Yamato: Reiterates "Buy" rating on TRIP.COM-S (09961) and lowers target price to HK$705

Nomura released a research report stating that it reiterates a "buy" rating on TRIP.COM-S (09961), with a target price lowered from HK$780 to HK$705, and pointing out that Ctrip is one of its top picks. The firm has lowered the company's earnings per share forecast for the next two years by 11% to reflect lower gross margin forecasts. The firm stated that although Trip.com's contribution gross profit is expected to remain flat year-on-year, it will include revenue integration into the group's operating income, and expects non-GAAP operating profit to be 28% for the first quarter and 30% for the full year. Nomura believes that Ctrip's lower guidance for this year is due to Trip.com's revenue growth surpassing expectations, as well as the impact of last year's high base which has slowed down outbound travel revenue growth. The firm recommends that investors take advantage of any weakness in stock prices, as gradual improvement in revenue per available room for mainland hotels will drive operational leverage for mainland operations, helping to offset the drag on gross profit from Trip.com. Catalysts for stock price performance in the first half of the year include the May Day holiday and share buyback exceeding expectations.