The company's recent situation
Recently, we invited Ctrip management to conduct a non-transactional roadshow with investors after the 4Q23 results. The company shared the recent business recovery situation and prospects for long-term business development.
reviews
Driven by lodging revenue, we expect domestic revenue to continue to grow faster than the industry in 1Q24. 1) Accommodation:
According to STR, the hotel industry OCC increased 10% year on year from January to early February. Considering the continuous increase in the online hotel reservation rate, we expect the company's 1Q24 domestic hotel reservation volume to increase 16%, and ADR and commission rates to be relatively flat year over year; 2) Transportation: We expect 1Q24's domestic air ticket volume to be basically the same as the industry; considering that VAS revenue is on a high base for the same period last year, we expect 1Q24 traffic revenue to recover more slowly than volume. Looking ahead to the whole year, we expect domestic revenue growth to slow down in 2Q24 or return to normal in 4Q. The fluctuation trend is similar to that of the industry, with domestic revenue rising by a single digit for the whole year.
2024 Focus on the resumption of outbound business. International business is developing rapidly and profits can be expected. 1) Cross-border: In mid-February, international flight capacity recovered to around 70% of the same period before the epidemic. We expect 1Q24 companies' outbound wine reservations to return to 90% of the same period in 2019. Considering the impact of cross-border ticket price inflation, partly hampered by the recovery in cross-border tour revenue, we expect 1Q24's cross-border revenue to return to more than 80% before the epidemic (corresponding to doubling year-on-year); looking forward to the whole year. According to the Civil Aviation Administration, the international passenger transport market is expected to return to about 80% by the end of 2024. We expect the company's cross-border wine revenue to exceed the same period before the epidemic; 2) International: Currently, the market is paying less attention to international business. We are optimistic about the supply chain collaboration between the company's overseas and outbound teams, as well as the brand advantage of cross-selling Asia-Pacific wine. We expect Trip.com to maintain medium to high double-digit growth in the medium term, and its revenue contribution is expected to increase to 15-20%; on the profit side, considering the expansion of scale and further improvement in marketing efficiency, the company expects that in 2-3 years, Trip.com will achieve break-even.
Raise the long-term growth range and profit margin guidelines. The company expects a compound revenue growth rate of 15-25% over the next 3-5 years. The high-end is higher than the previous guideline of 5ppt, mainly benefiting from the continuous increase in the online rate of domestic hotels, the growth in niche markets such as Yinfa, strong demand for cross-border travel and the increase in the company's market share, and rapid brand penetration in the international market. On the profit side, the company expects long-term steady operating profit margins to be in the 25-30% range, and the increase in commission rates is expected to move closer to the high-end.
Profit forecasting and valuation
We maintain our revenue and earnings forecasts for 2024 and 2025. Maintaining an outperforming industry rating and maintaining the target prices of $58.2 and HK$451.2 (based on the 2024 non-standard price-earnings ratios of 20 times and 20 times for US stocks and Hong Kong stocks). There is 30.9% and 26.5% upside compared to the current stock price, respectively. The company currently trades 15 times and 16 times the 2024 non-standard price-earnings ratio of US stocks and Hong Kong stocks.
risks
Macro consumption is weak, outbound flight capacity recovery falls short of expectations, and visa policies have been tightened.