Incident: On February 22, 2024, Ctrip Group (9961.HK/TCOM) announced unaudited results for the fourth quarter and full year of 2023, with 23Q4 net revenue of 10.3 billion yuan, yoy +105% (over Bloomberg's agreed estimate of 10.2 billion yuan); Q4 net profit of 1.3 billion yuan, compared to 2.1 billion yuan for the same period last year; Q4 Non-Gaap net profit of 2.7 billion yuan, compared with 498 million yuan for the same period last year. Net income for the full year of 2023 was 44.5 billion yuan, yoy +122%; net profit due to mother in 2023 was 9.9 billion yuan, compared to 1.4 billion yuan in the previous year; non-Gaap net profit was 13.1 billion yuan, compared to 1.3 billion yuan last year.
Various businesses grew strongly in the fourth quarter, and cost control was good. 1) Snow and ice tourism is popular in Q4, and Ctrip has maintained good growth during the off-season of traditional tourism. By business, Q4 accommodation revenue was 3.9 billion yuan, yoy +131%; transportation business revenue was 4.1 billion yuan, yoy +86%; vacation business was 704 million yuan, yoy +329%; business travel revenue was 634 million yuan, yoy +129%. 2) The gross margin on the cost side recovered significantly, with good control of other costs. The Q4 gross profit margin was 80.5%, yoy+4.4pct, in a reasonable range, recovering from the impact of COVID-19 in the past; R&D expense ratio (including share remuneration, sales expenses and management expenses) 28.2%, yoy-13.6pct; sales expense ratio 22.6%, yoy-0.2pct; management expense ratio 8.4%, yoy-7.8pct.
In terms of business data: Domestic bookings have recovered strongly, outbound recovery is faster than the industry, and international business is booming.
1) Ctrip Q4 domestic hotel bookings increased by more than 130% year over year. 2) In Q4, outbound hotel and air ticket reservations recovered to more than 80% of the same period in 2019, faster than 20% of the industry (industry air passenger traffic recovered to 60%).
3) Total bookings on Q4's international OTA platform increased by more than 70% year on year and doubled compared to 2019; the international platform has strong momentum, and the average number of daily visits from overseas users increased more than 5 times year on year in 2023.
Announcing a new return plan to continue to give back to shareholders: From September 2023 to the announcement date (February 22, 2024), the company has repurchased US$224 million; at the same time, the board of directors approved and authorized the company to implement strategic capital return plans totaling no more than US$300 million from time to time, including annual stock repurchases, annual cash dividend declarations, or a combination of the two; the company's repurchase quota was further increased to US$581 million.
Raise the strategic height of globalization: The company further enhances the strategic height of globalization. As mentioned in the financial report, it aims to become a leader in the Asian market and global market within the next 3-5 years. It is expected that Trip.com (Ctrip International Platform) will contribute 15% to 20% of Ctrip Group's total revenue over the next 3-5 years, with a compound annual growth rate of medium to high double digits.
Investment advice: We believe that the Ctrip brand has strong advantages, and the domestic travel business is expected to continue to recover in 2024. At the same time, the company's global layout is also expected to further enhance the company's performance growth. We are optimistic about the company's development in 2024, raise its 2024 performance, and add a profit forecast for 2026. The company's net profit for 2024-2026 is expected to be RMB 11.10 billion, RMB 13.292 billion, RMB 15.844 billion, EPS is 16.11 yuan and 19.45 billion yuan respectively Yuan and 23.18 yuan, corresponding to the closing price of February 23 PE were 21 times, 17 times, and 15 times respectively, maintaining the “recommended” rating.
Risk warning: 1) The recovery in travel consumption falls short of expectations; 2) the risk of increased external competition; 3) the risk of industry policy changes; 4) the risk of falling commission rates; 5) the impact of major negative events.