losses in Q3 and Q4. The outlook for the travel industry is positive with an expected growth rate of around 4 percent globally. The Asian market on the other hand, on which Ctrip.com operates almost exclusively, is expected to grow by 68 percent between 2017 and 2021 and offers enormous potential. A promising market that will also attract more well-funded competitors such as Meituan Travel, Alibaba’s Fliggy and Expedia. With the acquisition of Skyscanner and Trip.com Ctrip.com is well positioned for its further expansion abroad. The smart use of big data analysis and artificial intelligence and the implementation of new travel technologies will give Ctrip.com a competitive edge on its further expansion plans.
Ctrip.com’s revenues and profits grew by 22 and 65 percent respectively over the last three years. The company expects to grow sales by another 20 percent this year. Assuming a stable global economy, we expect the share price to increase 15 to 20 percent until the end of this year. Nevertheless, considerable downside risks remain inherent due to the already high valuation.
AIS Rating: ★★★☆☆
| 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | |
|---|---|---|---|---|---|---|
| EPS (RMB) | 26.6 | 6.4 | 56.9 | -24.2 | 30.8 | 15.7 |
| Change | 34% | -76% | 795% | -143% | 227% | -49% |
| P/E | P/E SECTOR |
P/B | P/CF | Equity Ratio* |
ROE | LIAB./ Equity** |
Div YLD |
|---|---|---|---|---|---|---|---|
| 157 | 19 | 1.7 | n/a | 48% | 3% | 109% | n/a |
* Equity / Total Assets, ** Total Liabilities / Equity
[/mepr-active]
