Ctrip is taking significant share from some of its smaller competitors, and investors seem to appreciate that.
Chinese stocks climbed in New York, led by Ctrip.com International Ltd., after the online travel agency’s better-than-estimated profit bolstered the outlook for company earnings as the economy rebounds.
The Bloomberg China-US Equity Index of the most-traded Chinese shares in the U.S. gained 0.8 percent to 101 yesterday, extending its 1.4 percent jump in the week. Solar company Yingli Green Energy Holding Co. rose to a three-week high, while real estate company SouFun Holdings Ltd. advanced the most in seven days.
China Eastern Airlines Corp. rallied, narrowing the discount to its Hong Kong shares, after a budget carrier joint venture with Qantas Airways Ltd. was approved.
Ctrip, which plunged 20 percent last week on concern a discount plane ticket program will cut profit, surged the most since December after posting fourth-quarter net income that beat analysts’ estimates and saying margins will probably stay at a similar level in the first three months of 2013.
“People reacted pretty positively to Ctrip’s quarterly results and its guidance,” Andy Yeung, an analyst at Oppenheimer & Co. who rates the stock the equivalent of buy, said by phone yesterday from New York. “Guidance on first-quarter margin helped relieve people’s concern about the negative impact of its air-ticket discount program.”
Shanghai-based Ctrip announced Jan. 31 fourth-quarter earnings of 22 cents per American depositary receipt, beating the 14-cent average estimate of four analysts compiled by Bloomberg, while its sales of $177 million also exceeded the $173 million forecast. Brean Capital LLC raised the stock rating to buy from hold yesterday, and at least three other analysts retained their buy recommendations.
The company’s Chief Financial Officer Jenny Wenjie Wu said Ctrip’s first-quarter operating margin will remain similar to the previous quarter’s 21 percent on a conference call Jan. 31, even though the period is normally a weaker season.
Morgan Stanley analysts led by Richard Ji raised a price target for Ctrip to $20.1 from $17.6 in a Feb. 1 note while maintaining a rating equivalent to buy. The company, which may face margin pressure in the near term, should still benefit from market share gains at the expense of smaller rivals, according to the report.
China Eastern, the nation’s second-largest domestic carrier, rebounded 2.9 percent from a two-week low to $23.09. Its ADRs, each representing 50 underlying shares in the airline, traded 0.8 percent below its Hong Kong stock, from a discount of 1.4 percent the previous day.
The company, based in Shanghai, received a notification from China’s Ministry of Commerce on Jetstart Hong Kong, a budget airline it owns jointly with Australia’s Qantas Airways, it said in an e-mailed statement Jan. 31. China Eastern hopes to receive a permission for Hong Kong to start operation, it said.
SouFun, the largest real estate information company in China, increased 3 percent to $26.6 in the steepest gain in a week.
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