Shaving revenue forecasts due to customer-centric initiatives
Ctrip is due to report 2Q results in late August or early September. Given the rolloutof customer-centric initiatives, we expect revenue to see some impact fromchanges in the hotel cash rebate mechanism and flight cancellation policy. Recall
Ctrip 2Q revenue growth guidance of 12-17% YoY; we expect Ctrip to deliver theresult towards the lower end of this range. We tweak our 2Q net revenue forecastdown by 1.2% to RMB7,277m, 12.7% YoY. We expect 2Q non-GAAP EBIT ofRMB1.1b and non-GAAP net profit of RMB751m.
Ctrip emphasized that international business would be the main driver forbusiness growth, and revealed that overall outbound travel in the first half of thisyear saw decent YoY growth. The product setting changes however will likelycontinue to bring pressure to top-line growth; we therefore lower our 3Q revenuegrowth forecast to 15.6% YoY. 4Q might see a stronger YoY growth given the lowbase last year. We shave full-year revenue by 0.6% to RMB31.6bn accordingly.
Seeking business synergies through corporate actions
Ctrip is pushing for eHi privatization. eHi is currently one of Ctrip's car servicesuppliers with whom Ctrip sees more business synergies. Ctrip revealed thaton average 30% of air ticket consumers ask for airport pick-up service. The carservice business alone is profitable, given Ctrip charges a commission on everytransaction to the supplier. We see Ctrip's offering to be different from otherprivate car or taxi-hailing service providers, as Ctrip offers pre-order long journeyservice which costs on average RMB120 per ticket. Ctrip therefore seems to haveno plans to enter into a price war with taxi-hailing providers. Ctrip also seeseHi's offline stores as key attraction sites and an important traffic generator forsubstantial cross-selling upside.
Tweak TP down by 2% to US$48; Maintain Hold
We shave our 2018/19/20E revenue forecast by 0.6%/0.6%/1.0%, and cut Ctr……[德意志银行]