维持“增持”评级。维持公司24/25/26 年经调整归母净利润27.15/32.91/40.26 亿元人民币（下同），给予2024 年行业平均20xPE估值，上调目标市值至543 亿元人民币，对应591 亿港元，上调目标价至25.97 元港币，增持。Introduction to this report:
The 24Q1 performance was in line with expectations. Increased investment in international business had an impact on core OTA profit margins, and continued to benefit from the increase in domestic and low-tier travel sentiment.
Summary:
Maintain an “Overweight” rating. Maintaining the adjusted net profit of RMB 27.15/32.91/4 026 billion for 24/25/26 (same below), giving the industry an average valuation of 20xPE in 2024, raising the target market value to RMB 54.3 billion, corresponding to HK$59.1 billion, and increasing the target price to HK$25.97 billion.
Performance summary: The company's 24Q1 revenue was 38.66 billion/+49.50%, adjusted EBITDA of 820 million/ +12%, and adjusted net profit of 558 million/ +10.90%. Among them, core OTA business revenue was 3.203 billion/+23.8%, and operating profit was 724 million/+6.6%.
Revenue results were all in line with expectations, and investment in international business increased. ① The core OTA business's investment in international business (outbound air tickets and hotels), in exchange for a high increase in revenue, also has a certain impact on profit margins. Therefore, during the investment period of new business, the revenue growth rate was faster than the growth rate of performance. ② Tongcheng expects overall 24Q2 revenue to be +47-52%, with core OTA growth of +20-25%. It shows that in the process of developing travel habits of users in the sinking market, the increase in penetration rate and increase in ARPU value will continue to drive the platform's revenue growth rate to outperform the market. ③ Due to the impact of travel agency business consolidation, gross margin decreased by 65% /-10pct, while R&D expense ratio -3.3pct, sales expense ratio -2.0%, and management expense ratio -0.6pct was disrupted by travel agency consolidation, and comparability decreased.
The logic of benefiting from the domestic and low-tier travel boom remains unchanged. ① Improving ARPU and repurchasing through operation after the upgrade is the main contradiction of Tongcheng at present. It also tests the company's ability to operate and convert users. The continuous increase in the company's ARPU value indicates that the above process is progressing steadily. ② The channel-side pattern of the outbound business has improved. The main participants are only Ctrip and Flying Pig (Flying Pig contraction), and outbound demand is recovering rapidly. Therefore, it is logical to explore the outbound flight+hotel business at this time. ③ However, unlike Ctrip, whose mentality is mature when leaving the country can benefit without investment, Tongcheng still needs to invest in subsidies to establish mentality, which has indeed led to a high rate of income growth. ④ Tongcheng's logic as a low-tier city and domestic travel consumption still holds true at this stage. It is a direct beneficiary of the current boom in tourism policies and service consumption.
Risk warning: Macroeconomic fluctuations have impacted domestic travel and business travel demand; new Internet platform leaders are entering competition and intensifying; and the progress of the transformation of existing user operations falls short of expectations.