With a steady recovery in industry demand, we expect the company's second-quarter revenue to increase 48% year over year to RMB 4.25 billion, which is basically in line with our previous expectations. Among them, we expect accommodation revenue to increase 14% year over year, transportation ticket revenue to increase 16% year over year, and vacation business revenue to reach 0.72 billion yuan. Due to the low profit margin of the vacation business and the company's increased investment in overseas business, we expect the adjusted net profit for the second quarter to increase 4.1% year on year to 0.62 billion yuan, and the adjusted net interest rate will drop 6.2 pp to 14.5% year on year. As the high base effect subsides, we expect the company's core OTA growth rate in the second half of the year to be faster than in the first half of the year.
Demand for summer travel remains strong. According to the Civil Aviation Administration's forecast, total summer passenger traffic is expected to reach 0.133 billion passengers, an increase of 10% over 2019. Demand for outbound travel is strong, international route capacity has increased markedly, and the international hotel supply chain has basically returned to 2019 levels. According to big data on air travel, inbound and outbound passenger traffic increased by about 70% year-on-year in the first half of the summer travel season. With rapid improvements on the supply side, the average price of air tickets and hotels declined year on year and gradually returned to normal. This also helped to stimulate travel demand and facilitate the sustainable growth of the industry.
Taking into account recent changes in the industry average valuation, we adjusted the target price to HK$18, corresponding to the 2024E/2025E 15x/12x price-earnings ratio. We are optimistic that the company will benefit from increased demand in the industry and maintain a “buy” rating.
Investment risks: Macro uncertainty; increased industry competition; new business development falls short of expectations.