Core Viewpoint - The Yunnan Provincial Tourism Homestay Industry Association has initiated collective legal action against online travel platforms (OTAs) like Ctrip for alleged abuse of market dominance, raising concerns about unfair competition practices in the homestay industry [1][4]. Group 1: Allegations Against OTAs - The association has received multiple complaints from its members regarding OTAs using their market power to impose unfair practices, including "choose one from two" clauses, arbitrary commission increases, unfair trading conditions, and traffic blocking [1][4]. - These practices are said to severely infringe on the legitimate rights of homestay operators, disrupt fair market competition, and hinder the healthy development of the industry [1][4]. Group 2: Association's Response and Actions - The association's president, He Shuangquan, emphasized the need for fair competition and criticized the notion that platforms should dictate which apps users must use or force homestays to align with specific platforms [1][4]. - The first step in their action plan involves collecting evidence from affected homestays to support a collective lawsuit to be submitted to the market supervision administration [1][4]. Group 3: Commission and Fee Concerns - He Shuangquan noted that while commissions typically range from 8% to 15%, hidden platform fees can lead to total commission rates as high as 30% to 40%, raising questions about the market and profit space for homestays [1][4]. - The president pointed out that the revenue generated by homestays is often viewed as a source of income for the platforms, resulting in platforms earning more than the service providers themselves, which he described as "blood money" [1][4].

Core Viewpoint - The Yunnan Homestay Association has initiated anti-monopoly legal actions against certain OTA platforms, particularly Ctrip, due to complaints from member units regarding unfair competition practices that harm the homestay industry in Yunnan [1][3]. Group 1: Complaints and Allegations - The association has received multiple complaints from its members about Ctrip and other OTAs using their market dominance to implement unfair practices, including "choose one from two" clauses, arbitrary commission increases, and unfair trading conditions [1][3]. - These practices are said to severely infringe on the legal rights of homestay operators, disrupt fair market competition, and hinder the healthy development of the industry [1][3]. Group 2: Actions Taken - To protect the legal rights of its members and foster a fair business environment, the association's council has approved the initiation of anti-monopoly legal actions [1][3]. - The actions include evidence collection, hiring legal services, and filing collective lawsuits against the offending OTA platforms [1][3]. Group 3: Response from Ctrip - As of the time of reporting, Ctrip has not responded to the allegations made by the Yunnan Homestay Association [2][4].

Investment Rating - The report maintains a "Buy" rating for the company [1][9]. Core Insights - The company reported a revenue of 5.5 billion RMB for Q3 2025, representing a year-over-year increase of 10.4%. The adjusted net profit reached 1.06 billion RMB, up 17% year-over-year, with an adjusted net profit margin of 19.2%, an increase of 1.0 percentage points year-over-year [4][6]. Financial Performance - The core online travel platform achieved a revenue of 4.6 billion RMB in Q3 2025, reflecting a year-over-year growth of 15%, with an operating profit margin of 31.2% [6]. - Revenue from transportation ticketing was 2.2 billion RMB, up 9% year-over-year, driven by user demand insights and enriched value-added services [6]. - Accommodation bookings generated 1.58 billion RMB, also up 15% year-over-year, supported by an increase in high-quality hotel room nights and brand recognition in lower-tier cities [6]. - The vacation business faced a revenue decline of 8% year-over-year, totaling 900 million RMB, primarily due to security issues in Southeast Asia [6]. - The average monthly paying user count reached 47.7 million, a 2.8% increase year-over-year, with a total of 253 million annual paying users, up 8.8% year-over-year [6]. Earnings Forecast and Valuation - The company is projected to benefit from the release of domestic travel demand, increased penetration in lower-tier markets, and international business expansion. Revenue forecasts for 2025-2027 are adjusted to 19.3 billion RMB, 21.9 billion RMB, and 24.5 billion RMB, respectively, with corresponding net profits of 2.9 billion RMB, 3.2 billion RMB, and 3.7 billion RMB [6][8]. - The target market capitalization for 2026 is set at 60.2 billion RMB, with a target price of 28 HKD per share, maintaining the "Buy" rating [7].

Company Overview - Tongcheng Travel is a leading OTA in China's lower-tier markets, benefiting from the tourism boom and backed by major shareholders Tencent and Ctrip, which provide significant traffic and supply chain advantages [1][2] - The company was formed from the merger of Tongcheng and eLong, positioning itself among the top three in the OTA industry [1] Financial Performance - In 2024, the company is expected to achieve revenue of 17.34 billion yuan, a year-on-year increase of 45.8%, and an adjusted net profit of 2.79 billion yuan, up 26.7% year-on-year [1] Industry Dynamics - The online travel market is projected to exceed 1 trillion yuan in 2024, driven by high demand in the cultural tourism sector and low penetration rates in lower-tier cities [1][2] - The current market structure is characterized by one dominant player (Ctrip) and several strong competitors (Tongcheng, Meituan, Fliggy) engaging in differentiated competition [2] Competitive Advantages - The company has over 80% of its users from non-first-tier cities, allowing it to capitalize on the growth potential in lower-tier markets [2] - Deep collaboration with Tencent and Ctrip enhances the company's customer acquisition and supply chain capabilities, providing a competitive edge [2] Future Growth Prospects - The company is actively expanding into hotel management and vacation services, as well as international markets, which are expected to contribute to revenue growth [2] - Projections indicate that the company will achieve net profits of 2.707 billion, 3.369 billion, and 4.082 billion yuan from 2025 to 2027, with corresponding P/E ratios decreasing over the years [2]

Investment Rating - The report assigns a "Buy" rating to the company, with an initial coverage date of July 8, 2025 [1][4]. Core Insights - The company is positioned as a leading player in the domestic OTA market, particularly benefiting from the growth in lower-tier markets and the overall tourism boom. It is backed by major shareholders Tencent and Trip.com, which provide significant advantages in customer acquisition and supply chain resources [4][6][9]. Summary by Sections Company Overview - The company, formed from the merger of Tongcheng and eLong, is a top-tier one-stop travel service platform in China, successfully ranking among the top three in the OTA industry [17]. Shareholding Structure - The company has a concentrated shareholding structure, with major shareholders Tencent and Trip.com holding 24.07% and 20.46% respectively, facilitating deep collaboration in business operations [18][21]. Business Breakdown - The core OTA business includes transportation and accommodation bookings, contributing approximately 50% and 30% of revenue respectively. The company is expanding into hotel management and vacation services, enhancing its competitive edge [23]. Financial Performance - The company has shown strong recovery post-pandemic, with revenues of RMB 11.896 billion in 2023 and projected growth to RMB 19.624 billion by 2025, reflecting a growth rate of 80.7% and 45.8% respectively [8][31]. Adjusted net profit is expected to reach RMB 27.07 billion in 2025 [6]. OTA Industry Insights - The online travel market in China is projected to exceed RMB 1 trillion in 2024, with a significant increase in online transaction rates, indicating a robust recovery and growth potential in the sector [39][46]. Competitive Landscape - The OTA market is characterized by a high concentration of major players, with Trip.com leading the market share. The competitive dynamics are stable, with companies leveraging unique strengths to capture different market segments [49][52]. Pricing Power - The pricing power of the company is influenced by the concentration of upstream resources, particularly in transportation and accommodation sectors, which affects commission rates and overall profitability [56][59].