Ctrip: Latest Data Indicate 45% Y/Y Revenue Growth in Q3

The growth of Chinese travel-booking company Ctrip (NASDAQ:CTRP) has historically demonstrated a positive correlation with the growth of China's airline passengers (Chart 1). Based on the August passenger data published yesterday by Civil Aviation Administration of China (CAAC), I forecast Ctrip will grow total revenue by 45% Y/Y to $116 million in 3Q10, handily surpassing the 3Q10 guidance of 35%-40% growth. Detailed data and analysis are as follows:

Based on official data from Civil Aviation Administration of China (CAAC), total number of China's air passengers rose 16% year-over-year (3% month-over-month) to 26.30 million in August 2010. Domestic passengers increased 15% Y/Y (3% M/M) to 24.39 million. International passengers rose 34% Y/Y (8% M/M) to 1.90 million (Chart 2). Based on data from TravelSky, the leading provider of IT solutions for China's airline industry, total number of China's air passengers rose 17% Y/Y (3% M/M) to 27.66 million in August. Domestic passengers increased 16% Y/Y (3% M/M) to 24.62 million. International passengers rose 29% Y/Y (6% M/M) to 3.05 million (Chart 3).

Combining August and July data, China's airline passengers grew 19% Y/Y in the first two months of 3Q10 to 51.77 million. Based on my regression analysis on the relationship between passenger growth and Ctrip revenue growth, I forecast Ctrip to grow organic revenue by 38.5% Y/Y in Q3. Considering the extra non-organic mid-single digit Y/Y growth contributed by the acquisition of Wing On Travel, I forecast Ctrip to grow total revenue by 45% Y/Y to $116 million in 3Q10, well above its guidance of 35%-40% growth. I continue to believe China's travel volume growth will help Ctrip overcome the challenges posed by air-ticketing commission cuts and high-speed rail's substitution effect on airlines. My calculations indicate that the market has taken a similar view and correctly shrugged off news flows on commission cuts and high-speed rail substitution.

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Chart 2
























Chart 3

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