Investment Rating - The report maintains a "Buy" rating for Tongcheng Travel with a target price of HKD 20.18 per share, based on a 25-year 13X PE valuation [2][6] Core Views - Tongcheng Travel's 24Q3 GMV grew 2.4% YoY to RMB 72.8 billion, with revenue increasing 51.3% YoY to RMB 4.99 billion [1] - Adjusted net profit for 24Q3 rose 46.6% YoY to RMB 910 million, with an adjusted net margin of 18.2% [1] - 24Q3 adjusted EBITDA increased 51.6% YoY to RMB 1.32 billion, maintaining a 26.4% margin [1] - MPU grew 5% YoY to 46.4 million, while APU increased 3.4% YoY to 230 million, and ARPU surged 53.2% YoY [1] Business Segment Performance - Transportation ticketing revenue grew 20.6% YoY to RMB 2.03 billion in 24Q3 [2] - Accommodation booking revenue increased 22.2% YoY to RMB 1.38 billion in 24Q3 [2] Operational Highlights - Sales expense ratio decreased 9.1pp YoY to 29% in 24Q3, reflecting improved marketing efficiency [2] - International ticket volume grew over 110% YoY, and international hotel room nights increased over 130% YoY in 24Q3 [2] - Cross-selling rate improved to 12% [2] Financial Projections - Revenue is forecasted to grow 44.2% YoY to RMB 17.2 billion in 2024, with further growth of 17.2% and 19.5% in 2025 and 2026 respectively [2] - Non-IFRS net profit is expected to reach RMB 2.72 billion in 2024, growing 24.4% YoY, with continued growth of 22.6% and 20.5% in 2025 and 2026 [2] - Non-GAAP EPS is projected to increase from RMB 1.21 in 2024 to RMB 1.78 in 2026 [4]

Investment Rating - Maintain "Buy" rating [5] Core Views - Adjusted net profit exceeded expectations, with significant improvement in core OTA profitability [1] - Core OTA business operating profit margin increased by 6.0 percentage points year-over-year to 31.1% [1] - Revenue from core OTA businesses grew by over 20% across all segments [1] - Monthly paying users reached a record high of 46.4 million, up 5.0% year-over-year [2] - Annual paying users reached 230 million, up 3.4% year-over-year [2] - Annual service users reached 1.88 billion, up 19.9% year-over-year [2] Business Breakdown Transportation Business - Revenue of RMB 2.03 billion, up 20.6% year-over-year [1] - International air ticket volume increased by over 110% year-over-year [1] Accommodation Business - Revenue of RMB 1.38 billion, up 22.2% year-over-year [1] - International hotel volume increased by over 130% year-over-year [1] - Cross-selling rate improved to 12% [1] Other Businesses - Revenue of RMB 610 million, up 23.7% year-over-year [1] - Elong Hotel Technology platform expanded to over 2,100 hotels [1] Vacation Business - Revenue of RMB 980 million [1] - Operating profit of RMB 23.84 million with an operating margin of 2.4% [1] Financial Forecasts - Adjusted net profit for 2024-2026 revised to RMB 2.7/3.3/3.9 billion (previously RMB 2.6/3.1/3.6 billion) [5] - PE ratios for 2024-2026 are 14/12/10x [5] - Revenue growth for 2024-2026 projected at 43%/15%/15% [2] - Net profit growth for 2024-2026 projected at 23%/26%/23% [2] Valuation Metrics - 2024E PE ratio: 20.3x [2] - 2025E PE ratio: 16.1x [2] - 2026E PE ratio: 13.0x [2] - 2024E P/B ratio: 2.0x [2] - 2025E P/B ratio: 1.8x [2] - 2026E P/B ratio: 1.6x [2] Market Position - Leading OTA player in lower-tier markets with strong competitive advantages backed by Tencent and Ctrip's traffic and inventory resources [5] - Active international market expansion expected to drive medium to long-term revenue and profit growth [5] Financial Data - 2024Q3 revenue: RMB 4.99 billion, up 51.3% year-over-year [1] - 2024Q3 adjusted net profit: RMB 910 million, up 46.6% year-over-year [1] - 2024Q3 adjusted net profit margin: 18.2% [1] - 2024Q3 core OTA operating profit: RMB 1.25 billion, up 50.4% year-over-year [1]

Investment Rating - The investment rating for the company is "Outperform the Market" [4][9]. Core Insights - The company's core business has shown significant improvement in profitability, with a year-on-year increase in per-customer contribution. In Q3 2024, the OTA operating profit margin improved by 6 percentage points, outperforming Bloomberg's expectations [1][7]. - The company's revenue for Q3 2024 reached 4.99 billion yuan, with a net profit attributable to shareholders of 790 million yuan and an adjusted net profit of 910 million yuan, representing year-on-year growth of 51.3%, 55.5%, and 46.6%, respectively [1][7]. - The OTA platform revenue was 4.01 billion yuan, up 21.6%, with an operating profit margin of 31.1%, a significant improvement from previous quarters [1][7]. Financial Performance Summary - The company's GMV for Q3 2024 was 72.8 billion yuan, a year-on-year increase of 2.4%. This growth was primarily influenced by structural impacts from industry pricing, with air ticket prices declining but ticket volumes increasing by over 20% [1][8]. - The company has focused on enhancing user value and purchase frequency through refined subsidy strategies, resulting in a 15.9% increase in the average purchase frequency per user over the past 12 months [1][8]. - The number of "Black Whale" members reached 78 million by the end of Q3, a 16.7% increase from Q2, with their average revenue per user (ARPU) being over 2.7 times that of regular members [1][8]. Earnings Forecast and Valuation - The adjusted net profit forecasts for 2024-2026 have been raised to 2.75 billion, 3.28 billion, and 3.83 billion yuan, respectively, with corresponding dynamic P/E ratios of 14, 12, and 10 times [2][9]. - The company is expected to benefit from low-cost traffic from the WeChat ecosystem and the penetration of lower-tier markets, while also needing to monitor the effectiveness of new channel cultivation and the pace of international business expansion [1][9].

Investment Rating - The report maintains a "Buy" rating for the company with a 6-month target price of HKD 22.5, representing a 27% upside from the current price [7][4] Core Views - The company's core OTA business profitability improved significantly, driving overall net profit above expectations [1][2] - Core OTA operating margin increased by 6 percentage points YoY to 31% in Q3 2024 [1][2] - Adjusted net profit reached a record high of RMB 910 million in Q3 2024, exceeding expectations by 14% [2] - The company's overall monetization rate improved to 6.9% in Q3 2024, up from 4.6% in Q3 2023 [3] Business Performance - Total revenue in Q3 2024 reached RMB 4.991 billion, a 51% YoY increase [2] - Core OTA revenue grew 22% YoY, with accommodation booking and transportation ticketing revenues increasing by 22% and 21% respectively [2] - Vacation business contributed RMB 980 million, accounting for 20% of total revenue [2] - International ticket bookings increased by over 110% YoY, while international hotel room nights grew by over 130% [3] User Metrics - APU (Annual Paying Users) reached 230 million, with annual spending per user increasing 15% YoY to RMB 1,095 [3] - MPU (Monthly Paying Users) grew 5% YoY to 46.4 million [3] - Black Whale membership exceeded 78 million, with spending 2.7 times that of regular users [3] Financial Projections - Core OTA revenue is expected to grow 18% in 2025, driven by cross-selling, user value growth, and international business expansion [4] - Adjusted net profit margin is projected to improve to 17% in 2025 [4] - The company is valued at 14x 2025 P/E, with a target price of HKD 22.5 [4] Operational Highlights - Accommodation booking ADR declined less than 5% YoY, with room nights maintaining growth [3] - Air ticket bookings grew 20% YoY, outperforming the overall civil aviation growth rate of 12% [3] - 15-day cross-selling rate improved by 2 percentage points to 12% [3]

Investment Rating - The report maintains a "Recommend" rating for the company [4][9] Core Views - The company's Q3 2024 revenue reached RMB 4.99 billion, a YoY increase of 51.3%, exceeding expectations [2] - Core OTA business revenue was RMB 4.01 billion, up 21.6% YoY, in line with expectations [2] - Net profit attributable to shareholders was RMB 790 million, a YoY increase of 55.5% [2] - Non-GAAP net profit was RMB 910 million, up 46.6% YoY [2] - Hotel take rate improvement drove revenue growth in the accommodation booking segment, with international room nights increasing by 130% YoY [2] - Transportation ticketing revenue reached a historical high of RMB 2.03 billion, driven by a 110% YoY increase in international air ticket volume [2] - Other revenue grew 23.7% YoY to RMB 610 million, supported by strong growth in hotel management and online vacation businesses [2] - The company's average monthly paying users reached 46.4 million, a 5% YoY increase, with ARPU rising to around RMB 70, up RMB 6 QoQ [3] - Non-GAAP net margin was 18%, with core OTA platform margin reaching 31%, a post-pandemic high [3] Financial Forecasts - Revenue is expected to grow from RMB 17.212 billion in 2024E to RMB 24.166 billion in 2026E, with a CAGR of 18.5% [6] - Non-GAAP net profit is projected to increase from RMB 2.732 billion in 2024E to RMB 4.468 billion in 2026E [6] - Adjusted diluted EPS is forecasted to grow from RMB 1.18 in 2024E to RMB 1.92 in 2026E [6] - The company's P/E ratio is expected to decline from 14.01X in 2024E to 8.57X in 2026E [6] Business Performance - Accommodation booking revenue grew 22.2% YoY to RMB 1.38 billion, outperforming ADR and overall hotel industry growth [2] - Vacation segment revenue reached RMB 980 million [2] - The company has 230 million annual paying users and 1.88 billion annual cumulative service users, up 3.4% and 19.9% YoY respectively [3] - Gross margin was 63% in Q3 2024, down 11.2 ppts YoY but only 1.2 ppts QoQ [3] - Sales and marketing expenses as a percentage of revenue decreased by 9.1 ppts YoY to 29% [3]

Investment Rating - The report maintains a "Buy" rating for Tongcheng Travel (0780.HK) [5] Core Insights - Tongcheng Travel reported a significant revenue growth of 51.3% year-on-year in Q3 2024, reaching 4.992 billion CNY, driven by strong performance in its core OTA business and vacation services [3] - The adjusted EBITDA for Q3 2024 was 1.319 billion CNY, reflecting a 51.6% increase year-on-year, while the adjusted net profit was 910 million CNY, up 46.6% year-on-year [3] - The company continues to deepen its market penetration, particularly in lower-tier cities, with over 87% of registered users from non-first-tier cities [3] Financial Performance - Q3 2024 revenue breakdown: accommodation booking revenue was 1.378 billion CNY (+22.2% YoY), transportation ticketing revenue was 2.027 billion CNY (+20.64% YoY), and other core OTA revenues were 609 million CNY (+23.7% YoY) [3] - The net profit margin for Q3 2024 was 18.2%, slightly down by 0.6 percentage points compared to the same period last year [3] - The company’s sales costs increased significantly by 117.55% year-on-year to 1.827 billion CNY, primarily due to rising costs in vacation service products and increased employee benefits [3] User Growth and Market Strategy - The average monthly paying users reached 46 million, a 5% increase year-on-year, while annual paying users totaled 232 million, up 3.4% year-on-year [3] - The report highlights the collaboration with Tencent and Alipay as a key factor in user growth, particularly in lower-tier markets [3] - The company aims to enhance its competitive advantage through mergers and acquisitions, expanding its presence in accommodation, vacation, and outbound travel sectors [3] Future Projections - The projected net profits for Tongcheng Travel are expected to be 1.942 billion CNY in 2024, 2.485 billion CNY in 2025, and 2.958 billion CNY in 2026, with corresponding P/E ratios of 20x, 16x, and 13x respectively [3][4]

Investment Rating - Maintain "Overweight" rating [1] Core Views - Q3 revenue slightly exceeded the upper guidance range, with profits surpassing expectations: Q3 revenue reached 4,991 million yuan, up 51.6% YoY, slightly exceeding the guidance range of 45-50% [2] - User subsidies narrowed, leading to significant improvement in sales expense ratio: Q3 gross margin was 63.4%, down 14.8 pct YoY, while sales expense ratio improved to 29.4%, down 9.1 pct YoY [2] - Transportation and accommodation businesses showed steady growth: Core OTA segment revenue increased by 21.6% YoY, with transportation ticketing and accommodation booking revenues reaching 2,027 million yuan and 1,378 million yuan, respectively, both hitting historical highs [3] - Monthly paying users reached a new historical high, with continued penetration in lower-tier markets: As of Q3 2024, annual paying users reached 232 million, up 3.4% YoY, with over 87% of registered users residing in non-tier-1 cities [3] Financial Performance and Forecasts - Revenue and profit forecasts adjusted upward: Expected 2024-2026 net profit attributable to parent company adjusted to 2,093.75 million yuan, 2,648.42 million yuan, and 3,265.09 million yuan, respectively [4] - EPS and valuation metrics: 2024E EPS is 0.90 yuan per share, with a P/E ratio of 18.81x [1] - Key financial ratios: ROE expected to improve from 8.78% in 2023A to 12.70% in 2026E, with net profit margin projected to increase from 13.06% to 13.56% over the same period [14] Business Segments - Transportation ticketing and accommodation booking: Q3 revenue for transportation ticketing and accommodation booking grew by 20.6% and 22.2% YoY, respectively [3] - Vacation segment: Q3 vacation segment revenue reached 979 million yuan, exceeding the company's guidance of 900-950 million yuan [3] Market and User Metrics - User engagement: Q3 average monthly paying users reached 46 million, up 5.0% YoY, with transaction volume of 72.8 billion yuan, up 2.4% YoY [3] - Lower-tier market penetration: Approximately 70% of new paying users on the WeChat platform in Q3 came from non-tier-1 cities [3]

Investment Rating - The report maintains a **Buy** rating for Tongcheng Travel with a target price of **HKD 25.8**, up from the previous target of HKD 23.1 [5][8] Core Views - **Revenue Growth**: Tongcheng Travel reported 3Q24 revenue of RMB 5 billion, a 51% YoY increase, slightly exceeding expectations of RMB 4.9 billion [1][2] - **Profitability**: Adjusted net profit for 3Q24 reached RMB 910 million, a 47% YoY increase, surpassing expectations by 10.2% [1][3] - **Outbound Travel**: Outbound hotel bookings and air ticket sales saw triple-digit growth, with international room nights up 130% YoY and international ticket volume up 110% YoY [2] - **User Value Focus**: The company shifted its strategy from user growth to maximizing user value, resulting in a 53% YoY increase in ARPU to RMB 70 [4] Revenue Breakdown - **Core OTA Business**: Revenue from core OTA business reached RMB 4 billion, a 22% YoY increase, driven by improved commission rates and strong outbound travel demand [2] - **Accommodation Business**: Revenue grew 22% YoY, exceeding expectations by 3%, with international room nights up 130% YoY [2] - **Transportation Business**: Revenue increased 22% YoY, surpassing expectations by 1.3%, supported by a 110% YoY growth in international ticket volume [2] Profitability and Cost Control - **Operating Profit**: Operating profit for 3Q24 was RMB 970 million, a 63% YoY increase, exceeding expectations by 26% [3] - **Cost Efficiency**: The company achieved significant cost control, with total expense ratio 4 percentage points lower than expected [3] - **Core OTA Profit**: Core OTA platform operating profit reached RMB 1.2 billion, 8.2% above expectations [3] User Metrics - **Monthly Active Paying Users**: Average monthly paying users reached 46.4 million, a 5% YoY increase [4] - **Annual Paying Users**: Annual paying users grew to 230 million, a 3.4% YoY increase [4] - **ARPU Growth**: ARPU increased to RMB 70, up 53% YoY, driven by improved marketing efficiency and cross-selling strategies [4] Financial Forecasts - **Revenue Forecast**: Expected revenue for 2024-2026 is RMB 17.3 billion, RMB 21.9 billion, and RMB 26.5 billion, respectively [5][12] - **Adjusted Net Profit Forecast**: Adjusted net profit for 2024-2026 is projected at RMB 2.77 billion, RMB 3.67 billion, and RMB 4.51 billion, respectively [5][12] - **Valuation**: The target price of HKD 25.8 is based on a 15x PE multiple for 2025, reflecting a discount to the peer average of 19.5x [5][14] Peer Comparison - **Valuation Multiples**: Tongcheng Travel's 2025 PE multiple of 15x is lower than peers such as Booking (23.9x) and Airbnb (29.8x) [15]

Investment Rating - The report maintains a "Buy" rating for the company with a target price adjusted to HKD 24.00, indicating a potential upside of 35.6% from the current price of HKD 17.70 [1][4][12]. Core Insights - The core OTA business is expected to grow faster than the industry average, with revenue projections of RMB 17.2 billion for 2024 and RMB 19.8 billion for 2025, reflecting growth rates of 19% and 16% respectively. The operating profit margin is anticipated to exceed 26%, leading to net profits of RMB 2.7 billion and RMB 3.4 billion for the respective years [1][2]. - The company reported a 51% year-on-year revenue increase in Q3 2024, reaching RMB 5 billion, which surpassed market expectations. The core OTA business revenue grew by 22%, driven by significant increases in both transportation and accommodation segments [2][3]. - The forecast for Q4 2024 anticipates a revenue increase of 29% to RMB 40.5 billion, with the core OTA segment expected to grow by 10% [2][9]. Financial Projections - Revenue forecasts for 2024 and 2025 have been slightly adjusted, with total revenue expected to be RMB 17.2 billion and RMB 19.8 billion respectively, reflecting growth rates of 44.2% and 15.7% [3]. - The adjusted operating profit margin is projected to improve to 16.3% for 2024 and 17.5% for 2025, with net profit margins expected to be 16.0% and 17.0% respectively [3][9]. - The company’s gross profit margin is forecasted to be 64.4% in 2024, slightly down from previous estimates, but still indicating strong profitability [3]. Market Performance - The stock has shown a year-to-date increase of 22.58%, with a market capitalization of approximately HKD 40.4 billion [6]. - The stock's 52-week high and low are HKD 22.30 and HKD 12.70 respectively, indicating significant volatility and potential for growth [6]. Summary of Earnings - The company achieved a net profit of RMB 9.1 billion in Q3 2024, a 47% increase year-on-year, exceeding market expectations by 11% [2][3]. - The operational efficiency is improving, with marketing expenses as a percentage of revenue decreasing to 29%, which is better than the anticipated 33% [2]. Conclusion - The report indicates a positive outlook for the company, driven by strong growth in the core OTA business, improved operational efficiency, and favorable market conditions, supporting the "Buy" rating and the revised target price [1][4][12].

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 ...