Key points of investment
Incident: In 23Q4, Ctrip achieved net revenue of 10.3 billion yuan, up 105% year on year; adjusted net profit was 2,675 billion yuan, up 437.1% year on year. Throughout 2023, the company achieved net operating income of 44.5 billion yuan, an increase of 122% over the previous year; adjusted net profit of 13.07 billion yuan, an increase of 910% over the previous year.
Domestic and international travel demand continues to grow strongly, and the outbound business is expected to continue to drive growth in '24.
In 23Q4, benefiting from the increase in travel demand driven by snow and ice tours, domestic hotel reservations increased by more than 130% year on year. Based on the company's international supply chain layout and service capabilities, the company's inbound and outbound business recovery achieved growth beyond the industry; in 23Q4, the company's outbound hotel and air ticket reservations returned to more than 80% of the same period before the 2019 epidemic. Compared with that, passenger traffic in the international aviation industry recovered to 60%.
In the future, with the gradual facilitation of visa applications and the resumption of flight volume, we expect the company's outbound travel business to drive performance growth in '24.
International business continues to advance, and revenue contribution is expected to increase in the long term. In terms of global layout, as of 23Q4, Ctrip's international OTA platform has been operating in 39 countries and regions in Asia, Europe and America; in 23Q4, total bookings for the company's international OTA platform increased by more than 70% over the same period last year. The focus of the company's global business remains to promote organic growth in the medium to long term. It is estimated that in the next three to five years, the international OTA platform Trip.com will contribute 15% to 20% of the group's total revenue.
Increased profit margins are mainly due to improved marketing efficiency, and capital return plans boost confidence. In 23Q4, the company's marketing/management/R&D expenses rate was 22.6%/8.4%/28.2%, respectively, with a year-on-year change of -0.2/-7.8/-13.6pct. On the marketing cost side, the company enhances conversion rates and cross-selling, and invests in content generation, thereby improving marketing efficiency. In 23Q4, the company achieved a non-GAAP net interest rate of 25.9%, an increase of 16 pcts over the same period last year. Additionally, the Board of Directors has approved the 2024 Capital Return Plan, further increasing the total return to $580 million, which is expected to boost market confidence.
Profit forecast and investment rating: As a leader in the OTA field, domestic business demand is growing strongly, and the recovery of outbound travel and overseas market expansion are expected to contribute to the increase. We raised the adjusted net profit of the company in 2024-2025 from 123.0/14.08 billion yuan to 135.7/16.21 billion yuan, up 4%/19% year on year respectively. The adjusted net profit for 2026 is expected to be 17.73 billion yuan, an increase of 9% year on year, maintaining the “buy” rating.
Risk warning: Cross-border business supply recovery falls short of expectations, competition intensifies risks, macroeconomic and political risks