20181129-兴证国际证券-Has_already_achieved_profitability,Looking_forward_to_the_direct_procurement_4页_483kb

TMT Summary: Tuniu (TOUR.O)

Core Content Overview

This report provides an in-depth analysis of Tuniu (TOUR.O), a China-based travel company, focusing on its financial performance, market position, investment highlights, and risk factors. The stock is currently rated as "Outperform" with a target price of 7.18 USD, compared to the current price of 5.92 USD, indicating a projected 21.3% growth. The report also includes key financial metrics, balance sheet data, cash flow analysis, and income statement details for the years 2017A to 2020E.

Main Financial Highlights

Revenue Growth

• FY2017A: 2,192,100 thousand RMB
• FY2018E: 2,209,539 thousand RMB (0.8% YOY growth)
• FY2019E: 2,448,595 thousand RMB (10.8% YOY growth)
• FY2020E: 2,777,477 thousand RMB (13.4% YOY growth)

Net Income (Non-GAAP)

• FY2017A: -522,549 thousand RMB
• FY2018E: 7,498 thousand RMB (N.A. YOY)
• FY2019E: 295,320 thousand RMB (N.A. YOY)
• FY2020E: 381,168 thousand RMB (29.1% YOY growth)

Profitability

• Tuniu achieved profitability in 18Q3 on both GAAP and non-GAAP bases, marking a significant milestone.
• The net income margin improved from -35.2% in FY2017A to 5.6% in FY2020E.
• ROE increased from -20.9% in FY2017A to 5.0% in FY2020E.

Gross Profit Margin

• The gross margin improved from 53.3% in FY2017A to 57.9% in FY2020E, showing better cost control and operational efficiency.

Investment Highlights

• Financial Results (18Q3):

  • Revenue was 763 million RMB, a 5.3% decrease YOY.
  • Gross profit reached 390 million RMB, a 11% decrease YOY.
  • Packaged tour revenue increased by 4.7% compared to the same period in 2017.
  • Total expenses rate dropped to 53.8% from 72.3% in Q2 2018.
  • The company expects 4Q18 net revenues to range from 422.9 to 446.4 million RMB, a 5% to 10% decrease YOY.

• Direct Procurement and Offline Stores:

  • Direct procurement contributed 60% of total GMV in 3Q18, with an expectation to reach 70% by 2020.
  • Offline retail stores contributed 15% of packaged tour GMV in 3Q18, up from 9% in Q3 17.
  • Tuniu plans to expand its store count to 500 stores by the end of 2018.

• Difeng Cloud Business:

  • Maintained double-digit YOY growth in 18Q3.
  • Cumulative GMV from Difeng Cloud business reached 2.8 billion RMB in 18Q1-Q3.

• Investment Rating Adjustment:

  • Due to industry pressures and the need for continued investment in B2B and offline stores, the stock price target was revised from 8.7 USD to 7.18 USD.
  • The investment rating remains "Outperform".

Key Financial Ratios

Metric	2017A	2018E	2019E	2020E
Revenue Growth (%)	51.4%	0.8%	10.8%	13.4%
Gross Margin (%)	53.3%	50.6%	55.8%	57.9%
Net Margin (%)	-35.2%	-9.6%	1.4%	5.6%
Non-GAAP Net Margin (%)	-23.8%	0.3%	12.1%	13.7%
ROE (%)	-20.9%	-5.9%	0.9%	5.0%
ROA (%)	-11.6%	-3.2%	0.5%	2.8%
Net Asset Ratio (%)	80.2%	84.8%	80.4%	78.5%
Asset-Liability Ratio (%)	44.5%	45.9%	44.6%	44.0%
Current Ratio (%)	174.2%	139.5%	149.1%	157.7%

Risk Factors

• Policy risk: Regulatory changes in the travel industry may impact operations.
• Natural disasters: These can affect tourism and revenue.
• Political and other emergencies risk: Unforeseen events may disrupt business.
• Industry competition: Intense competition could affect market share.
• Gross margin rate drops: Cost pressures may reduce profitability.
• Cost rises risk: Increasing operational costs may impact margins.

Analyst Information

• Analyst: Yidong Zhang

• Email: zhangyd@xyzq.com.cn

• SFC: BIS749

• SAC: S0190510110012

• Contact:

  • Peter Wang: wangwenzhou@xyzq.com.cn | SFC: ARO923 | SAC: S0190118060102
  • Venki Li: liwenjing@xyzq.com.cn | SAC: S0190118090169

Market Data (as of 2018-11-27)

Metric	Value (0.1 billions)
Closing Price (USD)	5.92
Per ADS equals to	3
Total Shares	3.89
Circulating Shares	3.72
Market Cap	7.67
Circulating Market Cap	7.34
Net Asset	34.09
Total Asset	70
Net asset per ADS	8.77

Conclusion

Tuniu has demonstrated improved financial performance and is on track to achieve sustained profitability. The company is actively expanding its offline retail presence and increasing direct procurement. Despite challenges such as island tourism decline and industry pressures, the investment rating remains "Outperform," with a target price of 7.18 USD. Investors should be aware of the associated risks, including policy, natural disaster, and competitive pressures, and consider the report's disclaimer regarding its use and the potential for conflicting investment decisions.