Goldman Sachs released a research report stating that it maintains a 'buy' rating on Tongcheng Travel (00780), believing that there is still room for further profit margin improvement. It is forecasted that by 2025 and 2026, Tongcheng's overall EBIT margin can increase to 18% and 18.7%, respectively, with the target price raised from 23.6 Hong Kong dollars to 27 Hong Kong dollars.
The report states that Tongcheng Travel's net income growth accelerated from 11% in the first half of the year to 47% in the third quarter, reaching 0.91 billion RMB, which is 9% and 10% higher than Goldman Sachs' and market expectations, respectively. Strong revenue growth during the period.
Goldman Sachs points out that Tongcheng focuses on improving ROI rather than simply pursuing revenue growth. The target EBITDA margin is expected to rebound by 3 percentage points in the second half of the year. Assuming stable revenue and marketing expenses, a decrease in service development costs, the bank predicts that Tongcheng's net profit for the fourth quarter could reach 0.606 billion RMB, totaling 2.7 billion RMB for the year, a 24% year-on-year growth.
