Summary of Conference Call Notes Company and Industry Overview - **Company**: Tongcheng Travel Holdings (0780.HK) - **Industry**: China Internet and Other Services Key Points and Arguments 1. **Investment in Dalian Sunasia Tourism**: Tongcheng's subsidiary will subscribe to a private placement at Rmb24.75 per share, totaling Rmb956 million, acquiring 23% of Sunasia's stakes and 31% voting power, making Tongcheng the final controller [1][2] 2. **Financial Performance of Sunasia**: Sunasia has operated at a net loss for the past two years due to asset impairment but was slightly profitable when excluding that impairment [2] 3. **Market Reaction**: Following the announcement, Tongcheng's share price declined by 11%, resulting in a market cap decrease of Rmb5.5 billion [2] 4. **Concerns on M&A Strategy**: The investment in a not very profitable, asset-heavy state-owned enterprise (SOE) raises concerns regarding Tongcheng's M&A strategy [2] 5. **Stock Rating and Price Target**: Morgan Stanley rates Tongcheng as "Overweight" with a price target of HK$27.00, indicating a potential upside of 33% from the closing price of HK$20.35 on July 28, 2025 [4] 6. **Financial Projections**: - **Revenue Growth**: Expected revenue growth from Rmb17,341 million in FY 2024 to Rmb22,736 million by FY 2027 [4] - **Net Income**: Projected net income growth from Rmb2,785 million in FY 2024 to Rmb4,199 million by FY 2027 [4] - **EPS Growth**: EPS expected to increase from Rmb1.22 in FY 2024 to Rmb1.78 by FY 2027 [4] 7. **Valuation Metrics**: - **P/E Ratio**: Expected to decrease from 14.1 in FY 2024 to 10.4 by FY 2027 [4] - **ROE**: Projected to improve from 11.2% in FY 2024 to 14.9% by FY 2027 [4] 8. **Risks Identified**: - **Upside Risks**: Strong pent-up demand and moderating competition in lower-tier cities could lead to margin upside [7] - **Downside Risks**: Softer macroeconomic growth in China and intensifying competition in lower-tier cities could negatively impact price-sensitive users [7] Additional Important Information - **Market Capitalization**: Current market cap is Rmb42,576 million [4] - **Average Daily Trading Value**: Approximately HK$242 million [4] - **WACC and Growth Assumptions**: WACC is set at 11.5% with a terminal growth rate of 3%, aligned with long-term GDP growth targets [6] This summary encapsulates the critical insights from the conference call, highlighting the strategic investment by Tongcheng, its financial outlook, and the associated risks and market reactions.