According to the Zhitong Finance and Economics APP, Guotai Junan International released a research report stating that it maintains a "buy" rating for Ctrip Group-S (09961), expecting a 16% year-on-year revenue growth in 2025. The domestic advantage on the supply side remains solid, with noticeable increase in average user spending compared to before the pandemic (20% in 3Q24), and the outbound + international OTA business is expected to maintain high growth. It is anticipated that there is still room for improvement in operational efficiency with AI, and adjusted net income is expected to remain above 30%. The target price is raised to 571 Hong Kong dollars.

The main points of Guojing International are as follows:

Net income exceeds expectations:

3Q24 net revenue was 15.9 billion yuan, an increase of 16% year-on-year/24% quarter-on-quarter, slightly exceeding the bank/market expectations of 1%/2%. Accommodation bookings increased by 22% year-on-year, while transportation ticket revenue increased by 5% year-on-year, contributing 43% and 36% of total revenue respectively, with a net incremental revenue contribution of 56% and 13%. Gross profit increased by 16% year-on-year, with gross margin stable at 82%; operating profit increased by 28% year-on-year, benefiting from effective cost control, where R&D/administrative expenses increased by 2% year-on-year, and marketing expenses increased by 23% year-on-year, aligning with the overseas market expansion. The three expenses as a percentage of income decreased by 3 percentage points year-on-year. Adjusted net profit attributable to equity holders was 5.96 billion yuan, a 22% year-on-year increase, surpassing the bank/market expectations of 4.3 billion yuan/4.8 billion yuan by 40%/25%.

Business segment highlights:

1) Lodging reservations: The year-on-year decline in ADR for domestic hotels narrowed to single digits (compared to a decline of over 10% in the second quarter), with a 6%-7% year-on-year increase in the number of hotels supplied on Ctrip's domestic platform, continuing the growth trend and strengthening the supply-side advantage; 2) Transportation ticketing: Revenue growth accelerated significantly compared to the previous two quarters; 3) Tourist vacation revenue was 1.56 billion yuan, an increase of 17% year-on-year/52% quarter-on-quarter, recovering to 95% of 3Q19, with outbound package tour revenue increasing by over 100% year-on-year; 4) Business travel management revenue was 0.66 billion yuan, an increase of 11% year-on-year/4% quarter-on-quarter, with a continuous growth in customer numbers.

International business maintains high growth rate:

1) Outbound travel: Hotel and flight bookings for outbound travel increased by 20% compared to the same period in 2019, with international civil aviation passenger volume recovering to 93% of 3Q19 levels. 2) Pure overseas: Hotel and flight bookings on the international OTA platform Trip.com increased by over 60% year-on-year, with the Asia-Pacific region accounting for approximately 70% of bookings and stability on a month-on-month basis; inbound travel hotel bookings increased by 100% year-on-year. In terms of revenue structure, the proportion of lodging business revenue has increased to 40%, the cross-selling rate from flights to hotels continues to increase, and the international OTA platform's revenue contributes 9% to the group's total revenue. The bank believes that the gross margin of outbound and pure overseas business is higher, and the increase in revenue share will be a medium- to long-term driver for the group's overall gross margin growth.