Ctrip:Continuous bottom-line beat from strong top line &improving efficiency

Valuation attractive after another better-than-expected quarter

    Ctrip reported another strong quarter with solid revenue (3% above consensus)and a bottom-line beat (26% above consumes). Baby tiger projects are growingrapidly to provide revenue momentum - ground transportation and alternativeaccommodation are growing at triple digit YoY. Even after incorporatingspending for future growth like marketing and branding expenses in the lowtiermarket, margin increased 14ppts YoY, thanks to efficiency improvement.We believe the FY18E 27x trading P/E is compelling vs. the historical PE trend,along with 53% EPS CAGR and 33% revenue CAGR for FY17-19E. Werecommend a Buy while the market is concerned with short-term policy risk.

    Strong result; expecting cross sales model change in 4Q

    Ctrip reported revenue of RMB6.4bn (+45% YoY, 3% above consensus) and18% non-GAAP OPM (14ppts YoY, 3ppts above consensus). For 3Q guidance,revenue growth range is 35-40% YoY, in line with market expectation. Non-GAAP OP target is RMB1.5-1.6bn, above consensus of RMB0.79bn. Newbusinesses such as alternative accommodation and group transportationdelivered over 100% YoY growth. Meanwhile, the company is testing newcross-sales items to prepare for a potential business model change (to all optout).As a result, it expects revenue growth of 25-35% in 4Q, when impact willbe temporary, and revenue growth to improve from 1Q18.