Stock Update (NASDAQ:CTRP): Ctrip.com International, Ltd. (ADR) Reports Unaudited Third Quarter of 2015 Financial Results


Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP), leading travel service provider of accommodation reservation, transportation ticketing, packaged tours and corporate travel management inChina (“Ctrip” or the “Company”), today announced its unaudited financial results for the third quarter ended September 30, 2015.

Highlights for the Third Quarter of 2015

  • Net revenues were RMB3.2 billion (US$501 million) for the third quarter of 2015, up 49% year-on-year.
  • Net commission earned (non-GAAP) was RMB3.1 billion for the third quarter, up 47% year-on-year. Net commission earned (non-GAAP) is calculated by deducting from the revenues the cost of transactions in which the Company undertakes majority of the business risks, including the inventory risks*. The Company accounts for discounts offered to customers as reduction to its revenues, and certain significant discounts may result in selling prices lower than their corresponding costs.
  • Accommodation reservation volume increased 50% year-on-year, and accommodation reservation revenues increased 45% year-on-year, reaching RMB1.4 billion (US$216 million) for the third quarter of 2015.
  • Transportation ticketing volume increased 150% year-on-year, and transportation ticketing revenues increased 51% year-on-year, reaching RMB1.2 billion (US$190 million) for the third quarter of 2015.
  • Gross margin was 73% for the third quarter of 2015, compared to 72% in the same period in 2014, and 71% in the previous quarter.
  • Net income attributable to Ctrip’s shareholders was RMB2.4 billion (US$380 million) for the third quarter of 2015, compared to RMB217 million (US$35 million) in the same period in 2014. Excluding share-based compensation charges (non-GAAP), net income attributable to Ctrip’s shareholders was RMB2.5 billion (US$401 million), compared to RMB354 million (US$58 million) in the same period in 2014.
  • Diluted earnings per ADS were RMB13.26 (US$2.09) for the third quarter of 2015. Excluding share-based compensation charges (non-GAAP), diluted earnings per ADS were RMB13.97 (US$2.20) for the third quarter of 2015.
  • Share-based compensation charges were RMB134 million (US$21 million), accounting for 4% of the net revenues, or RMB0.71 (US$0.11) per ADS for the third quarter of 2015.
* The Company presents the revenue on a net basis. Revenues are recognized at gross basis when the Company undertakes the majority of the business risks and acts as principal. In the third quarter of 2015, the Company recognized the revenue on gross basis of RMB 0.07 billion and associated cost of RMB0.07 billion. Should all of these transactions be presented on net basis, the net commission earned was RMB3.1 billion.

“Ctrip maintained strong momentum and delivered great results in the third quarter of 2015,” said James Liang, Chairman of the Board and Chief Executive Officer of Ctrip. “Both hotel and air ticketing businesses reached 50% year-over-year growth in volume. Outbound travel continued to grow at triple digit in the core business segments due to the booming demand this quarter. Meanwhile, the Ctrip team has demonstrated its strong execution through significant improvement in operational efficiency.”

“We are also very excited about the transaction between Baidu and Ctrip announced on October 26th. Ctrip and Qunar are committed to building a healthier ecosystem in China’s travel industry together. We are confident that both teams will further strengthen their fundamental capabilities and create better value for travelers, suppliers and shareholders.” James added.

Third Quarter of 2015 Financial Results and Business Updates

For the third quarter of 2015, Ctrip reported total revenues of RMB3.4 billion (US$528 million), representing a 49% increase from the same period in 2014. Total revenues for the third quarter of 2015 increased by 26% from the previous quarter.

Accommodation reservation revenues amounted to RMB1.4 billion (US$216 million) for the third quarter of 2015, representing a 45% increase year-on-year, primarily driven by an increase of 50% in accommodation reservation volume. Accommodation reservation revenues increased by 24% quarter-on-quarter.

Transportation ticketing revenues for the third quarter of 2015 were RMB1.2 billion (US$190 million), representing a 51% increase year-on-year, primarily driven by an increase of 150% in ticketing volume. Transportation ticketing revenues increased by 15% quarter-on-quarter.

Packaged-tour revenues for the third quarter of 2015 were RMB593 million (US$93 million), representing a 66% increase year-on-year, primarily driven by an increase in volume growth of organized tours and self-guided tours. Packaged-tour revenues increased by 80% quarter-on-quarter, primarily due to seasonality.

Corporate travel revenues for the third quarter of 2015 were RMB124 million (US$20 million), representing a 19% increase year-on-year, primarily driven by the increased corporate travel demand from business activities. Corporate travel revenues increased by 3% quarter-on-quarter.

For the third quarter of 2015, net revenues were RMB3.2 billion (US$501 million), representing a 49% increase from the same period in 2014. Net revenues for the third quarter of 2015 increased by 26% from the previous quarter.

Gross margin was 73% for the third quarter of 2015, compared to 72% in the same period in 2014 and 71% in the previous quarter.

Product development expenses for the third quarter of 2015 increased by 36% to RMB831 million (US$131 million) from the same period in 2014, primarily due to an increase in product development personnel related expenses. Product development expenses for the third quarter of 2015 increased by  4% from the previous quarter. Excluding share-based compensation charges (non-GAAP), product development expenses accounted for 24% of the net revenues, decreasing from 26% in the same period in 2014 and 29% in the previous quarter.

Sales and marketing expenses for the third quarter of 2015 increased by 40% to RMB838 million (US$132 million) from the same period in 2014 and increased by 23% from the previous quarter, primarily due to an increase in sales and marketing related activities. Excluding share-based compensation charges (non-GAAP), sales and marketing expenses accounted for 26% of the net revenues, decreasing from 27% in the same period in 2014 and remained consistent with the previous quarter.

General and administrative expenses for the third quarter of 2015 increased by 8% to RMB261 million (US$41 million) from the same period in 2014 primarily due to an increase in amortization expenses for intangible assets of newly acquired entities. General and administrative expenses for the third quarter of 2015 remained consistent with the previous quarter. Excluding share-based compensation charges (non-GAAP), general and administrative expenses accounted for 6% of the net revenues, decreasing from 8% in the same period in 2014 and the previous quarter.

Income from operations for the third quarter of 2015 was RMB405 million (US$64 million), compared to RMB88 million(US$14 million) in the same period in 2014 and RMB61 million (US$10 million) in the previous quarter. Excluding share-based compensation charges (non-GAAP), income from operations was RMB539 million (US$85 million), compared toRMB225 million (US$37 million) in the same period in 2014 and RMB214 million (US$35 million) in the previous quarter.

Operating margin was 13% for the third quarter of 2015, compared to 4% in the same period in 2014, and 2% in the previous quarter. Excluding share-based compensation charges (non-GAAP), operating margin was 17%, compared to 11% in the same period in 2014 and 8% in the previous quarter.

Other income for the third quarter of 2015 was RMB2.4 billion (US$377 million), compared to RMB108 million (US$18 million) in the same period in 2014 and RMB12 million (US$2 million) in the previous quarter, primarily due to the gain recognized from the deconsolidation of Tujia.com International Co., Ltd. (“Tujia”) as a result of the loss of control of Tujia after its recent financing in this quarter. The gain is primarily recognized for the difference between the fair value and carrying value of the investment in Tujia as of the deconsolidation date.

Income tax expense for the third quarter of 2015 was RMB361 million (US$57 million), compared to income tax expense of RMB50 million (US$8 million) in the same period of 2014 and RMB31 million (US$5 million) in the previous quarter.

Net income attributable to Ctrip’s shareholders for the third quarter of 2015 was RMB2.4 billion (US$380 million), compared to RMB217 million (US$35 million) in the same period in 2014 and RMB143 million (US$23 million) in the previous quarter. Excluding share-based compensation charges (non-GAAP), net income attributable to Ctrip’s shareholders was RMB2.5 billion (US$401 million), compared to RMB354 million (US$58 million) in the same period in 2014 and RMB296 million (US$48 million) in the previous quarter.

Diluted earnings per ADS were RMB13.26 (US$2.09) for the third quarter of 2015. Excluding share-based compensation charges (non-GAAP), diluted earnings per ADS were RMB13.97 (US$2.20) for the third quarter of 2015.

As of September 30, 2015, the balance of cash and cash equivalents, restricted cash and short-term investment wasRMB17.3 billion (US$2.7billion).

Recent Development

Share exchange transaction with Baidu

In October 2015, Ctrip completed a share exchange transaction with Baidu, Inc. (“Baidu”), pursuant to which Baiduexchanged 178,702,519 Class A ordinary shares and 11,450,000 Class B ordinary shares of Qunar Cayman Islands Limited (“Qunar”) beneficially owned by Baidu prior to the consummation of the transaction for 11,488,381 newly-issued ordinary shares of Ctrip. As a result of the transaction, Baidu owns ordinary shares of Ctrip representing approximately 25% of Ctrip’s aggregate voting interest, and Ctrip will own ordinary shares of Qunar representing approximately 45% of Qunar’s aggregate voting interest‎.

Share issuance for the benefit of Qunar employees

In connection with the recent transaction with Baidu, Ctrip has become a significant shareholder of Qunar Cayman Islands Limited (“Qunar”). Ctrip believes that it would be in the interest of the Company and its shareholders to provide equity incentives to Qunar employees to align their interests with those of Qunar and its shareholders, including Ctrip. To this end, Ctrip has agreed to issue a total of approximately 5 million ordinary shares to certain special purpose vehicles holding these shares solely for the benefit of Qunar employees.  Future receipt by Qunar employees of Ctrip shares will be upon satisfaction of legal and contractual conditions, including the condition that any Qunar securities held by or granted to any Qunar employee must have been surrendered or forfeited before the employee receives Ctrip shares.

Ctrip and Qunar are currently exploring ways through which they can effectively cooperate to enhance their respective products and services and better serve the market.

Share repurchase program

As of November 18, 2015, Ctrip had purchased approximately 21 million ADSs in aggregate with a total consideration ofUS$510 million.

ADS ratio change

Ctrip announced today that it will change the ratio of its American depositary shares (“ADSs”) to ordinary shares from four (4) ADSs representing one (1) ordinary share to eight (8) ADSs representing one (1) ordinary share, effectiveDecember 1, 2015. Ctrip ADS holders of record as of the close of business on November 30, 2015 will receive one (1) additional ADS for every one ADS held on that date. For Ctrip’s ADS holders, this ratio change will have the same effect as a two-for-one ADS split. The effect on the ADS price will take place on December 2, 2015. No action by ADS holders is required to effect the ratio change.

Business Outlook

For the fourth quarter of 2015, the Company expects to continue the net revenue growth year-on-year at a rate of approximately 45-50%. This forecast reflects Ctrip’s current and preliminary view, which is subject to change.(Original Source)

Shares of Ctrip International are up 10.97% to $105.50 in after-hours trading. CTRP has a 1-year high of $103.58 and a 1-year low of $40.74. The stock’s 50-day moving average is $81.43 and its 200-day moving average is $73.78.

On the ratings front, Ctrip International has been the subject of a number of recent research reports. In a report issued on November 13, Raymond James analyst Justin Patterson assigned a Buy rating on CTRP, with a price target of $110, which represents a potential upside of 15.7% from where the stock is currently trading. Separately, on October 27, Oppenheimer’s Jed Kelly maintained a Buy rating on the stock and has a price target of $110.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Justin Patterson and Jed Kelly have a total average return of 8.1% and 12.1% respectively. Patterson has a success rate of 70.6% and is ranked #1178 out of 3849 analysts, while Kelly has a success rate of 58.3% and is ranked #1140.

Overall, 8 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $96.67 which is 1.7% above where the stock opened today.

Ctrip.com International Ltd provides travel related services including hotel reservation, air-ticketing, packaged-tour services, as well as, to a much lesser extent, Internet-related advertising and other related services.