Summary of Conference Call Records Industry Overview - **Industry**: Online Travel Agencies (OTAs) in China - **Key Players**: TCOM (Trip.com Group Ltd) and TCEL (Tongcheng Travel Holdings) Core Insights 1. **Market Competition**: - The entrance of JD into the OTA market is not expected to significantly impact leading OTAs due to their supply chain advantages. [2] - Current competition has led to a suspension of inventory sharing with JD, but no major changes in take rates or subsidies have occurred. [2] - The market has absorbed initial fears regarding competition, with TCOM and Tongcheng stocks recovering. [2] 2. **Travel Demand Trends**: - Domestic travel demand has remained resilient despite a general decline in consumer sentiment in China, with notable fluctuations during holiday periods. [3] - A decline in travel demand was observed starting in June, leading to a weak start to the summer holiday season. [3] 3. **Earnings Expectations for 2Q25**: - TCOM and Tongcheng are expected to report earnings in line with guidance, with TCOM's revenue forecasted to grow 14% YoY to RMB 14.6 billion. [4][10] - Tongcheng's revenue is expected to grow 9.5% YoY, with adjusted net profit projected at RMB 748 million. [10] 4. **Financial Adjustments**: - TCOM's adjusted net profit is expected to decline by 9% YoY due to a high base from last year's equity affiliate income. [10] - Tongcheng's full-year transportation revenue forecast has been reduced due to weaker demand, but EPS forecasts remain unchanged due to cost control measures. [4] 5. **Macroeconomic Context**: - China's 2Q25 nominal GDP growth was only 3.9% YoY, marking the first time it fell below 4% post-COVID. [8] - Retail sales growth slowed unexpectedly to 4.8% YoY in June, down from 6.4% in May. [8] - The hotel sector is experiencing weak RevPAR, particularly in business travel, with July's recovery falling short of expectations. [8] Additional Important Points 1. **Revenue Forecasts**: - TCOM's revenue forecasts for 2025-2027 have been slightly reduced, with a 12% decrease in non-GAAP net profit estimates due to the sale of MakeMyTrip shares. [15] - Tongcheng's revenue forecasts have been adjusted downwards by 4% for 2025, 6% for 2026, and 9% for 2027, reflecting weaker ticket and hotel revenue expectations. [11] 2. **Price Target Adjustments**: - Morgan Stanley has cut the price target for Tongcheng from HK$28 to HK$27, while maintaining a bull case of HK$36 and a bear case of HK$16. [13] 3. **Operational Metrics**: - TCOM's operating profit margin is expected to remain flat QoQ, while Tongcheng's gross margin is projected to be around 65.7% for the upcoming years. [10][21] 4. **Future Outlook**: - Analysts recommend focusing on domestic demand outlook for 3Q25, as the current economic environment poses challenges for growth. [4] This summary encapsulates the key points from the conference call records, providing insights into the current state and future outlook of the OTA industry in China, particularly focusing on TCOM and Tongcheng.