Ctrip.Com International (CTRP) Earnings Review: 4Q Above Expectation: Back to Proﬁtable Growth With

6 March 2019 | 3:00AM HKT

Ctrip.com International (CTRP) Earnings Review: 4Q above expectation: Back to proﬁtable growth with

Buy margin upside; maintain Buy

Ronald Keung, CFA CTRP 12m Price Target: $48.00 Price: $34.99 Upside: 37.2% +852-2978-0856 | [email protected] Goldman Sachs (Asia) L.L.C. Ctrip reported a solid set of 4Q results, with revenue growth of Piyush Mubayi +852-2978-1677 | [email protected] +22% coming 6% above our estimates, on stronger-than-expected Goldman Sachs (Asia) L.L.C. recovery in its transportation revenue growth following the annual Bill Liu, CFA +852-2978-0820 | [email protected] lapsing of air ticketing un-bundling. 4Q18 non-GAAP operating Goldman Sachs (Asia) L.L.C. margin was 3.5% (vs. GSe of 1.7%, but below 4Q17 of 14.2%) Elsie Cheng +852-2978-1666 | [email protected] while management guided 1Q19 non-GAAP operating margin of Goldman Sachs (Asia) L.L.C.

12-14%. We highlight our four key takeaways from the results: Key Data ______Market cap: $19.9bn n We see favorable competitive landscape in the online travel Enterprise value: $24.2bn 3m ADTV: $126.7mn industry this year, where Ctrip’s guided 1Q19 non-GAAP China Asia Internet operating margin at mid-point of 13% (from 3.5% in 4Q18) now M&A Rank: 3 implies a less aggressive sales & marketing effort heading into GS Forecast ______12/18 12/19E 12/20E 12/21E 2019 vs. 4Q18; Revenue (Rmb mn) New 30,965.0 37,343.8 45,727.2 54,059.9 n Revenue (Rmb mn) Old 30,549.7 36,540.6 45,118.4 -- Building on its international business moat, as an early EBITDA (Rmb mn) 5,232.2 6,685.7 10,147.1 12,117.9 mover in Chinese outbound travel (which is driving advertising EPS (Rmb) New 9.22 8.94 14.03 18.24 EPS (Rmb) Old 8.22 7.38 13.96 -- revenues, from tourism boards) and its globally renowned P/E (X) 29.1 26.2 16.7 12.8 P/B (X) 1.7 1.6 1.5 1.3 Skyscanner platform. Trip.com, in investment phase, is the third Dividend yield (%) NM NM NM NM focus. International accounted for 30-35% of Ctrip’s revenues in CROCI (%) 14.6 13.6 10.1 15.6

4Q; 12/18 3/19E 6/19E 9/19E EPS (Rmb) 0.90 1.75 2.04 2.84 n Room for margin expansion mid-term, as transportation GS Factor Proﬁle ______revenue recovery drives a re-acceleration in revenue growth, Growth

with international growth (which is higher margin) outpacing Financial Returns domestic. We forecast 20% group non-GAAP EBIT margin for Multiple 2020E; Integrated n Lower-tier cities to be a key focus with another quarter of robust room night growth (c. 50%) in lower tier cities and Percentile 20th 40th 60th 80th 100th

continuing ofﬂine franchise store expansion. CTRP relative to Asia ex. Japan Coverage CTRP relative to Asia Internet

We introduce our forecasts for 2021E, while we lift our 2019E/20E Source: Company data, Goldman Sachs Research estimates. revenue forecasts by 2%/1% on improving take rates. We raise our See disclosures for details. non-GAAP operating margin for 2019E to 15.3% from 13.1% on

Goldman Sachs does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as research analysts with FINRA in the U.S. Goldman Sachs Ctrip.com International (CTRP)

Ctrip.com International (CTRP) Balance Sheet (Rmb mn) ______Buy Rating since Nov 4, 2015 12/18 12/19E 12/20E 12/21E Cash & cash equivalents 21,530.0 32,490.2 42,207.1 54,871.2 Accounts receivable 5,668.0 6,827.6 8,357.8 9,880.8 Inventory ------Ratios & Valuation ______Other current assets 52,196.0 55,019.6 59,107.8 63,197.7 12/18 12/19E 12/20E 12/21E Total current assets 79,394.0 94,337.4 109,672.6 127,949.8 P/E (X) 29.1 26.2 16.7 12.8 Net PP&E 5,872.0 6,793.9 7,944.3 9,297.6 P/B (X) 1.7 1.6 1.5 1.3 Net intangibles 13,817.0 13,423.6 13,046.4 12,825.0 FCF yield (%) 3.4 8.3 7.3 9.4 Total investments 26,874.0 26,884.5 27,209.6 27,615.7 EV/EBITDA (X) 33.1 24.2 15.0 11.5 Other long-term assets 59,873.0 59,873.0 59,873.0 59,873.0 CROCI (%) 14.6 13.6 10.1 15.6 Total assets 185,830.0 201,312.4 217,745.9 237,561.1 ROE (%) 6.4 6.1 9.2 10.9 Accounts payable 11,714.0 10,853.4 12,739.1 14,350.8 Net debt/equity (%) 42.8 28.7 16.8 4.1 Short-term debt 35,403.0 35,403.0 35,403.0 35,403.0 Interest cover (X) 2.9 3.5 8.3 11.0 Other current liabilities 21,667.0 32,577.7 38,278.4 44,857.9 Days inventory outst, sales ------Total current liabilities 68,784.0 78,834.1 86,420.5 94,611.6 Receivable days 60.3 61.1 60.6 61.6 Long-term debt 24,146.0 24,146.0 24,146.0 24,146.0 Days payable outstanding 553.3 519.8 463.0 471.9 Other long-term liabilities 4,167.0 4,167.0 4,167.0 4,167.0 DuPont ROE (%) 6.2 5.8 8.6 10.2 Total long-term liabilities 28,313.0 28,313.0 28,313.0 28,313.0 Turnover (X) 0.2 0.2 0.2 0.2 Total liabilities 97,097.0 107,147.1 114,733.5 122,924.6 Leverage (X) 2.1 2.1 2.1 2.1 Preferred shares ------Total common equity 86,715.0 92,163.3 101,026.3 112,666.4 Growth & Margins (%) ______Minority interest 2,018.0 2,002.0 1,986.0 1,970.0 12/18 12/19E 12/20E 12/21E Total liabilities & equity 185,830.0 201,312.4 217,745.9 237,561.1 Total revenue growth 15.6 20.6 22.4 18.2 Gross cash invested (ex cash) 97,055.3 99,093.7 70,033.4 70,030.3 EBITDA growth (7.3) 27.8 51.8 19.4 Net debt, adjusted 38,019.0 27,058.8 17,341.9 4,677.8 EPS growth 33.7 (3.0) 56.9 30.0 Average capital employed 120,259.3 123,988.0 120,789.2 119,834.3 DPS growth NM NM NM NM BVPS (Rmb) 156.60146.87 159.37 175.93 EBIT margin 13.9 15.3 19.9 22.4 EBITDA margin 16.9 17.9 22.2 22.4 Cash Flow (Rmb mn) ______Net income margin 17.7 14.6 19.4 21.5 12/18 12/19E 12/20E 12/21E Net income 5,480.0 5,448.3 8,863.1 11,640.1 Price Performance ______D&A add-back 920.2 970.2 1,061.5 1,036.9 CTRP ($) NASDAQ Composite Minority interest add-back (16.0) (16.0) (16.0) (16.0) Net (inc)/dec working capital (647.8) 6,066.9 1,968.0 2,578.1 70 8,500 Other operating cash flow 32.0 (10.5) (325.1) (406.1) 60 8,000 Cash flow from operations 5,768.4 12,458.911,551.5 14,833.1

50 7,500 Capital expenditures (777.6) (1,498.7) (1,834.6) (2,168.9) 40 7,000 Acquisitions ------Divestitures ------30 6,500 Others (8,992.1) ------20 6,000 Cash flow from investing (9,769.7) (1,498.7) (1,834.6) (2,168.9)

Apr-18 Jul-18 Oct-18 Jan-19 Dividends paid (common & pref) ------3m 6m 12m Inc/(dec) in debt 19,086.7 ------Absolute 18.1% (9.0)% (23.3)% Other financing cash flows (11,798.4) 0.0 0.0 0.0 Rel. to the NASDAQ Composite 11.3% (3.1)% (26.7)% Cash flow from financing 7,288.3 0.00.00.0 Total cash flow 3,287.010,960.29,716.912,664.2 Source: FactSet. Price as of 4 Mar 2019 close. Free cash flow 4,990.8 10,960.2 9,716.9 12,664.2 Income Statement (Rmb mn) ______Source: Company data, Goldman Sachs Research estimates. 12/18 12/19E 12/20E 12/21E Total revenue 30,965.0 37,343.8 45,727.2 54,059.9 Cost of goods sold (6,324.0) (7,922.9) (9,299.6) (10,476.1) SG&A (12,577.0) (14,972.6) (17,334.7) (20,175.6) R&D (7,752.0) (8,732.8) (10,007.3) (11,290.3) Other operating inc./(exp.) ------EBITDA 5,232.2 6,685.7 10,147.112,117.9 Depreciation & amortization (920.2) (970.2) (1,061.5) 0.0 EBIT 4,312.0 5,715.6 9,085.7 12,117.9 Net interest inc./(exp.) 391.0 429.5 1,283.9 1,645.2 Income/(loss) from associates (32.0) 10.5 325.1 406.1 Pre-tax profit6,257.0 6,455.5 10,694.6 14,169.3 Provision for taxes (793.0) (1,023.2) (1,847.6) (2,545.2) Minority interest 16.0 16.0 16.0 16.0 Preferred dividends ------Net inc. (pre-exceptionals) 5,480.0 5,448.3 8,863.111,640.1 Post-tax exceptionals (1,707.0) (2,181.6) (2,671.4) (3,158.2) Net inc. (post-exceptionals) 3,773.0 3,266.7 6,191.7 8,481.9 EPS (basic, pre-except) (Rmb) 10.01 9.86 15.88 20.65 EPS (diluted, pre-except) (Rmb) 9.22 8.94 14.03 18.24 EPS (basic, post-except) (Rmb) 2.035.91 11.09 15.04 EPS (diluted, post-except) (Rmb) 6.81 5.21 9.77 13.24 DPS (Rmb) ------Div. payout ratio (%) 0.0 0.0 0.0 0.0

6 March 2019 2 Goldman Sachs Ctrip.com International (CTRP)

lower marketing expense/higher gross margins, while keeping 2020 estimates broadly unchanged, on the back of solid 1Q guidance. Our non-GAAP EPADS in 2019E/20E are lifted by 21%/0% accordingly to Rmb8.94/Rmb14.03. Our SOTP-based, 12-m TP is lifted by 2% to US$48, on 21X 2020E P/E for core travel business with assumed 23% normalized non-GAAP operating margin, as well as updated USD/CNY of 6.8 (from 6.9) and valuation for strategic investments. Maintain Buy.

Exhibit 1: Our estimate changes at a glance; we also introduce 2021E non-GAAP EPADS at Rmb18.24 New New New 2019E Chg (%) 2020E Chg (%) 2021E Net revenues (Rmb mn) 37,344 2% 45,727 1% 54,060 Non-GAAP Operating profit (Rmb mn) 5,716 19% 9,086 3% 12,118 Non-GAAP EPADS (Rmb) 8.94 21% 14.03 0% 18.24

Source: Goldman Sachs Global Investment Research

Four key takeaways from 4Q18 results 1. Margins and competition: We believe that the 1Q19 non-GAAP operating margin guidance of 12-14% will help reduce concerns of irrational competition in the industry, particularly following management’s 4Q18 non-GAAP operating margin guidance of 0-1% back in November 2018. o Additionally, the higher-than-expected operating margin in 4Q18 was partially driven by lower-than-expected marketing costs, which printed -4% qoq as management cut down on certain lower ROI marketing channels, reflecting a rational customer acquisition strategy. 2. Milestone reached for international expansion, with revenues now comprising 30-35% of overall Ctrip revenues through a consecutive quarter of growth, tripling that of the overall industry. We note that this continues to track with management’s previous target of 40-50% contribution from the international business by 2020. We continue to see Ctrip’s growing and significant international exposure as a key factor distinguishing the platform from other domestic OTA players in terms of user experience and future profitability; 3. Transportation recovery well under way, with reported 4Q18 growth of +17% (from +0%/+1%/+16% in the 3 prior quarters) reinforcing our views of normalization of revenue growth at 20%+ given the low base, though we expect this to be partially offset by macro uncertainties in the wider economy; 4. Lower-tier cities continue to be a key focus with yet another quarter of c.50% growth in room nights in lower-tier cities, along with expansion into last-mile services (rental cars and buses) and through offline channels, with 7,000 stores across >200 cities at present. Management targets to expand to over 8,000 stores in 300 cities by end-2019, according to a separate announcement on March 1.

See our First Take published earlier for further details: Ctrip.com International (CTRP): First take: 4Q beat; 1Q margin guidance ahead of our expectations

6 March 2019 3 Goldman Sachs Ctrip.com International (CTRP)

Exhibit 2: We continue to see a gradual step-up in rankings for Skyscanner, in comparison with other travel aggregator apps in the US App Annie iOS rankings for top 10 US travel aggregator apps

Ranks Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 1. Hopper Booking.com Booking.com Booking.com Booking.com Booking.com Booking.com Hopper Hopper Booking.com Booking.com Booking.com Booking.com 2. Booking.com Hopper Hopper Expedia Expedia Expedia Expedia Booking.com Booking.com Hopper Expedia Expedia Expedia 3. Expedia Expedia Expedia Hopper Hopper Hopper Hopper Expedia Expedia Expedia Hopper Hopper Hopper 4. Hotels.com Hotels.com Hotels.com Hotels.com Hotels.com Hotels.com Hotels.com Hotel Tonight Hotels.com Hotels.com Hotels.com Hotels.com Hotels.com 5. TripAdvisor TripAdvisor TripAdvisor trivago trivago trivago Priceline Hotels.com Priceline Skyscanner Priceline Skyscanner Priceline 6. KAYAK Hotel Tonight Priceline Priceline Priceline Priceline Hotel Tonight KAYAK Skyscanner TripAdvisor Hotel Tonight KAYAK KAYAK 7. Hotel Tonight Priceline Hotel Tonight TripAdvisor TripAdvisor Hotel Tonight trivago TripAdvisor TripAdvisor Hotel Tonight TripAdvisor Priceline Hotel Tonight 8. Priceline trivago trivago Hotel Tonight Hotel Tonight TripAdvisor TripAdvisor Priceline Hotel Tonight Priceline KAYAK trivago Skyscanner 9. Skyscanner KAYAK KAYAK KAYAK KAYAK KAYAK KAYAK Skyscanner KAYAK KAYAK Skyscanner TripAdvisor TripAdvisor 10. trivago Skyscanner Skyscanner Travelocity Skyscanner Travelocity Skyscanner trivago trivago trivago trivago Hotel Tonight trivago

Source: App Annie

Other recent key developments n Personalized service offerings: Ctrip has upgraded service offerings for business customers through big data analytics with user preference, historical actions, etc. We note a more personalized user interface with accommodation listings, which has showcased its strengthening efforts of retaining old users. n Tujia, Ctrip’s afﬁliate focusing on short-term rental/local accommodation, had more than 1.2 million online listings worldwide, and its daily room nights reached 160k in 2018, the highest of China’s short-term property rental market. We see Tujia’s business as complementary to Ctrip’s suite of accommodation offerings, especially for non-business customers. n New feature under Ctrip App called Trip Moment or Lv Pai in Chinese that was launched December last year, which created a social network platform that enables users to share short videos during trips. According to management, users have generated c.1 million posts covering over 6,000 destinations worldwide. Management sees this new feature as an important initiative for improving customer engagement.

Exhibit 3: Hotel listings for business customers with new tags tailored to personal preference

Business customers of Ctrip now can find tags of "often chosen" / "recommended by colleagues" when browsing hotel lists, which indicate a more personalized and accurate service offering according to customers’ historical data analysis.

Source: Ctrip app

6 March 2019 4 Goldman Sachs Ctrip.com International (CTRP)

Estimate changes and valuation

Exhibit 4: Introducing our 2021 estimates (non-GAAP EPADS at Rmb18.24), and overview of estimate changes for 2019E/2020E

Income Statement New Old New Old New (Rmb mn) 2019E 2019E Chg (%) 2020E 2020E Chg (%) 2021E Accommodation reservation 14,008 13,437 4% 17,159 16,701 3% 19,960 Transportation ticketing 15,427 15,355 0% 18,920 19,091 -1% 22,526 Packaged tour 4,715 4,672 1% 5,847 5,793 1% 7,191 Corporate travel 1,221 1,161 5% 1,506 1,432 5% 1,844 Others 2,098 2,076 1% 2,433 2,419 1% 2,701 Gross revenues 37,467 36,701 2% 45,865 45,436 1% 54,223 Net revenues 37,344 36,541 2% 45,727 45,118 1% 54,060 Cost of revenues 7,923 8,623 -8% 9,300 9,991 -7% 10,476 Gross profit 29,421 27,917 5% 36,428 35,127 4% 43,584 Product development exp., non-GAAP 9,891 9,329 6% 11,426 10,526 9% 12,968 Sales, marketing exp., non-GAAP 11,270 11,278 0% 13,050 13,023 0% 15,212 General & admin. expenses, non-GAAP 2,544 2,521 1% 2,866 2,770 3% 3,286 Share-based compensation 2,182 2,192 0% 2,671 2,707 -1% 3,158 Total operating expenses 25,887 25,320 2% 30,013 29,026 3% 34,624 Operating profit, GAAP 3,534 2,598 36% 6,414 6,101 5% 8,960 Operating profit, Non-GAAP 5,716 4,790 19% 9,086 8,808 3% 12,118 Net profit, GAAP 3,267 2,318 41% 6,192 6,097 2% 8,482 Net profit, non-GAAP 5,448 4,510 21% 8,863 8,804 1% 11,640 EPADS, non-GAAP (Rmb) 8.94 7.38 21% 14.03 13.96 0% 18.24

Margins% 2019E 2019E Chg (%) 2020E 2020E Chg (%) 2021E Gross margin 78.8% 76.4% 2.4pp 79.7% 77.9% 1.8pp 80.6% Operating margin (non-GAAP) 15.3% 13.1% 2.2pp 19.9% 19.5% 0.3pp 22.4%

Source: Goldman Sachs Global Investment Research

Exhibit 5: Our SOTP-based valuation suggests 12-m target price of US$48 with updated USD/CNY of 6.8 from 6.9 and valuation for strategic investments

2020E Valuation Ctrip’s Value to $/ Value 2020E valuation (US$mn) PE (x) P/S (x) Comment revenue (US$mn) stake Ctrip ADS split Travel - hotel, transport, package tour 21X 20E P/E, assuming longer-term normalized 23% non- 6,725 21X 4X 26,436 100% 26,436 38.7 74% and others GAAP OP margin, 20% tax

Key equity investments 3,401 5.0 9% Tongcheng-Elong Holdings 4,009 23% 907 1.3 3% At current market cap BTG Hotels (Homeinns) 2,807 15% 433 0.6 1% At current market cap Huazhu Group (China Lodging) 10,327 7% 723 1.1 2% At GS 12-month target price of US$37 eHi 848 14% 118 0.2 0% At current market cap Tuniu 628 3% 20 0.0 0% At current market cap China Eastern (A) 11,170 3% 360 0.5 1% At GS 12-month target price of Rmb5.25 Tujia 1,046 45% 471 0.7 1% Fair value from 20-F, GS estimated stake Makemytrip 3,465 11% 370 0.5 1% At GS 12-month target price of US$33

Net cash 6,111 100% 6,111 8.9 17% 2020E Net cash, ex. convertibles Total 35,948 53 100% At USDCNY of 6.80 Less holding discount 10% 3,595 5.3 Total 32,353 48

Huazhu Group (HTHT) covered by Justin Kwok, CFA, China Eastern Airlines (H/A) covered by Ben Hartwright, CFA, Makemytrip (MMYT) covered by Manish Adukia, CFA.

Source: Bloomberg, Company data, Goldman Sachs Global Investment Research

6 March 2019 5 Goldman Sachs Ctrip.com International (CTRP)

Exhibit 6: Our yearly and quarterly forecasts for Ctrip

Rmb mn 2016 2017 2018 2019E 2020E 2021E 4Q18 1Q19E 2Q19E 3Q19E 4Q19E Accommodation reservation 7,309 9,517 11,580 14,008 17,159 19,960 2,656 3,010 3,321 4,342 3,334 Transportation ticketing 8,827 12,221 12,947 15,427 18,920 22,526 3,414 3,440 3,651 4,313 4,023 Packaged tour 2,310 2,970 3,772 4,715 5,847 7,191 721 1,043 1,049 1,723 901 Corporate travel 608 753 981 1,221 1,506 1,844 279 225 319 334 343 Others 734 1,515 1,824 2,098 2,433 2,701 515 434 493 578 592 Total gross revenue 19,788 26,977 31,104 37,467 45,865 54,223 7,585 8,151 8,833 11,290 9,194 yoy% 72% 36% 15% 20% 22% 18% 22% 20% 20% 20% 21% Less: Business tax and related surcharges (560) (197) (139) (123) (138) (163) (25) (27) (29) (37) (30) Total net revenue 19,228 26,780 30,965 37,344 45,727 54,060 7,560 8,124 8,804 11,253 9,164 yoy% 76% 39% 16% 21% 22% 18% 22% 21% 20% 20% 21% Cost of revnues (4,730) (4,678) (6,324) (7,923) (9,300) (10,476) (1,620) (1,681) (1,859) (2,464) (1,920) Gross profit 14,499 22,101 24,641 29,421 36,428 43,584 5,940 6,443 6,945 8,789 7,244 Product development (5,608) (7,246) (8,686) (9,891) (11,426) (12,968) (2,479) (2,275) (2,324) (2,701) (2,592) Sales and marketing (5,468) (8,108) (9,440) (11,270) (13,050) (15,212) (2,568) (2,518) (2,591) (3,320) (2,841) General and administrative (1,431) (1,987) (2,203) (2,544) (2,866) (3,286) (632) (634) (577) (751) (583) Share-based compensation (3,560) (1,834) (1,707) (2,182) (2,671) (3,158) (450) (552) (577) (506) (545) Total operating expenses (16,067) (19,175) (22,036) (25,887) (30,013) (34,624) (6,129) (5,979) (6,069) (7,277) (6,561) Operating profit (1,568) 2,926 2,605 3,534 6,414 8,960 (189) 464 876 1,512 682 Operating profit, non-GAAP 1,991 4,760 4,312 5,716 9,086 12,118 261 1,016 1,454 2,018 1,228 Pre-tax profit (1,760) 3,506 1,921 4,263 7,698 10,605 (1,140) 823 978 1,635 827 Income tax expense (478) (1,281) (793) (1,023) (1,848) (2,545) (35) (198) (235) (392) (199) Equity in income of affiliates 602 (65) (32) 10 325 406 (66) (116) (4) 85 45 Minority interests 206 (19) 16 16 16 16 51 4 4 4 4 Net income, non-GAAP 2,129 3,976 5,480 5,448 8,863 11,640 513 1,067 1,321 1,838 1,223

Gross margin 75.4% 82.5% 79.6% 78.8% 79.7% 80.6% 78.6% 79.3% 78.9% 78.1% 79.1% Operating margin, non-GAAP 10.4% 17.8% 13.9% 15.3% 19.9% 22.4% 3.5% 12.5% 16.5% 17.9% 13.4% Net margin, non-GAAP 11.1% 14.8% 17.7% 14.6% 19.4% 21.5% 6.8% 13.1% 15.0% 16.3% 13.3% Total GMV ex Skyscanner (Rmb bn) 427 557 728 888 1,070 1,253 187 193 214 255 226 yoy% 90% 31% 31% 22% 21% 17% 31% 22% 23% 22% 21%

Source: Company data, Goldman Sachs Global Investment Research

Key risks to our views: Weak macroeconomic environment, tougher-than-expected competition, regulatory concerns, share dilution risks on new shares.

6 March 2019 6 Goldman Sachs Ctrip.com International (CTRP)

Disclosure Appendix

Reg AC

I, Ronald Keung, CFA, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. Unless otherwise stated, the individuals listed on the cover page of this report are analysts in Goldman Sachs’ Global Investment Research division. GS Factor Profile The Goldman Sachs Factor Profile provides investment context for a stock by comparing key attributes to the market (i.e. our coverage universe) and its sector peers. The four key attributes depicted are: Growth, Financial Returns, Multiple (e.g. valuation) and Integrated (a composite of Growth, Financial Returns and Multiple). Growth, Financial Returns and Multiple are calculated by using normalized ranks for specific metrics for each stock. The normalized ranks for the metrics are then averaged and converted into percentiles for the relevant attribute. The precise calculation of each metric may vary depending on the fiscal year, industry and region, but the standard approach is as follows: Growth is based on a stock’s forward-looking sales growth, EBITDA growth and EPS growth (for financial stocks, only EPS and sales growth), with a higher percentile indicating a higher growth company. Financial Returns is based on a stock’s forward-looking ROE, ROCE and CROCI (for financial stocks, only ROE), with a higher percentile indicating a company with higher financial returns. Multiple is based on a stock’s forward-looking P/E, P/B, price/dividend (P/D), EV/EBITDA, EV/FCF and EV/Debt Adjusted Cash Flow (DACF) (for financial stocks, only P/E, P/B and P/D), with a higher percentile indicating a stock trading at a higher multiple. The Integrated percentile is calculated as the average of the Growth percentile, Financial Returns percentile and (100% - Multiple percentile). Financial Returns and Multiple use the Goldman Sachs analyst forecasts at the fiscal year-end at least three quarters in the future. Growth uses inputs for the fiscal year at least seven quarters in the future compared with the year at least three quarters in the future (on a per-share basis for all metrics). For a more detailed description of how we calculate the GS Factor Profile, please contact your GS representative. M&A Rank Across our global coverage, we examine stocks using an M&A framework, considering both qualitative factors and quantitative factors (which may vary across sectors and regions) to incorporate the potential that certain companies could be acquired. We then assign a M&A rank as a means of scoring companies under our rated coverage from 1 to 3, with 1 representing high (30%-50%) probability of the company becoming an acquisition target, 2 representing medium (15%-30%) probability and 3 representing low (0%-15%) probability. For companies ranked 1 or 2, in line with our standard departmental guidelines we incorporate an M&A component into our target price. M&A rank of 3 is considered immaterial and therefore does not factor into our price target, and may or may not be discussed in research. Quantum Quantum is Goldman Sachs’ proprietary database providing access to detailed financial statement histories, forecasts and ratios. It can be used for in-depth analysis of a single company, or to make comparisons between companies in different sectors and markets. GS SUSTAIN GS SUSTAIN is a global investment strategy focused on the generation of long-term alpha through identifying high quality industry leaders. The GS SUSTAIN 50 list includes leaders we believe to be well positioned to deliver long-term outperformance through superior returns on capital, sustainable competitive advantage and effective management of ESG risks vs. global industry peers. Candidates are selected largely on a combination of quantifiable analysis of these three aspects of corporate performance. Disclosures Coverage group(s) of stocks by primary analyst(s) Ronald Keung, CFA: Asia Internet, China Logistics. Piyush Mubayi: Asia Internet. Asia Internet: 58.com Inc., Alibaba Group, Aurora Mobile Ltd., Baidu.com Inc., Ctrip.com International, Gridsum, Huya Inc., iQIYI Inc., JD.com Inc., Jianpu Technology Inc., Meituan Dianping, MOMO.COM Inc., NetEase Inc., PChome Online Inc., Pinduoduo Inc., Qeeka Home (Cayman) Inc., Sea Ltd., SINA Corp., Singapore Post, Sogou Inc., Tencent Holdings, Tencent Music Entertainment Group, Uxin Ltd., Vipshop Holdings, Weibo Corp., Xiaomi Corp., YY Inc.. China Logistics: BEST Inc., Kerry Logistics Network Ltd., Sinotrans Ltd., ZTO Express (Cayman) Inc.. Company-specific regulatory disclosures The following disclosures relate to relationships between The Goldman Sachs Group, Inc. (with its affiliates, “Goldman Sachs”) and companies covered by the Global Investment Research Division of Goldman Sachs and referred to in this research. Goldman Sachs beneficially owned 1% or more of common equity (excluding positions managed by affiliates and business units not required to be aggregated under US securities law) as of the second most recent month end: Ctrip.com International ($34.99) Goldman Sachs has received compensation for investment banking services in the past 12 months: Ctrip.com International ($34.99) Goldman Sachs expects to receive or intends to seek compensation for investment banking services in the next 3 months: Ctrip.com International ($34.99) Goldman Sachs had an investment banking services client relationship during the past 12 months with: Ctrip.com International ($34.99) Goldman Sachs had a non-securities services client relationship during the past 12 months with: Ctrip.com International ($34.99) Goldman Sachs makes a market in the securities or derivatives thereof: Ctrip.com International ($34.99) Distribution of ratings/investment banking relationships Goldman Sachs Investment Research global Equity coverage universe

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Rating Distribution Investment Banking Relationships Buy Hold Sell Buy Hold Sell Global 35% 54% 11% 65% 58% 56%

As of January 1, 2019, Goldman Sachs Global Investment Research had investment ratings on 2,945 equity securities. Goldman Sachs assigns stocks as Buys and Sells on various regional Investment Lists; stocks not so assigned are deemed Neutral. Such assignments equate to Buy, Hold and Sell for the purposes of the above disclosure required by the FINRA Rules. See ‘Ratings, Coverage groups and views and related deﬁnitions’ below. The Investment Banking Relationships chart reﬂects the percentage of subject companies within each rating category for whom Goldman Sachs has provided investment banking services within the previous twelve months. Price target and rating history chart(s)

Regulatory disclosures Disclosures required by United States laws and regulations See company-specific regulatory disclosures above for any of the following disclosures required as to companies referred to in this report: manager or co-manager in a pending transaction; 1% or other ownership; compensation for certain services; types of client relationships; managed/co-managed public offerings in prior periods; directorships; for equity securities, market making and/or specialist role. Goldman Sachs trades or may trade as a principal in debt securities (or in related derivatives) of issuers discussed in this report. The following are additional required disclosures: Ownership and material conflicts of interest: Goldman Sachs policy prohibits its analysts, professionals reporting to analysts and members of their households from owning securities of any company in the analyst’s area of coverage. Analyst compensation: Analysts are paid in part based on the profitability of Goldman Sachs, which includes investment banking revenues. Analyst as officer or director: Goldman Sachs policy generally prohibits its analysts, persons reporting to analysts or members of their households from serving as an officer, director or advisor of any company in the analyst’s area of coverage. Non-U.S. Analysts: Non-U.S. analysts may not be associated persons of Goldman Sachs & Co. LLC and therefore may not be subject to FINRA Rule 2241 or FINRA Rule 2242 restrictions on communications with subject company, public appearances and trading securities held by the analysts. Distribution of ratings: See the distribution of ratings disclosure above. Price chart: See the price chart, with changes of ratings and price targets in prior periods, above, or, if electronic format or if with respect to multiple companies which are the subject of this report, on the Goldman Sachs website at http://www.gs.com/research/hedge.html. Additional disclosures required under the laws and regulations of jurisdictions other than the United States The following disclosures are those required by the jurisdiction indicated, except to the extent already made above pursuant to United States laws and regulations. Australia: Goldman Sachs Australia Pty Ltd and its affiliates are not authorized deposit-taking institutions (as that term is defined in the Banking Act 1959 (Cth)) in Australia and do not provide banking services, nor carry on a banking business, in Australia. This research, and any access to it, is intended only for “wholesale clients” within the meaning of the Australian Corporations Act, unless otherwise agreed by Goldman Sachs. 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Goldman Sachs Canada Inc. has approved of, and agreed to take responsibility for, this research report in Canada if and to the extent that Goldman Sachs Canada Inc. disseminates this research report to its clients. Hong Kong: Further information on the securities of covered companies referred to in this research may be obtained on request from Goldman Sachs (Asia) L.L.C. India: Further information on the subject company or companies referred to in this research may be obtained from Goldman Sachs (India) Securities Private Limited, Research Analyst - SEBI Registration Number INH000001493, 951-A, Rational House, Appasaheb Marathe Marg, Prabhadevi, Mumbai 400 025, India, Corporate Identity Number U74140MH2006FTC160634, Phone +91 22 6616 9000, Fax +91 22 6616 9001. Goldman Sachs may beneficially own 1% or more of the securities (as such term is defined in clause 2 (h) the Indian

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Securities Contracts (Regulation) Act, 1956) of the subject company or companies referred to in this research report. Japan: See below. Korea: This research, and any access to it, is intended only for “professional investors” within the meaning of the Financial Services and Capital Markets Act, unless otherwise agreed by Goldman Sachs. Further information on the subject company or companies referred to in this research may be obtained from Goldman Sachs (Asia) L.L.C., Seoul Branch. New Zealand: Goldman Sachs New Zealand Limited and its affiliates are neither “registered banks” nor “deposit takers” (as defined in the Reserve Bank of New Zealand Act 1989) in New Zealand. This research, and any access to it, is intended for “wholesale clients” (as defined in the Financial Advisers Act 2008) unless otherwise agreed by Goldman Sachs. 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European Union: Disclosure information in relation to Article 6 (2) of the European Commission Delegated Regulation (EU) (2016/958) supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the technical arrangements for objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflicts of interest is available at http://www.gs.com/disclosures/europeanpolicy.html which states the European Policy for Managing Conflicts of Interest in Connection with Investment Research. Japan: Goldman Sachs Japan Co., Ltd. is a Financial Instrument Dealer registered with the Kanto Financial Bureau under registration number Kinsho 69, and a member of Japan Securities Dealers Association, Financial Futures Association of Japan and Type II Financial Instruments Firms Association. Sales and purchase of equities are subject to commission pre-determined with clients plus consumption tax. See company-specific disclosures as to any applicable disclosures required by Japanese stock exchanges, the Japanese Securities Dealers Association or the Japanese Securities Finance Company. Ratings, coverage groups and views and related definitions Buy (B), Neutral (N), Sell (S) -Analysts recommend stocks as Buys or Sells for inclusion on various regional Investment Lists. Being assigned a Buy or Sell on an Investment List is determined by a stock’s total return potential relative to its coverage. Any stock not assigned as a Buy or a Sell on an Investment List with an active rating (i.e., a stock that is not Rating Suspended, Not Rated, Coverage Suspended or Not Covered), is deemed Neutral. Each regional Investment Review Committee manages various regional Investment Lists to a global guideline of 25%-35% of stocks as Buy and 10%-15% of stocks as Sell; however, the distribution of Buys and Sells in any particular analyst’s coverage group may vary as determined by the regional Investment Review Committee. Additionally, each Investment Review Committee manages Regional Conviction lists, which represent investment recommendations focused on the size of the total return potential and/or the likelihood of the realization of the return across their respective areas of coverage. The addition or removal of stocks from such Conviction lists do not represent a change in the analysts’ investment rating for such stocks. Total return potential represents the upside or downside differential between the current share price and the price target, including all paid or anticipated dividends, expected during the time horizon associated with the price target. Price targets are required for all covered stocks. The total return potential, price target and associated time horizon are stated in each report adding or reiterating an Investment List membership. Coverage groups and views: A list of all stocks in each coverage group is available by primary analyst, stock and coverage group at http://www.gs.com/research/hedge.html. The analyst assigns one of the following coverage views which represents the analyst’s investment outlook on the coverage group relative to the group’s historical fundamentals and/or valuation. Attractive (A). The investment outlook over the following 12 months is favorable relative to the coverage group’s historical fundamentals and/or valuation. Neutral (N). The investment outlook over the following 12 months is neutral relative to the coverage group’s historical fundamentals and/or valuation. Cautious (C). The investment outlook over the following 12 months is unfavorable relative to the coverage group’s historical fundamentals and/or valuation. Not Rated (NR). The investment rating and target price have been removed pursuant to Goldman Sachs policy when Goldman Sachs is acting in an advisory capacity in a merger or strategic transaction involving this company and in certain other circumstances. Rating Suspended (RS). Goldman Sachs Research has suspended the investment rating and price target for this stock, because there is not a sufficient fundamental basis for determining, or there are legal, regulatory or policy constraints around publishing, an investment rating or target. The previous investment rating and price target, if any, are no longer in effect for this stock and should not be relied upon. Coverage Suspended (CS). Goldman Sachs has suspended coverage of this company. Not Covered (NC). Goldman Sachs does not cover this company. Not Available or Not Applicable (NA). 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General disclosures This research is for our clients only. Other than disclosures relating to Goldman Sachs, this research is based on current public information that we consider reliable, but we do not represent it is accurate or complete, and it should not be relied on as such. The information, opinions, estimates and forecasts contained herein are as of the date hereof and are subject to change without prior notification. We seek to update our research as appropriate, but various regulations may prevent us from doing so. Other than certain industry reports published on a periodic basis, the large majority of reports are published at irregular intervals as appropriate in the analyst’s judgment. Goldman Sachs conducts a global full-service, integrated investment banking, investment management, and brokerage business. We have investment banking and other business relationships with a substantial percentage of the companies covered by our Global Investment Research Division. 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