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Maintaining Our FVE Despite Near-Term Estimate Reduction; Long-Term Growth Remains

Chelsey Tam Senior Equity Analyst

Analyst Note

| Chelsey Tam |

We maintain our fair value estimate at USD 39 per ADS and our long-term bullish view due to an eventual recovery from coronavirus and low penetration of outbound travel in China. We reduced our 2021 and 2022 revenue by 3% and 16%, respectively, and cut our non-GAAP EBIT margin by 860 basis points and 580 basis points. The domestic business recovery was strong in July, but cross-province travel was disrupted in August. The recovery has been slower in September. This leads to our non-GAAP EBIT margin estimate of negative 2.4% in the third quarter. We assume domestic revenue in the fourth quarter will be 5% higher than 2019’s level and international revenue will reach 4% of 2019’s level, with non-GAAP operating margin achieving about the mid-20s as it did in the third quarter of 2020. Our EBIT assumption for 2021 is still 94% below FactSet consensus as of Sept. 24. We expect earnings cuts in the future. 

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Company Profile

Business Description is the largest online travel agency in China. The company generated about 78% of sales from accommodation reservations and transportation ticketing in 2020. The rest of's revenue comes from package tours and corporate travel. Most of its sales come through websites and mobile platforms, while the rest come from call centers. The company was founded in 1999 and listed on the Nasdaq in December 2003.

968 Jin Zhong Road
Shanghai, 200335, China, People's Republic of
T +86 2134064880
Sector Consumer Cyclical
Industry Travel Services
Most Recent Earnings Mar 31, 2021
Fiscal Year End Dec 31, 2021
Stock Type
Employees 33,400


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