Key points of investment
Different from the market: The market is worried that the price of hotel tickets in the travel sector will be under pressure in 2024, while the entry of local lifestyle players such as Meituan and Douyin will increase competition, which will have an impact on Ctrip's revenue. However, we believe that Ctrip has high user stickiness, strong consumption capacity, deep supply-side inventory, rich cross-product offerings, large customer service investment, and misplaced competition with other OTA platforms. Overseas division, outbound travel is rapidly recovering, and Trip's localized service advantages are obvious; with pure overseas distribution, TRIP is diverted through transportation services, and the hotel's relatively low commission rate enhances customer acquisition, and the overseas business growth rate is expected to be significantly faster than domestic business.
At the industry level: Tourism demand is recovering strongly, the OTA business model is excellent, and demand for leisure is recovering at an accelerated pace. According to the Ministry of Culture and Tourism, travel revenue will surpass 2019, the number of outbound travelers will return to more than 80%, and the recovery of outbound travel will accelerate; the online penetration rate of the global travel market will continue to increase, and is expected to rise further to 76% in 2027. In the industrial chain, as a bridge between consumers and non-standard supply, OTA has strong upstream and downstream bargaining power, and is relatively asset-light and profitable. After the industry landscape experienced price wars and capital consolidation, the competitive situation was relatively stable, leading platforms were misplaced and stratified, and the influence of new entrants weakened.
Company level: Laying out a comprehensive business matrix to meet customer needs in one stop, Ctrip has established solid barriers in the process of growth and capital integration, which is mainly reflected in: 1) a high-quality, high-stickiness, price-insensitive customer base; 2) the inventory resources and supply chain completeness of high-star hotels; 3) a well-developed membership system, stronger black diamond consumption capacity, and a complete customer service system. Under the trend of recovery in travel, Ctrip is expected to reach more consumers through diversified products, the offline cities and user age groups will continue to expand, and the domestic business will continue to grow steadily.
Overseas business will become the company's next growth pole: the outbound business will still be in a period of rapid recovery. Ctrip's services are relatively localized, and overseas hotels adopt a low-takerate strategy, compounding the shift in demand from the original relatively high-quality customer base. It is expected that Ctrip's outbound travel business will recover better than the industry. In terms of pure overseas business, Trip.com targets the international market and is growing rapidly in the Asia-Pacific region. Ctrip's acquisition of Skyscanner was diverted to Trip through the airline ticket search business, and the transport+hotel model is expected to continue to gain share. In terms of inbound travel, Ctrip's high line resources matching and supply chain improvement will continue to contribute to increased performance.
Profit forecasting and valuation
We expect the company to achieve revenue of 52.5/60.3/68.5 billion yuan in 2024-2026, +18.0%/+14.8%/+13.7% YoY net profit of 12.285/14.879/17.164 billion yuan, +23.87%/+21.12%/+15.36% year-on-year, corresponding to PE 17X/14X/12X, with initial coverage and a “buy” rating.
Risk warning
Consumption recovery falls short of expectations; industry competition intensifies; overseas demand falls short of expectations risk.