Summary of the Conference Call for Tongcheng Travel Company Overview - **Company**: Tongcheng Travel - **Fiscal Year**: 2025 - **Key Financials**: - Net Revenue: 19.4 billion RMB (YoY +11.9%) - Adjusted Net Profit: 3.4 billion RMB (YoY +22.2%) - Cash Reserves: 12.3 billion RMB by the end of 2025 - Proposed Final Dividend: 0.25 HKD per share (YoY +38.9%) [2][6] Core Business Performance Accommodation Business - High-quality hotel sales increased by 5 percentage points in 2025 - Daily room sales grew by 30% in Q1 2026, outperforming the industry [2][3][4] - Integration of Wanda Hotels resulted in over 3,000 hotels in operation, with significant profitability improvements expected from 2026 [2][3][11] Transportation Business - Business volume increased by nearly 25% in 2025, achieving balanced growth [3][4] - International ticket revenue accounted for over 7% of total transportation revenue [5][8] User Engagement - Annual paying users reached 253 million (YoY +6%) - Average Revenue Per User (ARPU) increased to 76.8 RMB (YoY +5.5%) [2][3][4] Strategic Initiatives AI Integration - DeepTrip tool served 6.8 million users, with AI customer service covering 80% of inquiries [2][4][10] - AI-driven efficiency improvements are expected to enhance profit margins [9][10][14] International Expansion - International room bookings grew nearly 30% in 2025, with a target of 10%-15% revenue contribution in the next 2-3 years [2][9] Hotel Management - Successful integration of Wanda Hotels is expected to enhance market influence and operational efficiency [3][11] - Focus on high-quality growth in hotel management, balancing scale expansion with operational efficiency [11][15] Financial Performance Q4 2025 Highlights - Net income reached 800 million RMB (YoY +14.2%) - Adjusted net profit was 779.8 million RMB (YoY +18.1%) - Gross profit was 3.2 billion RMB (YoY +18.5%) [5][6] Full Year 2025 Financials - Adjusted EBITDA: 5.1 billion RMB (YoY +26.9%) - Adjusted EPS: 1.45 RMB (YoY +20.8%) [6][8] Market Outlook 2026 Projections - Continued focus on domestic market and outbound travel opportunities - Anticipated strong growth in accommodation and transportation sectors, with a shift towards high-quality offerings [4][9][15] - Emphasis on enhancing user experience through technology and AI [10][14] Regulatory Environment - Company is monitoring regulatory changes in the OTA industry but has not observed significant impacts on operations [11][12] Additional Insights - The company is adapting to changing consumer preferences, particularly towards high-quality travel experiences [12][13] - The integration of AI tools is expected to drive operational efficiency and enhance customer service [10][14] - The company remains optimistic about the long-term growth prospects of the travel industry despite short-term challenges [12][14][15]

Investment Rating - The report assigns a "Buy" rating to Tongcheng Travel (00780) with a target price of HKD 26.5 [1] Core Insights - Tongcheng Travel's net revenue increased by 14.2% year-on-year, surpassing UBS and market expectations of 1.7% and 1% respectively [1] - Core OTA revenue grew by 17.5%, exceeding UBS's forecast of 0.1% [1] - Revenue from tourism business was 10.7% higher than UBS's prediction [1] - The gross margin stood at 65.9%, in line with UBS's expectations [1] - Adjusted net profit reached RMB 780 million, exceeding UBS and market forecasts by 3.5% and 3.3% respectively [1] Summary by Relevant Sections - **Revenue Performance**: The company reported a net revenue growth of 14.2% year-on-year, with core OTA revenue growth of 17.5% [1] - **Profitability Metrics**: The gross margin was reported at 65.9%, and adjusted net profit was RMB 780 million, both metrics indicating strong financial performance [1] - **Market Focus Areas**: The report highlights that the market will focus on the company's demand outlook, industry competition, profit margin trends, and updates on new business initiatives [1]

Investment Rating - The report maintains an "Overweight" rating for Tongcheng Travel with a target price of HKD 29 [1] Core Insights - Tongcheng Travel's Q4 revenue exceeded Morgan Stanley's expectations by 2%, with core OTA business revenue growing by 17.5% year-on-year, aligning with market expectations [1] - Gross margin reached 65.9%, an increase of 2.4 percentage points year-on-year, primarily due to a higher proportion of high-margin accommodation business [1] - Adjusted net profit for the quarter was RMB 780 million, exceeding expectations by 6% and representing an 18% year-on-year growth; despite a significant 23% increase in marketing expenses, net profit margin expanded by 0.5 percentage points [1] - The annual dividend per share was HKD 0.25, a year-on-year increase of 39% [1] Revenue and Profitability Outlook - Driven by robust domestic tourism demand, Tongcheng projects a mid-teens growth in core OTA revenue by 2026, with an expected net profit margin expansion of approximately 0.5 percentage points [1] - Regarding ongoing regulatory scrutiny in the industry, Tongcheng believes the impact on its hotel commission rates will be limited, as the potentially affected hotels are primarily high-end, while Tongcheng's main focus is on mid- to lower-tier cities, thus minimizing the impact on its pricing competitiveness [1]

Investment Rating - The report maintains a "Buy" rating for the company, with a current price of HKD 19.00 and a fair value of HKD 24.14 [5]. Core Insights - The company has shown steady performance improvement, with the consolidation of Wanda Hotel Management contributing significantly to growth [3]. - The company reported a 14.2% year-on-year revenue increase in Q4 2025, reaching RMB 4.84 billion, and an adjusted net profit growth of 18.1% to RMB 780 million [10]. - The report highlights the acceleration of the hotel management business and the integration of AI technologies to enhance customer service [10]. Financial Projections - Revenue forecasts for 2026 to 2028 are RMB 22.06 billion, RMB 24.80 billion, and RMB 27.57 billion, representing growth rates of 13.7%, 12.4%, and 11.2% respectively [10]. - Non-GAAP net profit projections for the same period are RMB 3.85 billion, RMB 4.29 billion, and RMB 4.70 billion, with growth rates of 14.3%, 11.5%, and 9.6% respectively [10]. - The report anticipates a Non-GAAP EPS of RMB 1.63, RMB 1.82, and RMB 2.00 for 2026 to 2028 [10]. Business Performance - The company achieved a significant increase in its core OTA business, with a 53.0% year-on-year revenue growth in Q4 2025, driven by the integration of Wanda Hotel Management [10]. - The report notes that the company completed the acquisition of Wanda Hotels and Resorts for approximately RMB 2.65 billion, expanding its operational hotels to over 3,000 [10]. - The report emphasizes the historical highs in various operational metrics, including accommodation nights and the proportion of high-quality hotel nights [10]. Valuation Metrics - The report assigns a 13x PE valuation for 2026, corresponding to a fair value of HKD 24.14 per share [10]. - The Non-GAAP PE ratios are projected to be 13.4, 13.8, 10.2, 9.2, and 8.4 from 2024 to 2028 [4].

Investment Rating - The report maintains a "Buy" rating for the company [7][5]. Core Insights - The company reported a revenue of 4Q25 at 4.84 billion RMB, representing a year-over-year increase of 14.2%, which is in line with market expectations [1][2]. - Operating profit for the quarter was 350 million RMB, down 26.7% year-over-year, primarily due to a one-time goodwill impairment and adjustments in the tourism segment [3]. - Adjusted net profit reached 780 million RMB, exceeding expectations by 3.3% and showing an 18.1% year-over-year increase [3][5]. - The company is optimistic about the resilience of domestic tourism demand and the long-term growth potential in international business and hotel management [1]. Revenue Performance - The company's revenue for 4Q25 was 4.84 billion RMB, with the core OTA business generating 1.31 billion RMB from accommodation bookings, up 15.4% year-over-year [2]. - The transportation ticketing segment showed steady performance with revenue of 1.84 billion RMB, a 6.5% increase year-over-year, driven by increased user demand and enriched value-added products [2]. - Other business revenue, benefiting from strong hotel management performance and the strategic acquisition of Wanda Hotels and Resorts, reached 917 million RMB, up 53.0% year-over-year [2]. Profitability Analysis - The core OTA operating profit was 1.15 billion RMB, with an operating profit margin of 22.3%, aligning with expectations [3]. - The vacation business reported an operating loss of 430 million RMB, attributed to strategic reductions in the buyout business scale and weak tourism demand in Southeast Asia and Japan [3]. - The company confirmed a goodwill impairment of 453 million RMB in the vacation business, which significantly impacted overall operating profit [3]. Growth Potential - The international ticket booking volume saw significant year-over-year growth, contributing 7% to total transportation ticketing revenue [4]. - The company aims to increase the contribution of international business revenue to 10%-15% over the next 2-3 years, positioning it as a key growth driver [4]. - The proprietary app has shown strong user engagement, with daily active users increasing by over 30% year-over-year, supported by the AI travel planning tool DeepTrip [4]. Financial Forecast and Valuation - Revenue projections for 2026-2028 are estimated at 21.6 billion RMB, 24 billion RMB, and 26.6 billion RMB respectively, with adjusted net profits of 3.9 billion RMB, 4.4 billion RMB, and 4.5 billion RMB [5][11]. - The target price for the company is set at 29.9 HKD, based on a 16x PE ratio for 2026, reflecting a slight discount compared to comparable global OTA platforms [5][12].

Investment Rating - The report maintains a "Buy" rating for the company [7] Core Insights - The company reported a revenue of 4Q25 at 4.84 billion RMB, representing a year-over-year increase of 14.2%, which is in line with market expectations [1][2] - Operating profit for the quarter was 350 million RMB, down 26.7% year-over-year, primarily due to a one-time goodwill impairment and adjustments in the tourism segment [3] - Adjusted net profit reached 780 million RMB, exceeding expectations by 3.3% [1][3] - The company is optimistic about the resilience of domestic tourism demand and the long-term growth potential in international business and hotel management [1] Revenue Performance - The company's revenue for 4Q25 was 4.84 billion RMB, with the core OTA business showing strong performance [2] - Accommodation booking services generated 1.31 billion RMB, up 15.4% year-over-year, driven by an increase in hotel night stays and a slight rise in average daily rates [2] - Transportation ticketing revenue was 1.84 billion RMB, reflecting a 6.5% year-over-year increase, attributed to rising user demand and enriched value-added products [2] - Other business revenue, benefiting from the strategic acquisition of Wanda Hotels and Resorts, reached 917 million RMB, a robust growth of 53.0% [2] Profitability Analysis - The core OTA operating profit was 1.15 billion RMB, with an operating profit margin of 22.3%, aligning with expectations [3] - The vacation business reported an operating loss of 430 million RMB, below expectations, mainly due to strategic reductions in the buyout business and weak tourism demand in Southeast Asia and Japan [3] - The company confirmed a goodwill impairment of 453 million RMB in the vacation business, which significantly impacted overall operating profit [3] Growth Potential - The international ticket booking volume saw significant year-over-year growth, contributing 7% to total transportation ticketing revenue [4] - The company aims to increase the contribution of international business revenue to 10%-15% over the next 2-3 years, positioning it as a key growth driver [4] - The proprietary app has shown strong user engagement, with daily active users increasing by over 30% year-over-year, supported by the AI travel planning tool DeepTrip [4] Financial Forecast and Valuation - Revenue projections for 2026-2028 are estimated at 21.6 billion RMB, 24 billion RMB, and 26.6 billion RMB respectively, with slight downward adjustments for 2026 and 2027 [5] - Adjusted net profit forecasts for the same period are 3.9 billion RMB, 4.4 billion RMB, and 4.5 billion RMB, reflecting minor downward revisions [5] - The target price for the company is set at 29.9 HKD, based on a 16x PE ratio for 2026, which is a discount compared to comparable global OTA platforms [5]

Investment Rating - The investment rating for the company is "Accumulate" [1] Core Insights - The company's revenue for 2025 is projected to be 19.40 billion RMB, representing a year-on-year growth of 11.85% [1] - The net profit attributable to shareholders is expected to reach 2.37 billion RMB in 2025, with a year-on-year increase of 20.10% [1] - The company is experiencing significant growth in its core business, particularly in the hotel management sector, which is expected to create a second growth curve [7] - The gross margin for Q4 is reported at 65.8%, an increase of 2.3 percentage points year-on-year, indicating improved profitability [7] Financial Projections - Total revenue projections for the company from 2024 to 2028 are as follows: - 2024: 17.34 billion RMB - 2025: 19.40 billion RMB - 2026: 21.92 billion RMB - 2027: 24.46 billion RMB - 2028: 26.94 billion RMB [1][8] - The net profit attributable to shareholders is forecasted to grow from 1.97 billion RMB in 2024 to 3.96 billion RMB in 2028 [1][8] - The earnings per share (EPS) is expected to increase from 0.84 RMB in 2024 to 1.68 RMB in 2028 [1][8] Market Data - The closing price of the company's stock is 18.75 HKD, with a market capitalization of approximately 38.85 billion HKD [5] - The price-to-earnings (P/E) ratio is projected to decrease from 19.67 in 2024 to 9.82 in 2028, indicating a potentially attractive valuation over time [1][8] Financial Ratios - The company's return on equity (ROE) is expected to improve from 10.51% in 2025 to 11.95% in 2028 [8] - The asset-liability ratio is projected to decrease from 43.80% in 2025 to 36.42% in 2028, suggesting improved financial stability [8]

Investment Rating - The investment rating for the company is "Accumulate" [1] Core Insights - The company's revenue for 2025 is projected to be 19.40 billion RMB, representing a year-on-year growth of 11.85%. The adjusted net profit is expected to reach 2.37 billion RMB, with a year-on-year increase of 20.10% [7] - The core business is experiencing rapid growth, particularly in the hotel management sector, which is expected to create a second growth curve for the company. The acquisition of Wanda Hotel Management has been a significant factor in this growth [7] - The gross margin for Q4 is reported at 65.8%, an increase of 2.3 percentage points year-on-year, while the adjusted net profit margin is 16.1%, up by 1.0 percentage point year-on-year [7] Financial Projections - Total revenue projections for the company are as follows: - 2024: 17.34 billion RMB - 2025: 19.40 billion RMB - 2026: 21.92 billion RMB - 2027: 24.46 billion RMB - 2028: 26.94 billion RMB [1] - The projected net profit for the years 2026 to 2028 is as follows: - 2026: 3.17 billion RMB - 2027: 3.54 billion RMB - 2028: 3.96 billion RMB [1] - The earnings per share (EPS) is expected to grow from 0.84 RMB in 2024 to 1.68 RMB in 2028, reflecting a positive trend in profitability [1] Market Data - The closing price of the company's stock is 18.75 HKD, with a market capitalization of approximately 38.85 billion HKD [5] - The price-to-earnings (P/E) ratio is projected to decrease from 19.67 in 2024 to 9.82 in 2028, indicating an attractive valuation over time [1]

Investment Rating - The report maintains a BUY rating for Tongcheng Travel, indicating a potential return of over 15% over the next 12 months [1]. Core Insights - Tongcheng Travel reported total revenue of RMB4.8 billion for 4Q25, reflecting a year-on-year growth of 14.2%, which exceeded both the forecast and Bloomberg consensus estimates [1]. - Adjusted net profit for the same period was RMB780 million, up 18% year-on-year, also surpassing expectations [1]. - The core OTA business's operating profit margin (OPM) remained stable at 28.4%, aligning with estimates, and the company anticipates a 15% year-on-year growth in operating profit for this segment in 2026 [1][7]. - The target price for the stock has been slightly revised to HK$25.5, implying a 14.3x 2026E non-GAAP P/E ratio, with a significant upside potential of 36% from the current price of HK$18.75 [3][1]. Financial Summary - For FY26E, total revenue is projected to reach RMB21.8 billion, representing a 12.5% year-on-year growth, with the core OTA business expected to grow by 14.7% [2][9]. - Adjusted net profit is forecasted to be RMB3.98 billion for FY26E, reflecting a 17% increase year-on-year [9][12]. - The company’s gross profit margin is expected to improve to 68.8% in FY26E, with operating profit margin projected at 21.0% [9][12]. Share Performance - The stock has experienced a decline of 15.2% over the past month and 18.9% over the past six months [5]. - The market capitalization of Tongcheng Travel is approximately HK$43.85 billion [3]. Shareholding Structure - Major shareholders include TCH Sapphire Limited with 13.4% and C-Travel International Limited with 12.4% [4].

Financial Data and Key Metrics Changes - In 2025, the company reported net revenue of CNY 19.4 billion, representing an 11.9% year-over-year increase [26] - Adjusted net profit for 2025 increased by 22.2% year-over-year to CNY 3.4 billion, with adjusted basic EPS at CNY 1.45, a 20.8% year-over-year increase [27] - For Q4 2025, net revenue was CNY 4.8 billion, a 14.2% year-over-year increase, and adjusted net profit rose to CNY 779.8 million, reflecting an 18.1% year-over-year growth [20][24] Business Line Data and Key Metrics Changes - The core OTA business revenue for 2025 reached CNY 16.5 billion, a 16% year-over-year increase, while accommodation reservation revenue was CNY 5.5 billion, up 16.8% year-over-year [26] - Transportation ticketing revenue for 2025 was CNY 7.9 billion, a 9.6% year-over-year increase, and other business revenue achieved CNY 3.1 billion, representing a 34.4% year-over-year increase [26] - The accommodation business saw a record high in room nights sold, with a 30% increase in average daily room nights sold during the Chinese New Year holiday [51] Market Data and Key Metrics Changes - The company noted a shift in user preferences towards high-quality hotels, resulting in a 5 percentage point year-over-year increase in the proportion of high-quality hotels sold on its platform [8] - Outbound travel demand remains resilient, with users shifting to alternative destinations amid geopolitical tensions, particularly favoring middle-haul destinations [33] - The company expects the revenue contribution from the outbound segment to increase to around 10%-15% over the next two to three years [35] Company Strategy and Development Direction - The company aims to enhance user experience and operational efficiency through technological innovation, particularly by integrating AI into its business processes [4][17] - The acquisition of Wanda Hotels & Resorts is expected to strengthen the company's brand portfolio and market presence, positioning it for sustainable growth [10][45] - The company plans to focus on expanding its asset-light hotel management business and enhancing its competitive advantages in the travel industry [13][29] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the upward trajectory of China's travel industry, supported by government policies and sustained user demand [28] - The company is committed to improving operational efficiency and enhancing user value while expanding its outbound business [29] - Management highlighted the importance of adapting to changing consumer preferences and maintaining a disciplined approach to marketing and operational practices [54][66] Other Important Information - The company achieved an MSCI ESG rating of AAA in 2025, reflecting its leadership in ESG performance among global peers [18] - The total number of hotels in operation exceeded 3,000 by the end of December 2025, with more than 1,800 in the pipeline [13] Q&A Session Summary Question: Impact of geopolitical tensions on outbound travel - Management noted a limited impact on outbound travel due to geopolitical tensions, with users shifting to alternative destinations [32][33] Question: AI strategy and DeepTrip's contribution - Management highlighted DeepTrip's role in enhancing user experience and operational efficiency, serving about 7 million users since launch [57][59] Question: Regulatory environment and implications for the OTA sector - Management stated that they have not observed material changes affecting operations and emphasized a focus on compliance and sustainable growth [42][54] Question: Strategic focus for hotel management business - Management discussed the successful integration of Wanda Hotels & Resorts and the focus on balancing scale expansion with operational efficiency [45][46]