TONGCHENG TRAVEL HOLDINGS LIMITED(00780.HK)：RESILIENT PERFORMANCE-格隆汇

机构：申万宏源研究
研究员：贾梦迪

　　Tongcheng Travel reported 2Q24 revenue of Rmb4.2bn (+48% YoY) and adjusted net profit of Rmb657m (+11% YoY), in line with our expectations. The company revised down the full-year revenue outlook but lifted margin outlook. We lower our EPS forecast from Rmb1.3 to Rmb1.12 in 24E, from Rmb1.51 to Rmb1.32 in 25E, and from Rmb1.78 to Rmb1.52 in 26E. We lower target price from HK$23 to HK$20, with 49% upside, we maintain Buy rating.
　　Resilient core OTA business. In 2Q24, the company’s core OTA revenue increased by 23% YoY, with accommodation reservation revenue up by 13% YoY and transportation ticketing revenue up by 17% YoY, both reaching record highs.
　　Domestic air ticketing volume grew by nearly 20% YoY, and domestic hotel room nights grew by 10% YoY.
　　Solid growth of outbound travel business. In 2Q24, the company’s average dailyvolume of international air ticketing increased by more than 160% YoY, and international hotel room nights increased by nearly 140% YoY. Outbound travel business contributed c.3% of OTA revenue, and is expected to increase to 10-15% in the next two to three years. The impact of outbound travel business marketing activities on core OTA margin would decrease in 2H24. Outbound travel business is expected to breakeven in 2025, with long-term margin higher than domestic business.
　　Performance Outlook. We expect 3Q24 revenue to grow 46% YoY, with core OTA revenue up 19% YoY, accommodation reservation and transportation ticketing revenue both up 18% YoY, and other revenue up 22% YoY. We expect 3Q24 hotel ADR to grow QoQ but decline by single digits YoY, better than the market, thanks to a large proportion of the hotels being low-star independent hotels. Tongcheng Travel has a flexible organizational structure with a large proportion of its selling and marketing expenses being variable costs and a strong focus on marketing efficiency.
　　The company expects the adjusted net profit margin of its core OTA business in 2H24 to be higher than that in 2019.
　　Maintain Buy. We are optimistic about the long-term structural growth of the online travel industry, and Tongcheng Travel is expected to remain resilient on the top-line thanks to its mass market positioning and continuous expansion of customer acquisition channels, and strategically improve the certainty of bottom-line. We believe the company has relative high certainty in domestic consumption and maintain a Buy rating.
　　Risks. Revenue growth may fall short of expectations. Intensified competition could lead to margin erosion.