Trip.com Group Ltd - Conference Call Summary Company Overview - **Company**: Trip.com Group Ltd (TCOM) - **Industry**: Online Travel Agency (OTA) - **Market Focus**: Asia Pacific, excluding China and India Key Points Industry and Market Position - Trip.com aims to become the number one player in Asia (excluding China and India) in terms of market share, which is considered a challenging yet achievable target [2] - The company is currently the market leader in Singapore, Hong Kong, and Thailand, and is rapidly gaining market share in Korea and Japan [2] - The APAC travel market is expected to grow, with online penetration increasing, providing a favorable environment for Trip.com [2] Financial Performance and Projections - Trip.com anticipates that by 2030, international and outbound business will contribute to 50% of its revenue [2] - Revenue growth projections indicate a slowdown from over 55% in 2025 to around 25% by 2030 [2] - The company expects year-over-year margin improvements for both domestic and overseas operations, although mixed revenue sources may introduce uncertainty [4] Strategic Initiatives - Trip.com has a structured approach to entering new markets, focusing first on product and localization, followed by performance-based marketing, and then brand marketing once a market share of 2-5% is achieved [3] - The company prioritizes branding and service quality over pricing, believing its pricing is competitive [2] - A significant marketing push has been noted, which has positively impacted overseas expansion efforts [1] Competitive Landscape - Concerns regarding competition from Alibaba's Fliggy are downplayed, with Trip.com’s strong supply chain control seen as a competitive advantage [5] - The company is positioned to achieve profitability levels similar to global peers, potentially exceeding them if the revenue mix favors accommodation [3] Financial Metrics - Current stock price (as of November 25, 2025): US$70.30 - Price target set at US$86.00, indicating a potential upside of 22% [7] - Projected revenue growth from Rmb 53,294 million in FY25 to Rmb 77,641 million in FY27, with a net profit forecast of Rmb 32,156 million in FY25 [31] Risk Factors - Risks include rising competition in the domestic market, uncertainties related to the pandemic, and macroeconomic slowdowns that could affect travel demand [50] - The company is also exposed to foreign exchange headwinds, which could impact profitability [51] Investment Thesis - Trip.com is viewed as uniquely positioned to benefit from multiple growth engines, including domestic travel, outbound travel, and international expansion [39] - The company has announced a US$5 billion share repurchase program, representing over 10% of its market cap at the time of announcement, which is seen as a positive signal for investors [39] Conclusion - Trip.com Group Ltd is strategically positioned for growth in the APAC travel market, with a focus on enhancing its market share and profitability through targeted marketing and operational efficiencies. The company’s financial outlook remains positive, despite potential risks from competition and macroeconomic factors.

Investment Rating - The report assigns an "Outperform" rating to the company, indicating expected relative performance above the market benchmark over the next 12-18 months [3][12]. Core Insights - Domestic growth is stable while overseas growth continues to be high, with the company expanding its user share and influence. Adjusted net profit attributable to shareholders is projected to be RMB 31.86 billion, RMB 20.76 billion, and RMB 23.16 billion for the years 2025, 2026, and 2027 respectively [3][12]. - A valuation of 23x PE for 2026 is set, leading to a target market capitalization of RMB 476.4 billion, equivalent to HKD 523.3 billion, with a target price of HKD 733 [3][12]. Financial Summary - For Q3 2025, the company reported revenue of RMB 18.37 billion, a year-on-year increase of 15.52%. Adjusted EBITDA was RMB 6.35 billion, up 11.73%, and adjusted operating profit was RMB 6.13 billion, reflecting a 12.2% increase. Net profit attributable to shareholders surged to RMB 19.89 billion, a 194.01% increase, largely due to partial investment profit sales [3][13]. - The company’s revenue growth in transportation accelerated due to peak season and overseas demand, while hotel growth remained in double digits but showed signs of sequential slowdown. Group tours have seen a decline in growth since Q1 2025, attributed to a shift towards independent travel and regional risks [3][13]. Performance Metrics - The adjusted EBITDA margin is projected to be 30.5% in 2025, with a slight decline expected in subsequent years. The company has maintained stable profit margins despite increased competition in overseas markets [3][12][13]. - The report highlights that the company has increased its investment in Trip, leading to a rise in marketing expenses, which has contributed to rapid growth in overseas markets and an increase in user share [3][13].

Core Perspective - The article discusses how companies can transform ESG investments from a compliance cost into a core capital that attracts investment, drives innovation, and builds competitive advantages, ultimately reshaping corporate value [1]. Value Transformation - Companies need to establish a quantifiable ESG assessment system to clearly present the relationship between input and output, avoiding the mindset of only calculating costs without considering value [2]. - ESG investments should be viewed as both costs and benefits, with potential for cost reduction and efficiency gains, such as installing solar panels, and attracting new investors through green financing [2]. - Long-term institutional investors are likely to increase as ESG practices improve, optimizing shareholder structure [2]. - ESG can drive business and product innovation, creating new growth points, especially for products with a lower carbon footprint [2]. Active Practice - The chemical industry is undergoing a green transformation, with companies like Changhua Chemical innovating through catalyst technology to utilize CO2 as a raw material, achieving significant production milestones [3]. - Yabao Chemical has invested over 10 million in sustainable development, responding to industry compliance and enhancing operational efficiency, becoming one of the early adopters of ESG reporting among private enterprises [3][4]. - Ctrip is addressing carbon emission challenges in the travel industry by integrating carbon data from airlines and establishing low-carbon standards for hotels, aligning with the preferences of environmentally conscious consumers [4]. Digital Empowerment - The integration of AI and ESG is becoming a key driver for sustainable development, with companies like Longxin Group leveraging technology to facilitate industry-wide transitions [5][6]. - Longxin Group has developed a distributed photovoltaic management platform covering 50GW of resources and a charging platform with 26 million registered users, significantly enhancing operational efficiency and reducing costs for businesses [6].

Group 1 - Ctrip Travel Information Technology (Shanghai) Co., Ltd. has obtained a patent for a method, system, device, and storage medium for "tourism entity name matching," with authorization announcement number CN 115563965 B, applied for on September 2022 [1] - Ctrip Travel Information Technology (Shanghai) Co., Ltd. was established in 2003 and is located in Shanghai, primarily engaged in software and information technology services [1] - The company has a registered capital of 26,017.3694 thousand USD and has invested in 4 enterprises, participated in 1 bidding project, and holds 556 patent records along with 12 administrative licenses [1]

Core Viewpoint - Trip.com Group reported strong financial performance in Q3 2025, with revenue growth driven by various business segments and a reduction in sales and marketing expenses, leading to an increase in profit forecasts and target price [1][2]. Financial Performance - Q3 2025 revenue reached Rmb 18.4 billion, representing a 16% year-over-year increase [1]. - Non-GAAP operating profit for the same period was Rmb 6.1 billion, exceeding expectations due to lower-than-expected sales and marketing expense ratios [1]. - The company raised its 2025 non-GAAP EPS forecast from Rmb 27.8 to Rmb 45.4, primarily due to investment gains from MakeMyTrip [1]. Business Segment Performance - Accommodation reservation revenue increased by 18% year-over-year [2]. - Transportation ticketing revenue grew by 12% [2]. - Packaged-tour revenue saw a 3% increase [2]. - Corporate travel revenue rose by 15% [2]. - Other business revenue surged by 34% [2]. - Overall reservations on the Trip.com brand increased by over 60% year-over-year, with inbound travel bookings more than doubling and outbound hotel and air ticket bookings up 140% compared to 2019 levels [2]. Market Outlook - The company maintains a Buy rating, reflecting optimism about its leading position in China's online travel industry and potential for market share growth internationally [3]. - The target price has been raised from HK$ 618 to HK$ 657, indicating a 21% upside [1].

Core Insights - Ctrip's recent financial report shows a revenue of 18.3 billion and a net profit of 19.9 billion, raising concerns about the sustainability of such high profits in the industry [1] - The hotel industry is experiencing a push to reclaim direct booking power from Online Travel Agencies (OTAs), reminiscent of past movements in Europe [1][3] - The struggle against OTAs has led to significant legal and marketing efforts from major hotel groups, including campaigns to promote direct bookings [2][3] Group 1: Industry Dynamics - The hotel industry in Europe has historically viewed OTAs as detrimental middlemen, with high commissions being a major pain point [3][4] - Major hotel chains formed alliances, such as the Room Key platform, to combat OTAs by consolidating inventory and driving direct bookings [5][6] - Room Key ultimately failed due to internal conflicts and the realization that direct sales come with hidden costs that can rival or exceed OTA commissions [7][9] Group 2: Cost Analysis - Transitioning to direct sales shifted costs from OTAs to hotels, including website maintenance, marketing, and customer service expenses [8][9] - Analysis from 2016 to 2018 indicated that the total cost of direct sales often matched or exceeded OTA commission rates of 15% to 20% [9][10] - The competitive landscape requires hotels to invest heavily in marketing to compete with OTA advertising budgets, leading to a paradox where direct sales become more expensive [10][11] Group 3: Market Trends - The "advertising board effect" shows that hotels benefit from visibility on OTAs, as direct bookings increase when hotels are listed on these platforms [11][12] - Data from 2013 to 2015 revealed a decline in direct bookings from 59.4% to 55.2%, highlighting the challenges faced by hotels in reclaiming market share [14][17] - The current domestic market sees Ctrip as a dominant player, with commission rates ranging from 8% to 15%, leading to mixed feelings among hotel operators [18][19] Group 4: Comparative Analysis - Ctrip's operational costs are rising, with a 20% increase in operating costs and a 24% increase in sales and marketing expenses, outpacing revenue growth [19] - In comparison, Booking's EBITDA margin is significantly higher at 47%, indicating more efficient operations despite similar revenue growth rates [20] - The European hotel groups have adapted to the presence of OTAs, viewing them as necessary partners rather than adversaries, which contrasts with the current sentiment in the domestic market [21][22] Group 5: Strategic Insights - The hotel industry is recognizing the importance of leveraging OTAs for customer acquisition while focusing on converting high-value customers to direct bookings [22][23] - The competitive landscape in China offers various platforms beyond Ctrip, allowing hotels to diversify their distribution strategies [23][24] - The narrative suggests that without Ctrip, the market dynamics would not necessarily improve, as evidenced by the failure of Room Key [27][28]

Group 1 - Ctrip reported a revenue growth of 16% year-on-year and a net profit increase of 194.01% in Q3 2025, achieving a net profit of 199 billion yuan, surpassing Kweichow Moutai's net profit of 192.2 billion yuan [3][4] - The significant profit increase was partly due to the disposal of certain assets, including a portion of its stake in MakeMyTrip, which contributed 170.32 billion yuan in "other income" [3][4] - Ctrip's gross margin reached 81.55%, significantly higher than other major internet companies like Tencent and NetEase, which reported gross margins of 56.41% and 64.10% respectively [5][7] Group 2 - The hotel booking segment contributed 80 billion yuan in revenue, accounting for 43.72% of total revenue, marking the highest proportion in three years [9] - Ctrip's commission rates for hotels are notably high, with some hotels paying up to 20% in commissions, reflecting the industry's heavy reliance on Ctrip for customer acquisition [10][12] - Ctrip's market share in the domestic OTA market is projected to be 56% in 2024, significantly ahead of competitors like Tongcheng, Meituan, and Fliggy [12] Group 3 - Ctrip enjoys a strong competitive advantage with no significant direct competitors in the domestic OTA market, allowing it to capitalize on its market leader status [16][17] - The company has strategically invested in and partnered with potential competitors in the past, effectively consolidating the market and reducing price competition [13][14] - Ctrip's focus on service quality has fostered customer loyalty, making it difficult for competitors to gain market share despite potential price incentives [16][17]

Core Insights - The recent surge in interest from major internet companies in user reviews and ratings is driven by the need to find new growth avenues in the service consumption era, as traditional e-commerce growth has plateaued [1][2] - Platforms like JD.com and Gaode are expanding their roles beyond traditional functions to become influential in consumer decision-making, particularly in the restaurant and entertainment sectors [1] - The competition for consumer attention is intensifying, with platforms aiming to create high-frequency touchpoints through review content [1] Industry Dynamics - The service consumption market remains robust, with significant demand for experiences such as dining and entertainment, which are often subjectively evaluated [1] - The introduction of new review platforms is seen as a way for businesses to connect directly with consumers, especially in a high marketing cost environment [1] Consumer Behavior - Consumers are generally receptive to multiple review channels, appreciating the opportunity to discover new places and potential discounts [2] - There is a growing skepticism towards "water reviews," with consumers preferring authentic experiences over generic positive reviews [2] Trust and Credibility - Trust is fundamental to the review ecosystem, with users relying on genuine feedback to guide their choices, while platforms must maintain impartiality to build credibility [2][3] - The challenge lies in balancing the dual role of platforms as both arbiters of authenticity and profit-driven entities, which can lead to conflicts of interest [2] Future Considerations - New entrants in the review space must focus on rebuilding trust mechanisms rather than merely replicating existing functionalities [3] - The long-term success of review platforms hinges on their ability to foster genuine interactions and maintain consumer trust, as losing credibility can undermine even the most attractive data and interfaces [3]

Core Viewpoint - Ctrip Group reported strong financial performance in Q3 2025, with a significant increase in revenue and net profit, primarily driven by substantial other income from the sale of a stake in MakeMyTrip [2][5]. Financial Performance - In the first three quarters of 2025, Ctrip's revenue reached 471 billion, a year-on-year increase of 15.9%, and net profit was 291 billion, up 93.6% [2]. - The Q3 net profit was 199 billion, surpassing Kweichow Moutai's net profit of 192 billion by 3.6% [2]. - Ctrip's revenue in 2023 doubled to 446 billion, with a revenue index of 125, and is projected to reach 534 billion in 2024 [5]. - From 2019 to Q3 2025, Ctrip's revenue had a compound annual growth rate of 9.5% [7]. Revenue Breakdown - Accommodation bookings and transportation ticketing are the two main revenue streams, contributing 80% of total income [8]. - In 2019, accommodation revenue was 140 billion and transportation revenue was 135 billion, together accounting for 77% of total revenue [9]. - In 2023, accommodation and transportation revenue indices reached 128 and 132, respectively, indicating a strong recovery post-pandemic [10]. Cost Management - Ctrip has significantly improved its cost management, reducing total expense ratio by 12 percentage points since 2019 [14]. - In 2023, the gross profit margin increased to 81.8%, while the total expense ratio decreased to 56.3% compared to 2019 [16]. - By Q3 2025, Ctrip achieved a gross profit of 381 billion with a gross profit margin of 81.1% [16]. Competitive Landscape - The travel market is expected to see over 6 billion domestic trips and a total spending of 6.5 trillion by 2025, indicating a competitive environment with numerous players [22]. - Ctrip faces competition from various OTA platforms, traditional travel agencies, and new entrants like JD.com and Meituan [23][24]. - Ctrip's unique advantages include a vast hotel resource network, with over 1.4 million global hotel partnerships and nearly 100% coverage of high-star hotels in China [28]. Strategic Advantages - Ctrip has established a strong market position by acquiring competitors and enhancing its service offerings [25]. - The company operates over 7,000 offline stores across more than 300 cities, providing a significant advantage in customer trust and service [31]. - Ctrip's call center, with approximately 12,000 seats, offers 24/7 support, enhancing customer satisfaction and loyalty [32].

Core Insights - The report titled "2024-2025 Cross-Border Tourism Consumption Trend Research Report" highlights the steady growth of the global tourism market, with a focus on China's inbound and outbound tourism consumption characteristics, revealing new trends and development opportunities for high-quality industry growth [1][9]. Global Tourism Overview - The global tourism market is experiencing robust growth, with a projected 11% year-on-year increase in travel volume in the first half of 2025 and a 3.9% increase in tourism spending in 2024. Experience-based travel is becoming the core driving force, significantly influenced by sports events and entertainment performances [1][18]. - Popular destinations are showing regional differentiation, with France, Spain, and the United States leading in international tourist arrivals in 2024. China ranks first globally in inbound tourist arrivals, receiving approximately 132 million visitors [1][21]. Outbound Tourism Trends - China's outbound tourism is on the rise, with steady growth in both travel volume and spending. Short-haul and niche destinations are leading in growth rates, driven by optimized visa policies, the recovery of international routes, and cultural activities [2][10]. - Different demographic groups exhibit distinct travel preferences: Generation Z favors cost-effective and spontaneous trips, families prioritize safety and educational value, while seniors prefer long, in-depth travel experiences [2][10][66]. Inbound Tourism Trends - China's inbound tourism is experiencing rapid growth, driven by policy benefits such as visa facilitation. In the first half of 2025, the number of visa-exempt foreign visitors significantly increased, with South Korea, Malaysia, and Japan being the main source countries [2][10]. - The demand for "event tourism" and "cultural experience tourism" is rising, with major events like the Chengdu World Games and Harbin Asian Winter Games leading to a surge in inbound travel orders [2][10]. Emerging Trends in the Industry - Three core trends are emerging in the tourism industry: 1. "Emotional" travel is becoming a key driver, with a rise in therapeutic tourism and customized products catering to diverse psychological needs [3][34]. 2. "Local culture" is inspiring travel, shifting tourists from mere sightseeing to immersive experiences, with collaborations between destinations and gaming or film IPs gaining popularity [3][34]. 3. AI is transforming the industry, assisting in trip planning and product recommendations, thereby enhancing service efficiency [3][34]. Development Recommendations - The report suggests optimizing outbound tourism services, developing diverse products, and creating an AI-based digital platform to enhance payment security and convenience. For inbound tourism, it recommends improving Chinese-friendly ecosystems, deepening policy benefits, and enriching cultural experience products [3][10].