Investment Rating - The report maintains a "Buy" rating for the company, with a market price of HKD 21.42 and a sector rating of "Outperform" [1][3]. Core Insights - The company's core OTA (Online Travel Agency) business shows steady growth, with a revenue of RMB 4.669 billion in Q2 2025, representing a year-on-year increase of 10.0%. The adjusted net profit reached RMB 775 million, up 18.0% year-on-year. The report emphasizes the company's significant long-term competitive advantages [3][5][8]. Summary by Sections Financial Performance - In Q2 2025, the company achieved a revenue of RMB 4.669 billion, with an adjusted EBITDA of RMB 1.185 billion, reflecting a year-on-year growth of 29.7%. The adjusted net profit was RMB 775 million, up 18.0% year-on-year. The core OTA business generated revenue of RMB 4.01 billion, a 13.7% increase year-on-year [3][8]. - The company's gross margin stood at 65.0%, an increase of 0.4 percentage points year-on-year. Cost optimization led to improved profit margins, with the OTA operating profit margin at 26.7%, up 2.4 percentage points year-on-year [8]. Business Segments - Revenue from the accommodation, transportation ticketing, vacation, and other segments in Q2 2025 was RMB 1.37 billion, RMB 1.88 billion, RMB 660 million, and RMB 760 million, respectively. The transportation segment saw a nearly 30% year-on-year increase in international ticket volume [8]. Market Outlook - The domestic travel market remains robust, with cross-border travel continuing to grow. The company is well-positioned to benefit from the industry's growth in lower-tier markets and is actively expanding its business [5][8]. - The report projects the company's net profit for 2025-2027 to be RMB 2.707 billion, RMB 3.369 billion, and RMB 4.082 billion, with corresponding P/E ratios of 17.0, 13.7, and 11.3 times [5][7].

Core Insights - The company reported a revenue of 4.669 billion yuan in Q2 2025, representing a year-on-year increase of 10.0% [1] - Adjusted EBITDA for Q2 was 1.185 billion yuan, up 29.7% year-on-year [1] - Adjusted net profit reached 775 million yuan in Q2, reflecting an 18.0% increase year-on-year, with a net profit margin of 16.6% compared to 15.5% in the same period last year [1] Revenue Performance - The core OTA business showed steady growth, with significant contributions from hotel management [1] - Accommodation revenue in Q2 was 1.371 billion yuan (+15.2%), transportation revenue was 1.881 billion yuan (+7.9%), and other revenue was 755 million yuan (+27.5%), while vacation revenue decreased to 662 million yuan (-8.0%) [1] - The accommodation booking business was the main growth driver, benefiting from a rebound in average industry room rates and a shift towards higher-quality products [1] Profitability and Cost Management - The company’s profitability is on an upward trajectory, with continuous improvement in profit margins [2] - Excluding stock-based compensation, the sales cost rate, service development cost rate, sales expense rate, and administrative expense rate decreased year-on-year by 0.4, 0.5, 2.3, and 0.1 percentage points respectively [2] - The adjusted net profit margin reached 16.6%, an increase of 1.1 percentage points year-on-year, driven by improved sales ROI and marketing efficiency [2] Market Outlook - The travel industry is expected to have long-term growth potential as consumers seek unique experiences [3] - The company has a strong foundation in the OTA business, with a solid user base, supply chain capabilities, and service efficiency [3] - The company is projected to achieve revenues of 19.685 billion, 22.668 billion, and 26.018 billion yuan from 2025 to 2027, with adjusted net profits of 3.338 billion, 3.920 billion, and 4.615 billion yuan respectively [3]

Core Viewpoint - The company demonstrated robust revenue growth in Q2 2025, with adjusted net profit increasing by over 18% year-on-year, indicating a focus on profitability and operational efficiency [1][2]. Revenue Performance - Q2 revenue reached 4.669 billion yuan, a 10.0% increase year-on-year, while the net profit attributable to shareholders was 642 million yuan, up 48.0% [1]. - The OTA segment saw a revenue increase of 13.7%, with an operating profit margin (OPM) of 24.7%, reflecting a 2.4 percentage point improvement [1]. - The company experienced a strategic contraction in packaged business due to demand pressures in Southeast Asia, resulting in an 8.0% decline in revenue from this segment, but maintaining a positive profit contribution [1][2]. User and ARPU Growth - The company achieved a healthy increase in paid users and Average Revenue Per User (ARPU), with cumulative paid users reaching 250 million, a 10.2% increase, and ARPU at 72.2 yuan, up 13.9% [2]. Profitability and Cost Management - The gross profit margin improved by 0.4 percentage points in Q2, driven by enhanced monetization rates in the OTA business and efficiencies gained through generative AI [2]. - The sales expense ratio decreased by 2.4 percentage points, indicating a focus on balancing marketing investment returns, with expectations of breakeven in international business by 2025 [2][3]. - R&D and management expense ratios also saw a decline, with management projecting an overall increase in core business profit margins for the year [2]. Strategic Focus and Industry Positioning - The management emphasized the importance of the OTA core strategy, aiming to capitalize on domestic consumption trends while enhancing international business monetization and cross-selling opportunities [3]. - The company has positioned itself among the top 10 hotel management companies in China, with over 2,700 hotels operational and a target of 3,000 by year-end [3]. - Recent acquisitions, including a proposed 2.49 billion yuan purchase of Wanda Hotel Management, are expected to strengthen the company's market position and operational synergies [3].

Investment Rating - The report maintains a "Buy" rating for the company [2][9]. Core Insights - In Q2 2025, the company achieved revenue of 4.669 billion yuan, a year-on-year increase of 10.0%, and an adjusted net profit of 775 million yuan, up 18.0% year-on-year. The adjusted net profit margin improved to 16.6% from 15.5% in the same period last year [2][6]. - The company's core OTA business is experiencing steady growth, with significant contributions from hotel management. In Q2, accommodation revenue reached 1.371 billion yuan (+15.2%), transportation revenue was 1.881 billion yuan (+7.9%), and other revenue was 755 million yuan (+27.5%) [6][9]. - The company is expected to see revenue growth of 19.685 billion yuan, 22.668 billion yuan, and 26.018 billion yuan for the years 2025 to 2027, with adjusted net profits of 3.338 billion yuan, 3.920 billion yuan, and 4.615 billion yuan respectively, corresponding to a current PE of 13, 11, and 9 times [2][6]. Summary by Sections Revenue Performance - The company's core OTA business is growing steadily, with accommodation bookings benefiting from a recovery in average room rates and a shift towards higher-quality products. The platform's average daily rate (ADR) has shown positive growth, and the proportion of bookings for three-star hotels has increased by 4 percentage points year-on-year [6][9]. - The hotel management business is emerging as a significant growth driver, with over 2,700 hotels in operation and more than 1,500 in preparation. Q2 revenue growth for this segment exceeded 60%, contributing 25% to other business revenues [6][9]. Profitability - The company's profitability is on an upward trajectory, with the adjusted net profit margin reaching 16.6%, an increase of 1.1 percentage points year-on-year. This improvement is attributed to optimized sales costs and enhanced marketing efficiency [6][9]. - The report highlights that the company is well-positioned to continue improving its profit margins, supported by rising average revenue per user (ARPU) and operational efficiency [6][9]. Market Outlook - The travel industry is expected to maintain long-term growth potential as consumers increasingly seek unique experiences. The company has established a strong competitive moat through its user base, supply chain capabilities, and service efficiency [2][6]. - The report anticipates that the company's marketing strategies and refined subsidies will further enhance profitability, with room for improvement in sales expense ratios and take rates [2][6].

Investment Rating - The investment rating for the company is "Outperform the Market" [6][16]. Core Insights - The company has demonstrated steady revenue growth with a year-on-year adjusted net profit increase of over 18% in Q2 2025. Revenue reached 4.669 billion yuan, up 10.0%, and net profit attributable to shareholders was 642 million yuan, up 48.0% [1][9]. - The company is focusing on optimizing profit margins and enhancing user value, with a significant increase in paid users and ARPU (Average Revenue Per User). The total number of paid users reached 250 million, a 10.2% increase year-on-year, and ARPU increased by 13.9% to 72.2 yuan [2][10]. - The management emphasizes the core OTA (Online Travel Agency) business strategy while extending its industry chain layout, aiming to increase the number of hotels under management to 3,000 by the end of the year [3][15]. Revenue Summary - The revenue structure is showing significant upgrades, with international and hotel management sectors experiencing notable growth. Transportation, accommodation, and other businesses grew by 7.9%, 15.2%, and 27.5% year-on-year, respectively [2][10]. - International flight ticket volume increased by nearly 30%, now accounting for over 6% of total transportation revenue, reflecting a shift towards higher-quality hotel accommodations [2][10]. Profitability Summary - The company's gross margin improved by 0.4 percentage points in Q2, driven by enhanced monetization rates in the OTA business and efficiency gains from generative AI reducing customer service processing times [11]. - The sales expense ratio decreased by 2.4 percentage points year-on-year, indicating a focus on balancing marketing investment returns [11][12]. Financial Forecasts - The adjusted net profit forecasts for 2025-2027 have been revised upwards to 3.371 billion, 3.933 billion, and 4.530 billion yuan, respectively, reflecting a positive outlook on profitability and user growth [4][16]. - The projected revenue for 2025 is 19.598 billion yuan, with a year-on-year growth rate of 13.0% [5][18].

Group 1: Company Overview - The report highlights that Tongcheng Travel's Q1 profits exceeded expectations by 8%, attributed to a cautious subsidy and investment strategy, with OTA business profit margins increasing by 7 percentage points year-on-year [1] - The expected revenue growth for the OTA segment in Q2 is projected at 14% year-on-year, with profit margins continuing to show an upward trend [1] - Domestic hotel night stays are expected to see a high single-digit growth year-on-year, with Average Daily Rate (ADR) turning positive and reduced subsidy rates driving revenue growth [1] Group 2: Financial Projections - The report has slightly adjusted its forecasts while maintaining a target price of HKD 25.50, indicating a potential upside of 24.4% from the current closing price of HKD 20.50 [1] - The main drivers for revenue growth in the second half of the year are anticipated to be the increase in night stays and ADR [1] - The vacation business has seen a decline in revenue due to strategic adjustments, but this has had a minimal impact on overall profits [1]