 Good day, fellow investors! Jesse, a member of our stock market for modern value investors, Facebook group wrote to Monish Pabrai asking him why he bought RAIN and the answer was amazing. So here's the answer in written and he's saying that the devil lies in the details. There is no perfect formula for investing, there is no point in looking at the headline depth to equity, return on equity, return on invested capital etc. So the key here is to look in the details and as I'm researching the Chinese stock market the key is I cannot look just at the headline ratios, price earnings growth because that is obvious to everybody. I have to look in the details, I have to look for the devil in the stocks and I have to understand the company better than everybody else. To do that to find such great companies I have to really dig into every company and see whether that is a potential good investment or not. So the best way to analyze a company is to really make a video about it, present it to someone else because that's one of the greatest benefits of teaching. When you present you are the one that learns the most about it. So I've decided to go to all the Chinese companies especially those most interesting to me and make a short video really get to know the story because also when you discuss one company you learn a lot about the competition, other companies, why is Alibaba investing in ZTO etc etc. So in order to do that I'll make a big series of videos about Chinese companies and then we'll discuss of course the company, what's the company doing, the fundamentals, the growth rates, the earnings, the cash flows, the value if there is value, what is significant for the company then we'll discuss the story behind it a little bit going into the devil's details, going into the not so obvious things to the market where we can gain an advantage especially if we think for the long term over the rest of the community. And then at the end of each video I'll show what's the company worth from an absolute investing perspective where you expect your returns to come from business earnings and from a relative investing perspective where you expect your earnings to come from the fact that the company is undervalued in relation to another stock, sector, country, whatever and you expect the valuation to increase. So we are going to put those two things into perspective 99% of investors are relative investors not absolute so there will be something for everybody. So nothing else to do here, let's dig into the companies, let's dig into the details. If you like this approach whether you're an absolute relative investor I think I can save everybody time so please subscribe to this YouTube channel as there will be many many stock analysis investment analysis and we also discuss investment mindset investment theory mostly about value investing. Let's go into the Chinese stock market. All right Ctrip. Ctrip is the largest online travel agency in China. They generate 82% of sales for hotel reservation and air ticketing reservations. The rest of Ctrip's revenue comes from package tours, corporate travel and most more than 80% of its sales comes from website and mobile platforms while the rest comes from call centers even if they have now retail centers founded in 1999 and listed since 2003. So they just announced earnings and beat expectations the stock jumped 4.5% 40% gains in net revenue operating margin was 10% non-gap 16% net income rose 564% wow they are guiding continued net revenue growth of 14 to 18% diluted earnings per American depository share was 0.59 and non-gap diluted earnings were 0.29 depending on what you look at the adjusted earnings or not however if we look at earnings 0.65 reminbi now they are 3.89 reminbi so there is a huge jump in there is the huge jump in earning 0.59 bucks per share so this is a seasonal company of course so the summer will give even better earnings probably so each American depository share receipt represents 0.125 ordinary share so eight ADSS for one share earnings 4.95 reminbi so that's the earnings we have to use in our future calculations they are doing a lot of acquisitions so as every other company as Alibaba does they are really growing by acquiring other companies e-long they invested 180 million in make my trip further adding investments converted shares china eastern airlines in their their new financing they bought skyscanner holdings limited the skyscanner the online global ticket agency and they also bought btg hotels or what do they own 22% so a lot of investments which leads also to risks because in the tourist industry terrorist attacks do you remember h1n1 ebola avian flu middle east respiratory syndrome SARS and all those things that come out here and there and then scare the hell out of people which travel less so always keep that in mind that every few years unfortunately something like that comes increasing prices in hotels okay that's something we'll discuss in the next video about the hotel stock and then political unrest trade wars natural disasters and so what etc etc they have a lot of goodwill also by the cunar sky scanner acquisition that cost them 43 billion reminbi that's a lot of goodwill now the question is with 13% revenue grow can the company grow slower 13 10 15% which is good growth and still be profitable i have put the current earnings eps 0.80 growth rate 20% and then the present value of my price is 9.9 bucks the current stock price is 49 again crazy you would say but look at that 2013 it was 10 bucks then it spiked up but it's trading at a higher valuation how to make c-trip undervalued the growth rate has to be 0.6 percent at a 10 percent at the 10 valuation so a price earnings ratio of 10 in 2023 growth 60 percent possible but stretched would make this undervalued at a better valuation at a valuation of 30 c-trip would be undervalued at the growth rate of earnings of 40 percent over the next five years that's a much better perspective and you can put this into your model to see compared to other companies is it possible 30 percent they are investing a lot if they can leverage onto their ecosystem the growth 30 percent is possible especially if they can turn in that into profits if they have to spend a lot of money in things that are not profitable then we might see impairments of the goodwill in the long term and that's a completely different story so the risk here is high but the potential is also high another growth story thank you for watching looking forward to comments please subscribe for more many more chinese stock market videos where we look a little bit at the story not only at the headline numbers see you in the next video