Ctrip Rallies as Rebound Boosts Earnings: China Overnight
Chinese stocks climbed in New York, led by Ctrip.com International Ltd. (CTRP), 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 (CH55BN) 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. (YGE) rose to a three-week high, while real estate company SouFun Holdings Ltd. (SFUN) 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. Chinese manufacturing expanded for a fourth month in January and new home prices surged, data yesterday showed, boosting the outlook for an economy that is emerging from a seven-quarter slowdown.
“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.”
The iShares FTSE China 25 Index Fund (FXI), the largest Chinese exchange-traded fund in the U.S., advanced 0.8 percent to $41.82, for a weekly gain of 1.8 percent. The Standard & Poor’s 500 Index (SPX) rallied 1 percent to a five-year high of 1,513.17 as the Dow Jones Industrial Average rose above 14,000 after data showed the U.S. added jobs in January and manufacturing expanded.
Ctrip’s American depositary receipts added 3.2 percent to $20.45, the biggest rally since Dec. 18. The ADRs have slid 9.8 percent this year after retreating 3.2 percent in 2012.
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.
Yingli, the world’s biggest silicon-based panel maker by capacity, surged 5.5 percent to a three-week high of $3.05, extending its gains this year to 30 percent.
The Baoding, China-based company will see gross margin rise to as much as 20 percent this year if module prices rebound and production costs drop, Chief Financial Officer Bryan Li said in an interview Jan. 29. Photovoltaic panel prices have begun to recover slightly, rising 6 percent since the end of December, according to Bloomberg New Energy Finance.
Yingli in November reported gross margin was negative in the third quarter for the first time since listing on the New York stock exchange in 2007, coming in at minus 23 percent because of falling prices and lower sales in Germany. Current gross margin is in “single digits,” Li said in the interview.
The Purchasing Managers’ Index was 50.4 in January, compared with 50.6 in December, and indicated an expansion for a fourth month, according to data from the National Bureau of Statistics and the China Federation of Logistics and Purchasing yesterday. A separate gauge from HSBC Holdings Plc and Markit Economics covering fewer businesses rose to a two-year high of 52.3 from 51.5.
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.
Chinese new home prices rose 1 percent in January, the biggest increase since January 2011, the Beijing-based company said in an e-mailed statement yesterday, citing its survey of 100 cities.
Kandi Technologies Group Inc. (KNDI), a maker of electric cars, surged 12 percent, the most in seven months, to $4.01. The Jinhua, China-based carmaker and Geely Automobile Holdings Ltd. (175) are setting up an electric-vehicle joint venture in China, the companies said yesterday in a statement.
The Bloomberg Chinese Reverse Mergers Index (CHINARTO), which tracks a basket of companies that gained U.S. listings after buying firms that already trade, jumped 2 percent this week to 80.12, rising the most in three weeks.
The Hang Seng China Enterprises Index (HSCEI) climbed 0.7 percent to 12,215.03 yesterday, ending the week up 1.8 percent. The Shanghai Composite Index (SHCOMP) of domestic Chinese shares surged 1.4 percent to 2,419.02, gaining 5.6 percent in the week for the steepest rally since October 2011.
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