Investment Rating - Maintain BUY rating with a target price of US$71 0, representing a 15 8% upside from the current price of US$61 32 [1][2] Core Views - Trip com Group (TCOM) reported strong 3Q24 results with total revenue of RMB15 9bn, up 16% YoY, 2% above Bloomberg consensus estimates [1] - Non-GAAP operating income (OP) was RMB5 5bn, 6% better than consensus, driven by optimized sales and marketing spend [1] - Domestic business volume growth exceeded expectations, and outbound business recovery is on track, reaching 120% of 2019 levels in 3Q24 [1] - Incremental investment in international expansion is expected to support long-term revenue and earnings growth [1] - DCF-based target price raised by 8% to US$71 0, reflecting a more positive earnings outlook and valuation rollover to 2025E [1][10] Financial Performance Revenue and Profitability - 3Q24 revenue: RMB15 9bn, up 16% YoY, with domestic hotel reservations growing by mid-to-high-teens YoY and outbound air and hotel reservations recovering to 120% of 2019 levels [1] - Non-GAAP OPM for 3Q24 was 34 4%, 1 5ppts better than consensus, driven by efficient S&M spend [1] - 4Q24E revenue estimated at RMB12 4bn, up 20% YoY, 2% ahead of consensus [1] - Non-GAAP OPM for 4Q24E/2024E estimated at 20 7%/30 3%, compared to 25 6%/29 6% in 4Q23/2023 [1] Segment Performance - Domestic air tickets volume grew by mid-to-high single digits (MHSD) YoY in 3Q24, with a similar trend in 4Q24 QTD [1] - Outbound air and hotel reservations outperformed the industry by ~40ppts, reaching 120% of 2019 levels in 3Q24 [1] - Trip com achieved robust YoY revenue growth of ~60% in 3Q24, driven by strong growth in air tickets and hotel reservations [1] Forecasts - Revenue for 2024E/2025E/2026E estimated at RMB52 985bn/60 765bn/67 886bn, with YoY growth of 18 9%/14 7%/11 7% [5] - Adjusted net profit for 2024E/2025E/2026E estimated at RMB16 811 7bn/17 807 3bn/20 149 2bn, with YoY growth of 28 6%/5 9%/13 2% [5] Valuation and Growth - DCF-based target price of US$71 0, translating into 21 3x/20 7x 2024E/2025E PE (non-GAAP) [1][10] - Non-GAAP OP expected to grow at a 23-25E CAGR of 19% [1] - Gross margin for 2024E/2025E/2026E estimated at 81 5%/81 4%/81 4%, with operating margin at 26 3%/27 4%/28 5% [5][19] International Expansion - Trip com's international expansion, particularly in Asia, is supported by low online penetration and strong supply chain capabilities [1] - The company is expected to achieve a better OPM profile in international markets compared to domestic business, driven by higher AOV for international hotels and higher take rates for international ticketing [1]

Investment Rating - The report maintains a "BUY" rating for the company with a target price of US$15.00, down from the previous target of US$15.50, indicating a potential upside of 76.3% from the current price of US$8.51 [9]. Core Insights - The company reported a 5% year-over-year increase in net revenue for Q3 2024, reaching US$465 million, which exceeded Bloomberg consensus estimates by 7% [6]. - Advertising revenue grew by 2% year-over-year to US$399 million, primarily driven by strong performance in the food and beverage sector due to the Paris Olympics [7]. - The management remains cautiously optimistic about macroeconomic policy stimulus, although they believe the effects will take time to materialize [8]. Financial Performance Summary - For FY24E, the company expects revenue of US$1,755 million, with adjusted net profit projected at US$467 million and adjusted EPS at US$1.97 [12]. - The non-GAAP operating profit margin for Q3 2024 was 35.4%, a decline of 1.6 percentage points year-over-year, attributed to increased sales and marketing investments [8]. - The company anticipates a 4% decline in advertising revenue for Q4 2024 due to high base effects and weak demand in certain consumer-related verticals [8]. Revenue Breakdown - The company’s revenue for Q3 2024 was supported by a 25% increase in value-added services (VAS) revenue, which reached US$66 million [7]. - Monthly active users (MAUs) decreased by 3% year-over-year to 587 million, but the daily active users to monthly active users ratio improved to 43.8% [7]. Future Outlook - The management expects that the advertising business recovery will require more time, particularly in sectors like cosmetics and luxury goods, where demand has not shown significant improvement [8]. - The company is projected to benefit from policy stimulus and a gradual recovery in consumer spending, with a non-GAAP P/E ratio of 5x for FY25, indicating a favorable margin of safety [8].

Investment Rating - The report maintains a "Buy" rating for Trip.com Group (TCOM) with a target price of $71.00, reflecting an upside potential of 15.8% from the current price of $61.32 [10][19]. Core Insights - Trip.com Group reported solid business growth, with total revenue for Q3 2024 reaching RMB 15.9 billion, a year-on-year increase of 16%, exceeding Bloomberg consensus estimates by 2% [7][8]. - The company’s non-GAAP operating profit for the same period was RMB 5.5 billion, surpassing expectations by 6%, driven by better-than-expected sales and marketing expenditure optimization [7][8]. - The report highlights the robust recovery in outbound travel and the company's ongoing international expansion efforts, which are expected to contribute to long-term revenue and profit growth [7][9]. Financial Performance Summary - For FY 2024, total revenue is projected to be RMB 52.985 billion, representing an 18.9% year-on-year growth [13]. - Non-GAAP net profit is expected to reach RMB 16.812 billion in FY 2024, reflecting a 28.6% increase compared to the previous year [13]. - The report anticipates a compound annual growth rate (CAGR) of 23-25% for non-GAAP operating profit over the next few years [7][9]. Booking and Revenue Growth - The report indicates that domestic hotel bookings in Q3 2024 grew in the mid to high single digits year-on-year, with a similar trend expected to continue into Q4 2024 [8]. - Outbound flight and hotel bookings have recovered to 120% of 2019 levels, outperforming the industry average by approximately 40 percentage points [8][9]. - The company is expected to achieve a revenue of RMB 12.4 billion in Q4 2024, a 20% increase year-on-year, which is above market expectations [8]. Cost Management and Profitability - Trip.com’s non-GAAP operating profit margin for Q3 2024 was 34.4%, exceeding market expectations by 1.5 percentage points, primarily due to better-than-expected sales and marketing expenses [9]. - The report projects that the non-GAAP operating profit margin will reach 20.7% for Q4 2024 and 30.3% for the full year [9]. Valuation Metrics - The target price of $71.00 corresponds to non-GAAP P/E ratios of 21.3x and 20.7x for FY 2024 and FY 2025, respectively [19]. - The report emphasizes a positive outlook on Trip.com’s global expansion, particularly in the Asian market, where online penetration remains low [9][19].

20 Nov 2024 CMB International Global Markets | Equity Research | Company Update Tongcheng Travel (780 HK) Travel demand remains resilient Tongcheng Travel (TC) reported 3Q24 results: total revenue was RMB5.0bn, up 51% YoY (2Q24: +48% YoY), 3% better than Bloomberg consensus estimates; adjusted net income was RMB910mn, up 47% YoY, 11% better than consensus. OPM of core OTA businesses improved to 31.1% in 3Q24 (3Q23: 25.2%), driven by optimization of marketing strategies. Booking volume growth of TC's transpo ...

Investment Rating - The report assigns a "Buy" rating to several companies in the healthcare sector, indicating a potential upside of over 15% in their stock prices over the next 12 months [3][25]. Core Insights - The MSCI China Healthcare Index has underperformed, down 17.9% year-to-date, compared to a 32.4% decline in the MSCI China Index, suggesting that the healthcare sector may have high elasticity and potential for recovery [4]. - The report anticipates a recovery in the profitability of domestic medical device companies due to accelerated policy implementation for medical equipment updates and a supportive environment for innovative drugs [4]. - The upcoming release of the new medical insurance drug list is expected to continue supporting innovation, with significant sales from newly negotiated drugs in the past six years [4]. Summary by Sections Medical Device Sector - The report highlights a revival in medical device tenders, with 957 equipment update projects approved nationwide, totaling over 41 billion yuan as of September 15 [4]. - The procurement intention for medical devices has surged, with over 1 billion yuan in new procurement intentions recorded in the first week of November [4]. Innovative Pharmaceuticals - The report notes that multinational pharmaceutical companies are actively acquiring Chinese innovative drug assets, with various transaction types such as product licensing and mergers [4]. - Significant transactions include Merck's acquisition of global rights for LM-299, with upfront payments of 588 million USD and milestone payments of up to 2.7 billion USD [4]. Medical Insurance Policy - The new medical insurance drug list is expected to be released by the end of November, with implementation starting January 1, indicating a continued trend of encouraging innovation in the sector [4]. - The report emphasizes the importance of products that meet hospital needs and insurance requirements, which are likely to see sustained growth [4]. Target Companies - The report expresses optimism for companies such as United Imaging Healthcare, BeiGene, WuXi AppTec, and others, indicating strong potential for performance recovery in the healthcare sector [4].

Investment Rating - The report maintains a "BUY" rating for Alibaba with a target price of US$132.2, reflecting a potential upside of 49.2% from the current price of US$88.59 [2]. Core Insights - Alibaba's 2QFY25 results were in line with Bloomberg consensus, with total revenue of RMB236.5 billion, representing a 5.2% year-over-year increase. Adjusted EBITA and non-GAAP net income were RMB40.6 billion and RMB36.5 billion, down 5.3% and 9.0% year-over-year, respectively, due to increased investments in user experience and strategic areas [1][2]. - The company is on track to meet its targets for customer management revenue (CMR) and gross merchandise volume (GMV) growth, as well as double-digit cloud revenue growth in the second half of FY25 [1][2]. - Non-core businesses are expected to achieve profitability within 1-2 years, with significant improvements noted in user engagement and merchant adoption [1][2]. Financial Performance Summary - Total revenue for FY25E is projected at RMB991.9 billion, with a year-over-year growth of 5.4%. Adjusted net profit is expected to be RMB152.9 billion, reflecting a decline of 3.4% year-over-year [5][17]. - The adjusted EBITA margin for the Taobao and Tmall Group was 43.1% in 2QFY25, slightly below consensus expectations [7][16]. - Revenue from the Alibaba International Digital Commerce Group (AIDC) grew by 29% year-over-year to RMB31.7 billion, with a narrowing adjusted EBITA loss of RMB2.9 billion [9][10]. Segment Performance - Taobao and Tmall Group generated revenue of RMB99.0 billion in 2QFY25, up 1% year-over-year, with CMR revenue at RMB70.4 billion, up 2.5% year-over-year [7]. - Cainiao's revenue increased by 8% year-over-year to RMB24.6 billion, although adjusted EBITA declined due to increased investments [8]. - The Cloud Intelligence Group (CIG) reported revenue of RMB29.6 billion, up 7% year-over-year, with an adjusted EBITA margin of 9.0%, reflecting improved operational efficiency [10]. Shareholder Returns - During 2QFY25, Alibaba repurchased 52 million American Depositary Shares (ADS) for a total of US$4.1 billion, resulting in a 2.1% net reduction in outstanding shares [13].

Investment Rating - The report maintains a BUY rating for CSPC Pharmaceutical, despite ongoing sales pressure and a downward revision of the target price from HK$6.21 to HK$5.97, indicating a potential upside of 16.3% from the current price of HK$5.13 [1][3]. Core Insights - CSPC's total revenue for 9M24 decreased by 3.5% YoY to RMB22.69 billion, with attributable net profit falling by 15.9% YoY to RMB3.78 billion, representing 71% and 64% of previous full-year estimates respectively [1]. - The company faces significant sales pressure from legacy products, particularly in CNS, oncology, cardiovascular, and respiratory disease segments, with notable YoY declines in sales [1]. - New product sales are expected to partially offset the decline from legacy products, with management targeting RMB2.0 billion in sales from new products in 2024E and forecasting further growth in 2025E [1]. Financial Performance Summary - Revenue for FY24E is projected at RMB29.47 billion, a decrease of 6.3% YoY, with net profit expected to decline by 19.0% to RMB4.92 billion [2][8]. - Gross profit margin is anticipated to be 70.42% in FY24E, decreasing to 69.45% in FY25E [2][11]. - The company’s operating profit is expected to decline to RMB6.26 billion in FY24E, with a further decrease to RMB5.90 billion in FY25E [2][11]. Sales and Product Insights - Sales from finished drugs in 3Q24 were RMB5.21 billion, reflecting an 18.9% YoY decrease, primarily due to price cuts and regulatory pressures [1]. - The anticipated inclusion of Duomeisu in the national VBP from March 2025 is expected to lead to further price reductions and continued sales pressure [1]. - CSPC has out-licensed global rights for a pre-clinical stage product to AstraZeneca, which could provide additional profit sources in the future [1].

Investment Rating - The report maintains a "Buy" rating for the company [1][3]. Core Insights - The company reported a 4% year-over-year decline in total revenue for Q3 2024, amounting to RMB 26.2 billion, which aligns with Bloomberg consensus expectations [1]. - Operating profit decreased by 5% year-over-year to RMB 7.15 billion, also in line with expectations [1]. - The decline in revenue is attributed to a high base effect and underperformance of certain new games [1]. - Future growth is anticipated from the launch of new game products in December 2024, which are expected to drive revenue growth in FY2025 [1]. - Revenue forecasts for FY2024 to FY2026 have been revised downwards by 5-6% due to the underperformance of new games [1]. - The target price has been adjusted to $125.50 from $130.00, reflecting a 64.5% upside from the current price of $76.28 [4]. Revenue Breakdown - Game and related value-added services revenue decreased by 4% year-over-year to RMB 20.9 billion in Q3 2024, with mobile game revenue down 10% to RMB 14.3 billion [1]. - PC game revenue increased by 29% year-over-year to RMB 5.9 billion, driven by re-releases of popular titles [1]. - Non-gaming businesses showed steady growth, with NetEase Cloud Music revenue increasing by 1% year-over-year to RMB 2 billion [2]. - Youdao's revenue grew by 2% year-over-year to RMB 1.6 billion, primarily due to growth in smart devices and online marketing services [2]. Financial Metrics - The adjusted operating profit margin for Q3 2024 decreased by 0.4 percentage points to 27.3% due to increased sales and R&D expenditures [3]. - The expected P/E ratio for FY2025 is 10 times, which is 31% lower than the historical average over the past two years, indicating an attractive risk-reward profile [3]. - The company accelerated its share buyback program, repurchasing 6.3 million American Depositary Shares at a total cost of $543 million, representing about 1% of the market capitalization as of November 14 [3]. Earnings Summary - Revenue projections for FY2024 to FY2026 are as follows: - FY2024: RMB 106.0 billion - FY2025: RMB 113.2 billion - FY2026: RMB 119.6 billion - Adjusted net profit for FY2024 is projected at RMB 32.5 billion, with a slight decline expected in FY2025 [9][10].

Investment Rating - The report maintains a "BUY" rating for NetEase with a target price of US$125.5, down from the previous target of US$130.0, indicating a potential upside of 64.5% from the current price of US$76.28 [1][3]. Core Insights - NetEase reported a total revenue decline of 4% year-over-year (YoY) to RMB26.2 billion in 3Q24, which aligns with Bloomberg consensus estimates. The operating profit also decreased by 5% YoY to RMB7.15 billion, consistent with expectations [1]. - The decline in revenue is attributed to a high-base effect and underperformance of certain new game titles. The upcoming launches of "Marvel Rivals" and "Where Winds Meet" in December are anticipated to be key catalysts for revenue growth in FY25E [1]. - The report has adjusted the FY24-26E total revenue forecast down by 5-6% due to the softer-than-expected performance of new titles [1]. Revenue Breakdown - Games and related value-added services (VAS) revenue fell by 4% YoY to RMB20.9 billion in 3Q24, with mobile games revenue down by 10% YoY to RMB14.3 billion, primarily due to the high-base effect from the previous year's launch of "Justice Mobile" [1]. - PC games revenue, however, grew by 29% YoY to RMB5.9 billion, driven by the relaunch of "World of Warcraft" and "Hearthstone" in China, with daily active users (DAUs) increasing significantly [1]. - Non-gaming businesses showed steady development, with NetEase Cloud Music revenue up by 1% YoY to RMB2.0 billion and Youdao revenue increasing by 2% YoY to RMB1.6 billion, although innovative businesses revenue declined by 10% YoY [1]. Financial Metrics - The operating profit margin (OPM) slightly decreased by 0.4 percentage points YoY to 27.3% in 3Q24, mainly due to increased investments in sales and marketing (S&M) and research and development (R&D) [1]. - The report highlights that NetEase's current valuation of 10x FY25E price-to-earnings (PE) is at a 31% discount to its 2-year historical average PE, suggesting an attractive risk-reward profile [1]. Valuation Methodology - The report employs a sum-of-the-parts (SOTP) valuation methodology, attributing US$118.4 to the online game business, US$0.7 to Youdao, US$3.2 to NetEase Cloud Music, and US$1.5 to innovative businesses and others, with net cash valued at US$1.7 [8][9].

Investment Rating - The report maintains a "BUY" rating for Bilibili with a target price of US$22.00, reflecting an upside potential of 18.3% from the current price of US$18.59 [3][7]. Core Insights - Bilibili reported a total revenue of RMB7.31 billion for 3Q24, representing a 26% year-over-year increase, which exceeded both the report's and Bloomberg's consensus estimates [1]. - The company achieved quarterly breakeven with an adjusted net income of RMB236 million, a significant improvement from an adjusted net loss of RMB878 million in 3Q23 [1]. - The strong performance is attributed to the success of the new game title SanMou and effective cost optimization initiatives [1]. - For 4Q24, total revenue is expected to grow by 21% year-over-year, with adjusted net margin projected to expand to 5.3% [1]. Revenue Performance - Mobile games revenue surged by 84% year-over-year to RMB1.82 billion in 3Q24, driven primarily by SanMou's performance [1]. - Advertising revenue increased by 28% year-over-year to RMB2.09 billion, supported by approximately 50% growth in performance-based ads [1]. - Value-Added Services (VAS) revenue rose by 9% year-over-year to RMB2.82 billion, mainly due to growth in premium membership and Fan Charging revenue [1]. Future Outlook - The report forecasts continued revenue growth momentum into 4Q24, with mobile games, advertising, and VAS revenues expected to grow by 78%, 24%, and 5% year-over-year, respectively [1]. - SanMou's upcoming Season 4 launch is anticipated to further boost mobile game revenue in 4Q24 [1]. - Management expects advertising revenue to maintain faster-than-industry growth, supported by increasing ad inventories and improving monetization efficiency [1]. Margin Expansion - The overall gross profit margin expanded by 9.9 percentage points year-over-year to 34.9% in 3Q24, attributed to cost optimization and strong mobile game performance [1]. - Adjusted net margin improved by 18.4 percentage points year-over-year to 3.2% in 3Q24, with expectations for further expansion to 5.3% in 4Q24 [1]. Financial Forecasts - The report updates the revenue forecasts for FY24-26, increasing them by 1-5% due to robust game performance [1]. - For FY24E, total revenue is projected at RMB26.78 billion, with a gross margin of 32.8% and an adjusted net profit of RMB68 million [2][4].