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Ctrip Is Expected To Deliver Yet Another Successful Quarter On The Back Of Organic And Inorganic Growth

Ctrip ( CTRP ) is slated to release its Q3 2017 results on November 1st. The Chinese OTA leader is currently experiencing healthy growth even after investing heavily towards its strategic alliances and towards its expansion in new markets. Its operating margin for Q1 and Q2 of this year was around 15% and 18% respectively, and it is expected to reach around 20% to 30% over the next couple of years. Ctrip's top line is now growing at over a 40% y-o-y growth rate. Both its top line and bottom line growth are expected to continue well into the future, especially after the gradual tapering off of its expenses and as the synergies from its big ticket acquisitions come into the picture. The two most important factors that had lately been driving Ctrip's growth are: its organic growth process as well as the soar in its air ticket sales. The latter is expected to rise even further as the integration of its newly acquired Skyscanner gets completed. This month Ctrip has invested in Tujia.com, Airbnb's biggest competitor in China and the Chinese leader in the vacation rental space, thus suggesting that it is keen on building its presence in the vacation rental segment and in giving a tough competition to Airbnb in China. We have a $53 price estimate for Ctrip's stock, which is around 11% higher than the current market price.

Ctrip's Acquisitions Are Helping It In Capturing Greater Market Shares Both In The Domestic And International Fronts

Currently, Ctrip is on the lookout for more acquisition opportunities especially entities that might help in the expansion of its global footprints or allow it to further penetrate into the lower-tiered Chinese cities where it is still struggling for a stronghold. Its majority stake in Traveling Bestone is helping it in growing a greater presence in lower tiered cities through offline stores. Ctrip has made its appearance in the Chinese brick-and-mortar travel agencies and created two types of franchised stores: the Ctrip branded stores that target the mid-to-high end customers mainly residing in China's top-tier cities, and the Qunar branded stores that aim to capture the clientele from the lower-tiered cities. Till September of this year, Ctrip and Qunar have launched 400 such retail stores and have 200 more stores in the pipeline.

Internationally, Ctrip is targeting markets like East Asia where the preferred tourist destinations match those of the Chinese travelers. Along with this, in the West it has recently collaborated with Spanish travel entities. The company is trying to expand Skyscanner's functionalities from a metasearch platform further to a air ticket booking platform, the success of which might ensure a greater share for the company in the air ticket booking market.

Ctrip's Recent Investments In Tujia.com

In October, Tujia.com, Airbnb's biggest competitor in China, raised $300 million to fund its international expansion efforts. Ctrip, along with All-Stars Investment Ltd. led the round of financing. Tujia is currently valued at around $1.5 billion, reflecting a 50% increase from its 2015 valuation. While Airbnb is emerging as a direct competitor for the OTAs, Ctrip's investments might strengthen its position against Airbnb's rising threat. Being the market leader in China's vacation rental market, Tujia's platform includes around 650,000 listings, mainly catering to the Chinese tourists who incidentally enjoy the top position among both the international and domestic tourist populations in the world. This might be Tujia's counter move to Airbnb's latest move of quadrupling its Chinese tech team in order to capture a bigger portion of the China market. Currently, Airbnb contains around 100,000 listings in China.

Ctrip's investment in Tujia might expand its presence in the vacation rental market and hence, offer it a significant advantage over players like Airbnb. Also, going by Ctrip's past behavior, it is quite possible that Ctrip acquires Tujia sometime in the future, thereby strengthening its position in the vacation rental market even further.

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com

2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Ctrip

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.