Bocom Intl issued research reports stating that Ctrip Group (09961) second-quarter revenue met expectations, adjusted net income exceeded expectations, benefiting from economies of scale, optimized cross-selling, increased proportion of high-profit businesses, and profits from affiliated companies exceeded expectations.
The bank slightly adjusted its revenue forecast, based on better-than-expected profits in the second quarter, raising the adjusted net income for 2024 by 7%. It is expected that the pressure on ADR in the second half will marginally improve, the competitive environment will ease, and mainland hotel business revenue will grow compared to the second quarter. It is expected that the annual mainland business revenue will grow by single digits, outbound travel will recover to 90% of 2019 levels, Trip.com will maintain rapid growth. It is expected that the operating profit margin in 2024 will improve by 2 percentage points year-on-year, with increased investment in Trip.com in the second half but expected to be offset by improved operational efficiency in mainland business.
Based on a constant 20 times pe for 2024, the bank maintains a target price of 509 Hong Kong dollars / 66 US dollars (TCOMUS). The demand for mainland hotel bookings remains resilient, with ADR pressure partly offset by subsidies, the company's mainland hotel business growth being driven by volume and outperforming large caps. As the high base of 2023 prices is digested, 2025 is expected to resume healthy growth. There is still around 20% growth potential in outbound business in the medium to long term, international business driving long-term revenue growth, strong double-digit revenue growth certainty for the company in a mild competitive environment, the trend of improving operational efficiency continues, reiterating a buy rating.