The new media business represented by Letu Travel Network drives value revaluation

The top three CCTV advertising agencies have a stable position

Valuations are attractive, and there is limited room for stock prices to decline

Combining traditional industry knowledge with the Internet drives value revaluation

We would like to see CITIC Jinqiao as an example of traditional industry companies successfully using the Internet to find new growth points. By combining Internet marketing and operation methods with rich experience and deep knowledge in the advertising industry, CITIC Jinqiao has successfully developed a new growth point suitable for itself. We believe Letu Travel Network is only the first example of CITIC Jinqiao's successful implementation of traditional industry knowledge and Internet operation models. The same business logic and experience will help CITIC Jinqiao develop more new growth points. Under this logic, we think the value of CITIC Jinqiao will be re-valued.

Letu Travel Network drives the transformation of the new media business

Combining CITIC Jinqiao's leading position in the travel advertising industry, Letu Travel Network has successfully pioneered a new business model, that is, a revenue model based on tourist destination promotion expenses based on traditional online travel websites based on travel product reservation revenue models. We expect Lantu Travel Network to cover up to 50 destinations in 2014 and at least 200 destinations by 2016. In addition to revenue from tourist destinations, we believe advertising revenue, which began monetizing website traffic in 2015, will also begin to contribute to Letu's performance. We expect Letu Travel Network to achieve break-even in 2014 and start contributing to profits in 2015.

Catalysts and risks

Catalysts: 1) The rapid development of Letu Travel Network in terms of the number of products, users and destinations 2) Other new media businesses have exceeded expectations. Risks: 1) The development of Letu Travel Network is slower than expected 2) The economic downturn causes advertisers to reduce advertising budgets

valuations

For the first time, we gave CITIC Jinqiao a purchase rating. The 12-month target price based on the DCF model was HK$8.07, which is equivalent to 8.74 x 2014E P/E and 7.65 x 2015E P/E. 1) Our revenue forecast for Letu Travel Network is based only on the increase in the number of tourist destinations, without considering the potential revenue contribution of website traffic monetization; 2) The company's 2014-2016 net profit CAGR was 14.8%, but the latest closing price corresponds to 7x 2014E P/E 3) The 2014 E P/E corresponding to our target price is still far below the industry average (China Vision Jinqiao 8.74x vs. Dongye 14.4x 2014E P/E).