Conclusion: Nike’s accelerating investment in new product categories,efficiency, and international markets may bring its valuechain the largestopportunity since 2010. Our top pick in the valuechain is Shenzhou.
Valuation attractive after another better-than-expected quarter
Updated guidance: overall in-line with DBe, sustainable China growth apositive surprise
Ctrip reported another strong quarter with solid revenue (3% above consensus)and a bottom-line beat (26% above consumes). Baby tiger projects are growingrapidly to provide revenue momentum - ground transportation and alternativeaccommodation are growing at triple digit YoY. Even after incorporatingspending for future growth like marketing and branding expenses in the lowtiermarket, margin increased 14ppts YoY, thanks to efficiency improvement.We believe the FY18E 27x trading P/E is compelling vs. the historical PE trend,along with 53% EPS CAGR and 33% revenue CAGR for FY17-19E. Werecommend a Buy while the market is concerned with short-term policy risk.
Nike projects a high-single digit ppt revenue / mid-teens ppt EPS CAGR in thenext 5years. To highlight, Nike forecasts China revenue CAGR to be at low-tomid-teens ppt YoY into 2022(vs. previous guidance of a c.13% CAGR from2015to 2020). This likely indicates a more sustainable sales growth in Chinavs. our expectation.
Strong result; expecting cross sales model change in 4Q
Ctrip reported revenue of RMB6.4bn (+45% YoY, 3% above consensus) and18% non-GAAP OPM (14ppts YoY, 3ppts above consensus). For 3Q guidance,revenue growth range is 35-40% YoY, in line with market expectation. Non-GAAP OP target is RMB1.5-1.6bn, above consensus of RMB0.79bn. Newbusinesses such as alternative accommodation and group transportationdelivered over 100% YoY growth. Meanwhile, the company is testing newcross-sales items to prepare for a potential business model change (to all optout).As a result, it expects revenue growth of 25-35% in 4Q, when impact willbe temporary, and revenue growth to improve from 1Q18.
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