What’s Priced into Qunar’s Valuation?



Forward EV to sales

Ideally, we would value an online travel player using the forward price-to-earnings multiple. However, since Qunar (QUNR) is still seeing losses at the EBITDA level, we’ll value the company with the forward EV-to-sales multiple.

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Current valuation

Qunar (QUNR) is currently trading at a forward EV-to-sales multiple of 5.9x, which is lower than its average valuation of 8.5x since November 2013. However, this is because sales have been growing at an exponential rate. While sales growth is expected to remain high, it’s not expected to see the three-digit growth in revenue that it was clocking earlier.

Qunar’s multiple is also lower than Ctrip’s (CTRP) multiple of 11x. Priceline (PCLN) enjoys a higher multiple as compared to Qunar with a forward EV-to-sales multiple of 7.6x. Expedia is valued lower than QUNR at a multiple of 2.6x. TripAdvisor (TRIP) is trading at a multiple of 4.7x. However, these players aren’t strictly comparable.

Qunar’s sales are expected to grow 9% in 2016, while Ctrip’s revenue is expected to grow 69% in 2016. The market is expecting Expedia’s (EXPE) sales to grow 33% in 2016. Rival PCLN’s sales are expected to grow at a much slower rate of 15% in 2016.

Our analysis

Valuation multiples help us understand the market’s perception of risk, growth, and investors’ willingness to pay.

A few macro factors working in favor of Qunar are the growing consumer disposable income that is driving China’s travel growth, the shift in consumer spending from offline to online, and industry consolidation, which could reduce pricing wars. However, investors also need to track Qunar’s own fundamentals closely.

Investors can gain exposure to the Chinese OTA market by investing in the KraneShares CSI China Internet ETF (KWEB).


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