Core Insights - Tongcheng Travel reported a revenue of Rmb4.38 billion in 1Q25, representing a 13% year-over-year increase, and an adjusted net profit of Rmb788 million, up 41% year-over-year, exceeding expectations due to a higher-than-expected core OTA operating profit margin [1] - The company raised its 2025 EPS forecast from Rmb1.38 to Rmb1.41, while maintaining forecasts for 2026 and 2027 at Rmb1.57 and Rmb1.74 respectively, and increased the target price from HK$24.8 to HK$26.5, indicating a 21% upside potential [1] Domestic Operations - In 1Q25, core OTA revenue increased by 18% year-over-year, with accommodation reservation revenue up 23% and transportation ticketing revenue rising 15% [2] - Monthly paying users (MPUs) grew by 9% year-over-year to 46.5 million, and annual paying users (APUs) increased by 8% year-over-year to 250 million, both reaching historical highs [2] - The domestic hotel take rate is expected to rise by 0.5 percentage points quarter-over-quarter to 9.5-10% in Q2, driven by reduced subsidies [2] - Hotel average daily rate (ADR) growth is anticipated to turn positive in 2Q25, with an upward trend in the proportion of three-star and above hotels on the platform [2] Outbound Travel Business - The outbound travel business is projected to turn from loss to profit in 2025, with outbound flight tickets contributing approximately 5% to transportation revenue in 1Q25 [2] - By the end of the year, outbound flight tickets and hotels are expected to contribute more than 7% to flight and hotel revenue, with the loss from outbound flight tickets decreasing quarter-over-quarter [2] Investment Outlook - The company maintains a Buy rating, reflecting optimism about the growth certainty of the online travel industry and the stability of its competitive landscape [3] - Improvements in marketing efficiency and the expansion of outbound travel are expected to enhance margins, while the hotel management business is poised to provide additional growth drivers [3]

Summary of Tongcheng Travel 1Q25 Earnings Call Company Overview - **Company**: Tongcheng Travel - **Industry**: Internet Services, specifically in travel and accommodation Key Points Earnings Performance - **1Q25 Revenue**: Tongcheng reported revenue of RMB 4,377 million, which was in line with expectations and represented a year-over-year growth of 13.2% [1] - **Margins**: The company achieved a gross margin of 68.8%, an increase of 295 basis points compared to the previous quarter [9] - **Net Profit**: The net profit attributable to the company was RMB 669 million, with a net margin of 15.3% [9] Industry Trends - **Pricing Trends**: Management noted improving pricing trends in domestic hotel Average Daily Rate (ADR) and airfare, expecting this momentum to continue due to resilient travel demand and a low base effect [1] - **Market Position**: Tongcheng continues to outperform the industry, with domestic hotel ADR remaining flat year-over-year in 1Q and expected to turn positive from 2Q onwards [1] Business Updates - **Gross Merchandise Volume (GMV)**: Although GMV was not disclosed, it is estimated to have negative year-over-year growth primarily due to weakness in domestic airfare, while domestic hotel GMV is expected to show double-digit room night growth [2] - **Outbound Travel**: Outbound air ticketing and hotel room nights grew robustly by 40-50% year-over-year in 1Q, contributing approximately 5% to transportation and accommodation revenues [2] - **Hotel Management**: Tongcheng currently manages 2,500 hotels, with over 1,400 in the pipeline. The addition of Wanda Hotel Management is expected to enhance brand portfolio and profitability [2] Financial Estimates - **Revenue Estimates**: Total revenue estimates for 2Q and 2025 remain unchanged, with expected growth rates of 9.9% and 12.1% respectively [3] - **Core OTA Revenue**: Anticipated to grow at 13.4% for 2Q and 16.4% for FY25E, while tourism revenue is under pressure with a high single-digit decline due to safety concerns in Southeast Asia [3] Valuation - **Price Target**: The price target is maintained at HK$24.5, implying a price-to-earnings ratio of 15x for 2025 and 13x for 2026 [4] - **Current Trading Metrics**: As of May 23, 2025, the stock was trading at HK$20.50, with a market capitalization of HK$46.5 billion (approximately US$5.94 billion) [6] Additional Insights - **Net Margin Expansion**: Expected steady net margin expansion of approximately 1 percentage point per year driven by scale and cost optimization [2] - **Valuation Metrics**: The company is trading at a price-to-earnings growth (PEG) ratio of 0.8x, indicating an undemanding valuation [1] Conclusion Tongcheng Travel is positioned well within the travel industry, showing resilience in revenue growth and profitability despite some challenges in the tourism segment. The company is focusing on enhancing monetization strategies and expanding its hotel management portfolio, which could provide further growth opportunities in the coming quarters.

Investment Rating - The report maintains an "Outperform" rating for Tongcheng Travel (00780) [1] Core Insights - Tongcheng Travel's Q1 performance exceeded expectations, with revenue in line with forecasts but net profit surpassing both Macquarie's and market consensus by 6% and 8% respectively, driven by strong commission rate expansion [1] - The robust hotel business within the travel services sector is expected to contribute to revenue and profit growth [1] - Macquarie has raised its adjusted net profit forecasts for Tongcheng Travel for 2025 and 2026 by 2% to reflect a more favorable profit margin outlook [1] - The target price for Tongcheng Travel has been increased from HKD 25.1 to HKD 25.5 [1]

Group 1 - The core viewpoint of the article highlights the strategic partnership between Tongcheng Travel and the Gyeonggi Tourism Organization of South Korea, focusing on market promotion, product development, and sustainable development initiatives [1][2] - Both parties will develop mid-to-high-end tourism products that cater to the diverse needs of Chinese tourists, leveraging Gyeonggi-do's unique attractions such as filming locations for Korean dramas and Starfield Suwon [2] - The collaboration aims to promote low-carbon travel models in response to global sustainable tourism trends, enhancing the appeal of Gyeonggi-do as a must-visit destination for Chinese travelers [2][3] Group 2 - The partnership is expected to accelerate the penetration of the Gyeonggi-do tourism brand in the Chinese market, which is crucial as China is one of South Korea's most important source markets for tourists [2][3] - Recent data from the Korea Tourism Organization indicates a significant increase in bilateral tourism, with 2.66 million South Korean visitors to China in Q1 2025, marking a 24.1% year-on-year growth [3] - The young demographic (ages 20-40) constitutes over 60% of the Chinese tourists visiting South Korea, indicating a strong market potential for targeted tourism products [3]

Group 1 - The core theme of the Dragon Boat Festival this year is characterized by short-distance travel, a rise in folk culture, and experience-based tourism, influenced by multiple factors such as the "no time-off" policy and the proximity to the summer vacation [1] - The parent-child travel market is experiencing a surge, with ticket bookings for popular theme parks doubling and camping activity reservations increasing by 80%, as families engage in activities like watching dragon boat races and making rice dumplings [1][3] - The value of folk culture IP is a significant highlight this Dragon Boat Festival, with searches related to folk customs increasing over 100% year-on-year, and keywords like "dragon boat" and "rice dumpling" seeing over 200% growth [2] Group 2 - Accommodation preferences show a notable shift, with high-star hotel bookings (4-star and 5-star) increasing by 30% to 50% year-on-year, significantly outpacing lower-star hotels, reflecting a demand for quality in folk culture tourism [2] - The trend of "good accommodation" and "deep experiences" is emerging, with hotel packages that include activities and dining seeing a 24% increase in bookings [2] - The rental car market is thriving, with a 47% year-on-year increase in rental bookings, indicating a preference for self-driving trips despite the lack of free highway access during the holiday [4] Group 3 - Short-distance travel is prevalent, with many travelers opting for high-speed rail within a three-hour radius, particularly in urban clusters like Beijing-Tianjin-Hebei and the Yangtze River Delta [4] - Cross-border travel is also on the rise, with destinations like Japan, South Korea, and Southeast Asia being popular choices, particularly among travelers from the Jiangsu-Zhejiang-Shanghai region [5]

Core Insights - Tongcheng Travel's Q1 2025 revenue increased by 13% to 4.4 billion yuan, exceeding market expectations by 1%, primarily driven by better-than-expected transportation revenue [1] - Non-IFRS net profit reached 780 million yuan, surpassing market expectations by 6%, with a Non-IFRS net profit margin of 18% attributed to effective cost control [1] Revenue Growth - The tourism consumption remains resilient, with Q2 core OTA business revenue expected to maintain a year-on-year growth rate of 10-15% [1] - In Q1 2025, the number of nights booked met guidance, with international business nights increasing by over 50%, driving revenue growth [1] - During the May Day holiday, domestic travel increased by 6.4% year-on-year, and total spending by tourists grew by 8.0% [1] Hotel and Transportation Performance - Q2 2025 hotel revenue is projected to grow by 13% year-on-year, with hotel prices expected to see low single-digit growth due to a shift towards higher-quality products and services [1] - Q1 2025 domestic flight volume remained flat, while international flight volume increased by over 40%, with international ticket revenue accounting for over 5% of transportation revenue [1] - Q2 2025 transportation revenue is expected to grow by 10%, with international business entering a peak season [1] User Engagement and Profitability - Q1 core OTA business revenue grew by 18%, supported by a 9% increase in MPU and improved monetization from reduced user subsidies [2] - Daily Active Users (DAU) for the independent app increased by nearly 60%, surpassing 4 million during the May Day holiday, with independent app revenue accounting for about 7% of core OTA revenue [2] - Q1 2025 core OTA operating profit margin was 29%, exceeding expectations by 3 percentage points due to better-than-expected marketing investments and improved operational efficiency [2] Future Outlook and Valuation - The company maintains its profit guidance of 3.2 to 3.4 billion yuan for 2025, with an ongoing target of achieving breakeven in international business [2] - The target price is set at 23 HKD, corresponding to 15x/12x 2025e and 2026e Non-IFRS P/E, indicating an upside potential of 12% [2]

Core Viewpoint - The company reported a strong performance in Q1 2025, with revenue growth driven by increased domestic travel demand and improved commission rates, leading to a positive outlook for the year [1][2][3] Group 1: Financial Performance - In Q1 2025, the company achieved revenue of 4.38 billion yuan, a year-on-year increase of 13.2% [1] - Adjusted EBITDA and net profit for Q1 2025 were 1.16 billion yuan and 790 million yuan, respectively, reflecting year-on-year growth of 41.3% and 41.1% [1] - Revenue from accommodation bookings, transportation tickets, vacation services, and other businesses were 1.19 billion yuan, 2.00 billion yuan, 590 million yuan, and 600 million yuan, with year-on-year changes of +23.3%, +15.2%, -11.8%, and +20.0% respectively [1] Group 2: User Growth and Market Expansion - The average monthly paying users reached 46.5 million, a year-on-year increase of 9.2%, while annual paying users totaled 250 million, up 7.8% [2] - Over the past 12 months, the company served 1.96 billion travelers, marking a 7.3% increase [2] - International ticket sales and hotel night bookings grew by over 40% and 50% year-on-year, respectively, due to effective international expansion strategies [2] Group 3: Cost Management and Profitability - The company's gross margin for Q1 2025 was 68.8%, an increase of 3.8 percentage points [2] - Management, R&D, and sales expense ratios were 7.0%, 11.3%, and 33.2%, with year-on-year changes of +0.2 percentage points, -1.3 percentage points, and -2.2 percentage points respectively [2] - The adjusted net profit margin was 18.0%, reflecting an increase of 3.6 percentage points, indicating improved profitability due to cost reduction and efficiency measures [2] Group 4: Future Outlook - The company expects continued high growth in revenue driven by increasing OTA penetration and improved commission rates, alongside a reduction in losses from international operations [3] - The overall performance for the year is deemed to have strong certainty, maintaining a "strongly recommended" rating [3]

Core Viewpoints - In Q1 2025, the company achieved revenue of 4.377 billion yuan, a year-on-year increase of 13.2%, and an adjusted net profit of 788 million yuan, a year-on-year increase of 41.1% [1] - The company's profitability has significantly improved, with ongoing progress in cost reduction and efficiency enhancement, and expectations for continued growth in core OTA business scale effects and international business loss reduction [1][2] - The company plans to acquire Wanda Hotel Management to enhance its hotel management capabilities, indicating ongoing optimization of its diversified business [1][3] Financial Performance - Q1 2025 revenue growth of 13.2% aligns with previous expectations, while adjusted net profit growth of 41.1% exceeds expectations, resulting in an adjusted net profit margin of 18.0%, up 3.6 percentage points year-on-year [1] - Adjusted EBITDA for Q1 2025 was 1.159 billion yuan, a year-on-year increase of 41.3%, with an EBITDA margin of 26.5%, up 5.3 percentage points [1] - Revenue breakdown shows accommodation booking revenue of 1.190 billion yuan (up 23.3% YoY), transportation ticketing service revenue of 2.000 billion yuan (up 15.2% YoY), and other core OTA business revenue of 603 million yuan (up 20.0% YoY) [1] User Engagement - The company has deepened user value, with average monthly paying users reaching 46.5 million (up 9.2% YoY) and annual paying users reaching 250 million (up 7.8% YoY), both hitting record highs [2] - The overall user payment frequency is expected to remain stable, with a focus on youth marketing and a significant increase in daily active users on the app [2] Business Development - The company is enhancing market solutions and sales efficiency, with AI applications improving operational efficiency [3] - In Q1 2025, the company provided cost-effective transportation solutions, with significant growth in product bookings, including a 22% increase in "Huo Huo" intermodal product bookings and a 44% increase in "Kong Kong" intermodal bookings [3] - The company launched AI-driven services, reducing employee workload by 20% and helping hotels reduce labor costs by 30% through AI self-service solutions [3] Strategic Outlook - The company expects to achieve net profits of 2.52 billion yuan, 3.02 billion yuan, and 3.51 billion yuan from 2025 to 2027, with corresponding adjusted net profits of 3.31 billion yuan, 3.72 billion yuan, and 4.26 billion yuan [4] - Current stock price corresponds to a PE ratio of 18X, 15X, and 13X for net profits, and 14X, 12X, and 11X for adjusted net profits for the same period [4]

Group 1 - The company reported a net profit of 790 million yuan, a year-on-year increase of 41%, exceeding the guidance range of 700-750 million yuan [1] - The average monthly paying users increased by 9.2% to 46.5 million [1] - Core-OTA segment revenue grew by 18% to 3.79 billion yuan, with transportation ticketing and accommodation booking revenues of 2.00 billion and 1.19 billion yuan, respectively, showing year-on-year increases of 15% and 23% [1] Group 2 - The gross profit margin for Q1 was 68.7%, an increase of 3.7 percentage points year-on-year, driven by the rapid growth of Core-OTA and a decrease in the proportion of lower-margin vacation business [1] - The adjusted net profit margin was 18.0%, up 3.6 percentage points year-on-year [1] - The company is actively leveraging WeChat traffic for accelerated growth and maintaining high demand in domestic travel while tightening user subsidies to ensure profit levels [1] Group 3 - Following the acquisition of Wanda Hotel Management, the profit forecast for 2025-2027 has been raised, with expected net profits of 2.50 billion, 3.01 billion, and 3.52 billion yuan, respectively [2] - The adjusted net profit for 2025 is projected to be 3.50 billion yuan, corresponding to a PE ratio of 13 times [2] - The investment rating is maintained at "Buy" [2]

Group 1: Financial Performance - The company reported Q1 2025 revenue of 4.377 billion yuan, a year-on-year increase of 13.2% [1] - Adjusted EBITDA reached 1.159 billion yuan, up 41.3% year-on-year [1] - Adjusted net profit was 788 million yuan, reflecting a 41.1% increase compared to the previous year [1] - Gross margin improved to 68.8%, up 3.8 percentage points, primarily due to cost optimization in the core OTA business [1] - The adjusted net profit margin increased to 18.0%, up 3.6 percentage points [1] Group 2: Business Segments - Core OTA business revenue grew by 18.4%, with operating profit margin at 29.2%, up 6.6 percentage points [1] - Accommodation booking revenue was 1.19 billion yuan, a 23.3% increase, driven by high cross-selling rates and over 50% growth in international hotel night stays [1] - Transportation ticketing revenue reached 2 billion yuan, up 15.2%, with significant growth in connecting travel products [1] - Other business revenue was 603 million yuan, a 20% increase, with nearly 2,500 hotels on the platform [1] - Vacation business revenue declined to 585 million yuan, down 11.8%, impacted by safety issues in Southeast Asia [1] Group 3: User Metrics and AI Integration - Monthly active paid users (MPU) reached 46.5 million, a 9.2% increase, while annual paid users (APU) hit 247 million, up 7.9% [2] - Average revenue per user (ARPU) was 72.2 yuan, reflecting a 25.6% year-on-year increase [2] - The platform introduced a new high-tier membership with over 50 additional benefits to enhance user loyalty [2] - AI integration through DeepSeek and the launch of DeepTrip improved user decision-making and internal efficiency, reducing employee workload by 20% [2]