China Online Travel Agencies_ 3Q24 Preview and Golden Week Travel Update

Summary of Conference Call Transcript Industry Overview - Industry: China Online Travel Agencies (OTAs) - Date: October 13, 2024 - Key Focus: 3Q24 Preview and Golden Week Travel Update Core Insights and Arguments - Travel Demand Resilience: The travel demand in China remains resilient, with expectations for continued growth in the OTA sector. The guidance for 3Q24 is on track, with an optimistic outlook for potential consumption recovery [2][5] - Golden Week Performance: Domestic tourists and receipts increased by 5.9% and 6.3% YoY, respectively. Daily air passenger volume rose by 11% YoY, indicating a high single-digit percentage growth in domestic air volume [2][3] - Outbound Travel Recovery: The National Immigration Administration reported a 26% YoY growth in daily average visitors, driven by a 33% increase in mainland tourists. International flight recovery is at 84% compared to 2019 levels, with Southeast/East Asia accounting for approximately 77% of total flight volume [3] Financial Projections for 3Q24 - Trip.com Group (TCOM): - Expected revenue growth of 13% YoY - Non-GAAP operating profit growth of 21% - Outbound volume growth projected at 40-50% (110-120% vs. 2019) [4][9] - Tongcheng Travel Holdings: - Forecasted core OTA revenue growth of 20% - Non-IFRS adjusted profit growth of 37% [4][9] Valuation and Price Target Adjustments - Price Target Increases: - TCOM's price target raised from US$61 to US$73 - Tongcheng's price target increased from HK$18 to HK$24 - Valuation Metrics: TCOM and Tongcheng are trading at 15x and 12x 2025 estimated P/Es, respectively, which are considered attractive compared to the internet average NTM P/E of approximately 16x [5][6] Additional Insights - Cost Control and Margin Trends: Leading OTAs are maintaining stringent cost control, contributing to a sustainable upward trend in margins. The upcoming easy YoY comparisons are expected to support the delivery of consensus forecasts [5] - Policy Impact: While no significant direct consumption stimulus from the central government is anticipated, small-scale coupon initiatives from local governments may boost consumption recovery over time [5] Key Performance Indicators (KPIs) - Accommodation Reservations: Expected to grow by 22% YoY in 3Q24 - Transportation Ticketing: Anticipated growth of 3% YoY - Gross Revenue: Projected to reach Rmb 15.6 billion, reflecting a 13% YoY increase [11] This summary encapsulates the key points from the conference call, highlighting the optimistic outlook for the OTA industry in China, financial projections for major players, and adjustments in valuation metrics.