Summary of Tongcheng Travel Holdings Conference Call Company Overview - **Company**: Tongcheng Travel Holdings (0780.HK) - **Industry**: Online Travel Services in China Key Points and Arguments 1. Financial Performance and Guidance - **4Q25 GMV Growth**: Accelerated to high-single digit % year-over-year, compared to mid-single digit % in 3Q25, primarily driven by the hospitality segment [1] - **Hotel ADR Increase**: Low-to-mid single digit % increase in Average Daily Rate (ADR) on the platform, attributed to a slowdown in hotel supply [1] - **Ticketing Business Performance**: Tracking low-to-mid single digit % year-over-year growth, aligning with broader industry trends due to high online penetration rates of 80-90% [1] - **4Q25 Revenue Guidance**: Expected revenue growth of 10-15%, with 15-20% from Online Travel Agency (OTA) services and a stable EBIT margin of 28.4% [1] 2. Strategic Focus for 2026 - **Leisure Travel Demand**: Management is optimistic about resilient demand supported by favorable policies, such as more school holidays [2] - **User Base Monetization**: Targeting existing 252 million user base with promotions and subsidies; users are willing to spend more on upgraded services [2] - **Outbound Travel Business**: Currently represents ~5% of group revenue but has reached breakeven profitability; plans to prioritize air ticket bookings before expanding into hospitality [2] - **Mobile App Development**: Mobile apps account for ~10% of Monthly Active Users (MAU), up from 5% in 2023, reducing reliance on Weixin platform from ~80% to 75% [2] 3. Competitive Landscape - **Competition Analysis**: Competition remains benign with smaller operators focusing on niche markets; it will take time for them to build supply chains and customer service teams [3] 4. Margin Improvement Potential - **EBIT Margin Improvement**: Potential for further improvement driven by increased GMV contribution from mobile app users, improved profitability from hotel management and outbound travel, and operational efficiency through AI adoption [7] 5. Market Sentiment and Valuation - **Share Price Performance**: The share price has been range-bound due to concerns over domestic competition and profit margin comparisons [8] - **Valuation Metrics**: Current trading at 13x FY26E P/E, representing a 24% discount to 17x for TCOM, in line with historical averages [8] 6. Price Target and Risks - **Price Target**: 12-month target price set at Rmb28.8, based on an 85% weighting to fundamental value and a 15% weighting to M&A value [9] - **Downside Risks**: Increased competition, potential decline in transportation take rates, reliance on Tencent/WeChat, and weaker macroeconomic conditions [10] 7. Investment Thesis - **Investment Recommendation**: Rated as a Buy due to leverage on resilient domestic travel, upside from hospitality segment, and ongoing business initiatives that could drive earnings growth [11] Additional Insights - **Market Capitalization**: HK$52.6 billion / $6.7 billion [13] - **Revenue Forecasts**: Expected revenue growth from Rmb17,340.7 million in FY24 to Rmb24,372.1 million in FY27 [13] - **Free Cash Flow Yield**: Projected to increase from 6.8% in FY25 to 10.5% in FY27 [13]

Group 1: Macro Insights - The U.S. job market showed good performance in December, with non-farm employment slightly below expectations but an unemployment rate better than expected, indicating overall stability [4] - CPI has risen for four consecutive months, reaching the highest level since March 2023, while PPI has also shown signs of recovery, suggesting a potential upward trend in prices for 2026 [4][16] - The overall market sentiment is influenced by various macroeconomic indicators, with a focus on liquidity, economic performance, and valuation metrics [8][9] Group 2: New Energy Vehicles - The domestic new energy vehicle market continues to thrive, with projected sales for 2026 expected to reach 1,515 million units in China, reflecting a 15% year-on-year increase [17] - The demand for batteries and materials is expected to improve, with a significant increase in global battery demand anticipated [17][19] - Investment recommendations include focusing on key players in the battery sector such as CATL and other midstream material companies [19] Group 3: Wind Power Industry - The domestic wind power demand is steadily increasing, with expectations for offshore wind projects to accelerate as planning progresses [20] - The profitability of domestic wind turbine manufacturers is expected to improve, driven by price increases and export opportunities [20][21] - Investment suggestions include major turbine manufacturers and component suppliers, highlighting the potential for growth in the offshore wind sector [20] Group 4: Real Estate and REITs - The real estate market remains cautious, with land transaction volumes declining but at a slower rate, indicating a potential stabilization [12] - C-REITs have shown positive performance in the secondary market, with specific sectors like municipal water and data centers performing well [27] - Investment strategies focus on identifying quality projects with growth potential in high-demand urban areas [27] Group 5: Chemical Industry - Haohua Technology is positioned as a leading platform in new materials, benefiting from high demand in specialty chemicals and refrigerants [28][29] - The company has seen significant profit growth driven by rising prices in fluorinated chemicals, with expectations for continued upward momentum [29] - Investment recommendations emphasize the potential for growth in commercial aerospace and high-end electronic materials [29][32]

Investment Rating - The report initiates coverage with a "Buy" rating for the company [3][6]. Core Viewpoints - The company is positioned as a leading OTA in the lower-tier market, benefiting from the release of pent-up demand and the enhancement of user value, which drives growth [3][11]. - The online travel market is characterized by strong certainty, with a stable competitive landscape allowing major players to release profits comfortably [2][11]. - The company has shown significant revenue growth, with a projected increase in revenue and net profit over the next few years, driven by the release of demand in the lower-tier market and refined operations [3][11]. Summary by Relevant Sections Company Overview - The company, Tongcheng Travel, was formed by the merger of Tongcheng Network and Elong in 2018, leveraging strengths in transportation ticketing and hotel bookings [1][14]. - It has over 250 million annual paying users, primarily in the lower-tier market, and has seen a significant recovery in performance post-pandemic [1][15]. Market Analysis - The domestic tourism market has rebounded, with tourist numbers and revenue recovering to 109% and 111% of 2019 levels, respectively, indicating a strong recovery trajectory [2][38]. - The OTA market is dominated by a few key players, with Ctrip holding over 50% market share and Tongcheng around 15%, suggesting a stable competitive environment [2][11]. Financial Performance - For the first three quarters of 2025, the company reported revenues of 145.6 billion RMB, a year-on-year increase of 11%, with net profit rising by 41% to 22.9 billion RMB [1][24]. - The adjusted profit margin improved from 16.2% in Q1-Q3 2024 to 18.0% in the same period of 2025, reflecting operational efficiency [1][24]. Growth Drivers - The company is focusing on the lower-tier market, where there is significant potential for growth and increased online penetration in travel services [3][11]. - It is expanding its app and multi-channel traffic strategies, leading to a rise in average revenue per user and overall user engagement [3][11]. Financial Projections - Revenue projections for 2025-2027 are 193.0 billion RMB, 220.6 billion RMB, and 251.2 billion RMB, respectively, with net profits expected to reach 28.5 billion RMB, 33.4 billion RMB, and 39.0 billion RMB [3][5].

Group 1 - The core viewpoint of the articles highlights a significant opportunity for cost-effective travel in China during the winter vacation period, driven by lower flight and hotel prices, particularly appealing to students and families [1][2] - According to Tongcheng Travel, domestic flight booking costs are expected to be 40% cheaper compared to the upcoming Spring Festival travel period, with reduced fuel surcharges further lowering costs for consumers [1] - Popular domestic travel destinations include Beijing, Shanghai, Chengdu, and Harbin, with hotel booking interest in these areas showing over 20% year-on-year growth for certain cities [2] Group 2 - The search interest for family-oriented accommodations and attractions has surged, with top searched destinations including Shanghai Disneyland and Harbin Ice and Snow World, indicating a strong demand for family-friendly travel experiences [2] - Hotel prices in popular tourist areas like Harbin and Sanya are projected to be over 50% cheaper compared to peak travel times during the Spring Festival, making it an attractive option for travelers [1]

Core Viewpoint - Tongcheng Travel issued an apology for ticketing issues during the opening of the 2026 KPL Spring Season, attributing the problems to a surge in traffic that overloaded their servers [1] Group 1: Incident Overview - On January 7, 2026, the ticket sales for the first round of the KPL Spring Season faced significant issues due to server overload caused by sudden traffic spikes [1] - The company acknowledged a lack of foresight and insufficient system capacity preparation during the ticketing process [1] Group 2: Apology and Future Actions - Tongcheng Travel expressed deep apologies to both KPL fans and the KPL Alliance for the inconvenience caused [1] - The company announced that the ticket purchasing rights for the home game day of the teams will be re-released on January 8 at 12:00 PM [1] Group 3: Ticket Purchase Guidelines - All ticket purchasing platforms will be open to users for the KPL home game day, and users must have tickets for that specific match to place an order [1] - Orders placed without the required tickets will be refunded, and it was noted that tickets for the KPL home game day are non-refundable once purchased [1]

Group 1 - The 2026 KPL Spring Season first round ticket sales faced issues due to a surge in traffic, leading to server overload and inability to process ticket purchases [1] - The ticketing company, Tongcheng Travel, issued an apology for the lack of foresight and insufficient system capacity during the preparation process [1] - The KPL League will re-launch the purchase rights for the team home day tickets on January 8 at 12:00 PM [1] Group 2 - All ticket platforms will be open for users to purchase tickets for the KPL team home day, and users must have tickets for that specific match to place an order [1] - Users who do not have tickets for the match will receive refunds for their orders [1] - The KPL team home day is a fixed event, and once purchased, tickets cannot be refunded [1]

Group 1 - The core issue reported is the inability to purchase tickets for the 2026 KPL Spring Season due to server overload caused by a sudden spike in traffic [1] - The ticketing service provider, Tongcheng Travel, acknowledged the lack of predictive measures and insufficient system capacity during the preparation phase, apologizing to both users and the KPL Alliance [1] - The KPL team home game ticket purchasing rights will be re-released on January 8 at 12:00 PM, with all ticket platforms open for users [1] Group 2 - Users must possess tickets for the specific match to place orders, and those without tickets will receive refunds [1] - The KPL team home game day is fixed, and once purchased, tickets cannot be refunded [1]

Core Points - The company Tongcheng Travel publicly apologized to both the event alliance and users for the ticketing issues experienced during the KPL Spring Season ticket sales [1][3] - The ticket sales for the KPL Spring Season were disrupted due to a surge in traffic that exceeded server capacity, leading to system overload and failure to process ticket purchases [3] - Tongcheng Travel announced that the "Team Home Day Add-on Rights" will be re-listed for purchase on January 8 at 12:00 PM to accommodate users who were unable to buy tickets [1][3] - The company committed to optimizing its system to enhance the ticket purchasing experience for users in the future [3]

Core Viewpoint - Tongcheng Travel issued an apology regarding the ticketing issues for the 2026 KPL Spring Tournament, citing server overload due to a surge in traffic as the primary cause of the problem [1] Group 1 - The ticket sales for the first week of the 2026 KPL Spring Tournament, which were scheduled to start at 12:00 on January 7, faced significant issues due to unexpected high traffic, leading to server overload and failure to process ticket sales [1] - The company acknowledged a lack of foresight in the ticketing process and insufficient system capacity during the preparation phase, expressing deep regret to KPL fans and the KPL Alliance [1] - The additional purchase rights for the home game days of the teams will be re-released on January 8 at 12:00, with the company committing to ongoing system optimizations to enhance the ticket purchasing experience [1]

Group 1 - The core issue reported by Tongcheng Travel is the server overload due to a sudden surge in traffic during the ticket sales for the 2026 KPL Spring Season, leading to an inability to process ticket purchases [1] - The company expressed deep apologies for the lack of foresight in ticketing operations and insufficient system capacity during the preparation phase [1] - The KPL Alliance, the event organizer, was also apologized to for the inconvenience caused [1] Group 2 - The ticket purchasing guidelines for the KPL team home day were outlined, stating that all ticket platforms will be open for users, and only those with tickets for the specific match can place orders [3] - Users who attempt to order without having a ticket for the match will receive a refund [3] - The KPL team home day is a fixed event, and once purchased, tickets cannot be refunded [3]