凯撒旅游(000796)

1H17 top line up by 31%; bottom line up by 21%

Caissa Travel announced its 1H17 interim report this evening. The company’s1H17 top line increased by 31% yoy to RMB3.4bn from RMB2.6bn. Its core netprofit (mainly excluding investment gain of RMB59m) increased by 21% yoy toRMB74m in 1H17 from RMB61m. We reiterate our Buy rating for Caissa, with anew target price of RMB23 (from RMB26), revised down owing mainly to a cutin our 2017 retail business growth forecast.

Top line up 31% yoy, driven mainly by outbound retail and wholesale business

Retail outbound - revenue rose 19% to RMB1.96bn in 1H17 fromRMB1.65bn in 1H16. This was the main driver of total top-line growth,however, wholesale business growth slows down compared to 32% yoygrowth in 2016. We believe that this is mainly due to the slowdown inAsia lines (especially Korea and Thailand outbound products)

Wholesale outbound - revenue from the wholesale business rose 73% toRMB576m in 1H17 from RMB332m in 1H16. We believe that this is mainlydriven by Europe lines (more airline routes for Tier 2 and 3 cities in China).

We cut our 2017E earnings forecast by 6%

Given that 1) the recent Paris (in April) and London (in June) terrorist attacksmay affect the 3Q peak season in Europe and 2) uncertainty about Asia lines'regulation, we conservatively believe that 2017 full-year retail revenue growthshould be slightly above the 1H17 level (19% growth). The main revision isin our 2017 retail revenue growth forecast, which we cut to 30% from 50%.Consequently, our 2017/18E net profit decreases by 6%/14%.

Valuation and risks

Our RMB23 target price is DCF-derived (9.6% WACC and 3% TGR, unchanged).The stock is trading at 29x/23x 2017/18E PER. Its current valuation is in line withleading domestic travel companies in A shares. The outbound business normallyhas a premium to the domestic travel listco due to its 1) high growth, 2) asset-lightbusiness model and 3) higher barriers to entry. Key risks: 1) further depreciationin the RMB; 2) unfavorable government policy towards outbound travel; and 3)negative events, such as terrorist attacks.