Trip.com Group Ltd_ China BEST Conference Takeaways

Summary of Trip.com Group Ltd Conference Call Company Overview - Company: Trip.com Group Ltd (Ticker: TCOM.O) - Industry: China Internet and Other Services - Market Cap: US$44.224 billion - Current Share Price: US$64.90 (as of January 8, 2025) - Price Target: US$81.00, representing a 25% upside potential Key Points 1. Operational Performance - 4Q24 operations were on track, with management confident about revenue growth in the teens for 2025, supported by stable domestic hotel Average Daily Rate (ADR), outbound recovery, and market share gains [1][2][4] - Domestic hotel ADR remained flat year-over-year (YoY) in 4Q24, outperforming the industry which saw a low-single-digit decline [2] 2. Revenue Growth Drivers - Management expects stable ADR in 2025 due to slowing hotel supply growth and a continued strong leisure demand, which constitutes 70-80% of total demand [2] - Corporate travel budgets are expected to remain flat in 2025 [2] 3. Air Ticketing and Travel Consumption - Air ticketing volume grew in high single digits YoY in 4Q24, aligning with industry trends, while prices normalized YoY [3] - Despite recent air crash incidents, travel consumption on the platform remains resilient, with increased spending per user in 2024 [3] 4. Outbound Travel Recovery - Outbound travel growth in 2025 is projected to exceed pre-COVID normalized levels, with international air capacity expected to recover to 100% of 2019 levels by year-end 2025 [4] - The company's recovery rate is 120% compared to 2019, significantly outperforming the industry by 35-40 percentage points [4] 5. Market Share and Tour Offerings - Packaged tours have only recovered to 50-60% of pre-COVID levels, but the rise of self-guided tours is helping the company gain market share in both domestic and outbound travel [5] - Trip.com aims to increase revenue without compromising overall profitability, focusing on volume growth with a take rate of 7-8%, compared to global peers at 15-16% [6] 6. Shareholder Returns - Management plans to enhance total shareholder return from the current 20% of free cash flow (FCF) through a combination of buybacks and dividends [7] 7. Financial Projections - Revenue projections for the next fiscal years are as follows: - 2024: Rmb 52.866 billion - 2025: Rmb 60.519 billion - 2026: Rmb 67.792 billion - Expected EPS for 2025 is Rmb 27.02, with a P/E ratio of 15.8 [8] 8. Risks and Challenges - Potential risks include rising competition from domestic players like Tongcheng Travel and Meituan, macroeconomic uncertainties, and FX headwinds that could lower travel demand [13] 9. Valuation Methodology - Key assumptions include a WACC of 10.5%, terminal growth of 3%, and an FX rate of 7.6 [11] Conclusion Trip.com Group Ltd is positioned for growth in 2025, driven by stable domestic performance, a strong recovery in outbound travel, and strategic focus on increasing market share. However, the company faces competitive and macroeconomic challenges that could impact its performance.