Goldman just upgraded CTRP from Neutral to Buy: “Given our belief that the company is well positioned to benefit from: 1) emerging secular trend of industry consolidation among travel agencies; 2) centralizing hotel bookings from fragmented supplier base; and 3) structural growth of overall travel industry in China, and sustainable shift toward online booking. We expect CTRP to continue to broaden its leadership position within the travel agency industry by taking share from smaller players, leveraging its solid service-oriented execution, expanding business aggressively while implementing disciplined cost controls. Catalyst: While the travel industry is economically sensitive, and could be impacted by a slow down in China GDP growth, we believe the secular consolidation trends among travel-related resources will more than offset the cyclical factor. We expect CTRP will consistently outperform investor’s expectations over the next few quarters, driven by its expansion into lower-tier cities for hotel booking business, continued strong growth in volume for air ticketing, increase in packaged tours with travel restrictions lifted for US and potentially Taiwan, and momentum in corporate travel. Additionally, its long range initiatives such as inbound travel could bear fruit in the coming years. We are raising our non-GAAP EPS for 2007 by 1% to $0.89, for 2008 by 3% to $1.30, and for 2009 by 10% to $1.91. 5 Valuation: We are raising our 12-month price target for CTRP from $50 to $67, based on 35x 2009E non-GAAP EPS. We believe 35x is fair given our estimated earning growth CAGR of 33% from 2009-2012, and 2008E ROE of 37%.” This is a weekly chart below.
$47.5 (02/08/08)
