携程：Looking beyond release of pent-up demand to globalization

Investment Rating - The report assigns a "BUY" rating for Trip.com Group (TCOM) with a target price of US$65.8, up from the previous target of US$49.0, indicating a potential upside of 17.9% from the current price of US$55.83 [3][12]. Core Insights - Trip.com Group reported a net revenue of RMB11.9 billion for Q1 2024, representing a year-over-year increase of 29.4%, which exceeded both the forecast and consensus estimates [2]. - The company is positioned to capitalize on globalization opportunities beyond the current pent-up demand in the travel industry, leveraging its one-stop shop business model and strong customer service capabilities [2][7]. - Management anticipates that international business will contribute over 20% of total revenue within the next 3-5 years, supported by a significant total addressable market in Asia that is 1.5 times that of China [7][8]. Summary by Sections Financial Performance - In Q1 2024, Trip.com achieved a non-GAAP operating income of RMB3.8 billion, surpassing forecasts due to better gross profit margins and controlled marketing expenses [2][10]. - The company expects revenue for Q2 2024 to reach RMB12.9 billion, reflecting a 15% year-over-year growth [2]. Market Position and Growth Strategy - Trip.com’s domestic travel bookings grew at a double-digit rate year-over-year in Q2 2024, outpacing the overall market [9]. - The international flight capacity rebounded to 70% of pre-pandemic levels, with Trip.com outperforming the industry by 20-30% in outbound travel bookings [8][9]. - The inbound travel revenue, which accounted for approximately 20% of Trip.com’s revenue in Q1 2024, is expected to further support revenue growth [7]. Operational Efficiency - The non-GAAP operating profit margin for Q1 2024 was 31.6%, significantly better than forecasted, driven by disciplined sales and marketing spending [2][10]. - The company aims to maintain efficient marketing expenditures focused on return on investment, which is expected to stabilize the operating profit margin despite a high base [2][10]. Future Projections - Revenue projections for 2024, 2025, and 2026 are RMB52.8 billion, RMB59.5 billion, and RMB65.8 billion respectively, with corresponding growth rates of 18.5%, 12.6%, and 10.6% [10][11]. - The gross profit margin is expected to remain strong at around 81.3% for 2024, with operating margins projected to improve to 26.2% [10][11].