Everbright released a research report stating that it maintains a "Buy" rating for TONGCHENGTRAVEL (00780), basically maintaining the company's revenue projections for 2024-2026 to be 17.263, 20.195, and 23.134 billion yuan respectively, and adjusted net income attributable to the parent company to be 2.74, 3.252, and 3.872 billion yuan.

The main points of view of Everbright Securities are as follows:

Q3 2024 performance maintains high growth, with core OTA profit margin improving:

In the third quarter of 2024, the company's revenue was 4.991 billion yuan, a year-on-year increase of 51%; achieving an adjusted net income of 0.91 billion yuan, a year-on-year increase of 46.6%; both revenue and adjusted net income exceeded the company's previous guidance. Core OTA revenue reached 4.013 billion yuan, a year-on-year increase of 22%; vacation business revenue reached 0.979 billion yuan, a quarter-on-quarter increase of 36%, also exceeding the company's previous guidance. The company's adjusted net income margin in Q3 2024 increased by 2.7 percentage points to 18.2%; core OTA profit margin reached 31.3%, an increase of 5.9 basis points year-on-year and 6.8 percentage points quarter-on-quarter.

The increase in profit margin is mainly due to: 1) the Lodging Sector narrowed user subsidies, driving up hotel net

take

rate levels; 2) optimizing international business investment strategy, focusing on revenue management and more precise pricing strategies, which weakened the negative impact of international business on profit margins; 3) adjusting the focus of sales expenses on user placements, optimizing subsidies for existing customers on WeChat. In Q3 2024, the company's sales expense rate reached 29.4%, a year-on-year decrease of 9.1 percentage points and a quarter-on-quarter decrease of 6.0 percentage points. 4) The vacation business achieved break-even in Q3 2024, with a profit margin of 2.4%, reducing the drag on profit.

User value has significantly improved, accelerating the expansion of new traffic and international business:

Since 2023, the company has continuously delved into user value, achieving good results: 1) In Q3 2024, the average monthly paid users of the company reached 46.4 million, a year-on-year increase of 5%; 2) As of the end of September 2024, the company's user purchase frequency exceeds 8 times per year, compared to about 5.5 times in 2019; 3) The ARPU in Q3 2024 grew to about 70 yuan, a year-on-year increase of 53%; 4) The GMV realization rate in Q3 2024 improved to 6.9%, a year-on-year increase of 2.2 percentage points.

Additionally, the company continues to expand new high-quality traffic through its own app. Before the National Day holiday in 2024, the daily active users of the app exceeded 3 million, setting a new historical high. According to Questmobile, from August 2023 to August 2024, the traffic contribution of the TONGCHENGTRAVEL app increased from 4% to 8%. In terms of international business, the company established an overseas headquarters in Singapore and launched an international travel booking platform—HopeGoo—in mid-2024. Currently, the company’s international business revenue contribution is still low, but it is expected to gradually increase its revenue scale and profitability in the future, expanding its market share in the Global market.

The OTA business is expected to maintain double-digit growth in Q4 2024, with a focus on improving profitability.

In the Lodging Sector, the company's lodging bookings during the National Day holiday in 2024 saw a double-digit year-on-year growth. The bank expects that the net take rate of hotels in Q4 2024 will also increase, and the company's lodging booking revenue in Q4 2024 is expected to maintain a double-digit year-on-year growth.

In the Transportation Sector: 1) According to the Flight Butler, in October/November 2024, China's civil aviation passenger transport volume increased by 15.2%/15.4% year-on-year, indicating a positive industry trend.

During the National Day holiday in 2024, the company's flight ticket bookings experienced double-digit year-on-year growth, and the company has a rich variety of ancillary products for flight tickets, especially a stable sales rate for Insurance products. The growth in flight ticket bookings is expected to drive sales of ancillary products, thereby boosting flight ticket booking revenue. The bank expects that the company's flight ticket booking revenue in Q4 2024 will also maintain a double-digit year-on-year growth. 2) In terms of train ticket bookings, the company continues to enhance the monetization capability of its train ticket business through the optimization of the Comet system.

In summary, the institution expects the company’s core OTA business revenue in Q4 2024 to maintain double-digit year-on-year growth. Considering the company's change in user strategy, future attention will be focused on the company’s progress in optimizing cost-effectiveness to enhance user value and drive profitability growth.