Summary of Trip.com Group (TCOM) Conference Call Company Overview - **Company**: Trip.com Group (TCOM) - **Market Cap**: $44.3 billion - **Enterprise Value**: $38.0 billion - **Current Price**: $69.72 - **12-Month Price Target**: $91.00 (Upside: 30.5%) [1][5] Key Industry Insights - **Industry**: Online Travel Agency (OTA) in Asia, particularly focusing on travel to Japan and other Asian markets - **Recent Trends**: Concerns over profit margins and geopolitical tensions affecting travel to Japan, presenting a potential buying opportunity [1][19] Core Points Discussed 1. **Profit Margin Outlook**: - Management addressed concerns regarding lower EBIT margin guidance for 4Q25 (20.8% vs. 21.6% in 4Q24), attributing it to a revenue mix shift towards the loss-making Trip.com platform (18% of revenue vs. 14% in 4Q24) [1][19] - Confidence in improving profitability from domestic and outbound businesses into FY26 due to scale economies and a shift towards higher-margin hotel business [1][19] 2. **Revenue Growth Projections**: - Base case scenario assumes Trip.com's revenue growth will slow to 40% YoY (from 50-60% in recent quarters), with a narrower loss from Trip.com supporting group margin expansion to 29.8% in FY26E [1][19] - Stronger top-line growth (60%+) could dilute margin trends, projecting a decline to 27.5% [1][19] 3. **Impact of Geopolitical Tensions**: - Acknowledgment of cancellations due to the Chinese government's advisory against traveling to Japan, but management remains optimistic about revenue/earnings impact due to the low travel season in 4Q [2][18] - Potential diversion of travel demand to other destinations like Thailand, Hong Kong, and Korea [18] 4. **AI Integration**: - AI is being leveraged to enhance service quality and automate customer interactions, with current automation rates at 75-80% in mainland China [21] - AI is expected to improve cross-selling predictions, potentially boosting revenue [21] 5. **Market Focus and Competitive Strategy**: - Trip.com will prioritize expansion in Asia over Europe, focusing on under-penetrated markets like Korea and Japan [19][21] - Differentiation from competitors through a focus on local Asian travelers and a one-stop shop model for travel services [21] 6. **Financial Projections**: - Revenue forecasts for FY26E: Rmb 70,907.8 million, with EBITDA of Rmb 22,049.5 million and EPS of Rmb 31.43 [5][16] - Expected EBIT margin improvement for domestic/outbound business by 1.3-1.5 percentage points YoY in FY26E [19] Additional Important Insights - **Travel Booking Volume**: A 30-40% YoY decline in travel booking volume was noted, but management is not overly concerned due to the timing and potential for re-arrangements for upcoming holidays [18] - **Investment in MakeMyTrip**: Trip.com retains a 16.9% stake in MakeMyTrip, expecting synergies from shared travel resources [18] - **Valuation Metrics**: The stock is trading at 17x FY26E P/E, 11x EV/EBITDA, and a 6.3% FCF yield, indicating an undemanding valuation [19] This summary encapsulates the key takeaways from the Trip.com Group conference call, highlighting the company's strategic focus, financial outlook, and market dynamics.