The company's overall Q2 results were in line with expectations. 24Q2 achieved revenue of 4.25 billion yuan, a year-on-year increase of 48.1%, a record quarterly revenue scale; achieved adjusted net profit of 0.66 billion yuan, up 10.9% year on year; adjusted net profit margin was 15.5%, -5.2 pct year on year; realized gross profit was 2.74 billion yuan, up 26.9% year on year; gross margin was 64.6%, -10.8 pct year on year; net profit to mother was 4.34 billion yuan, up 21.9% year on year. The difference in adjusted profit attributable to mother was mainly due to the net exchange loss of 24Q2 being significantly lower than 23Q2.

By business, the core OTA sector has maintained strong growth resilience. The transportation business achieved revenue of 1.74 billion yuan in 24Q2, an increase of 16.6% over the previous year. Among them, air ticket volume increased by nearly 20% year-on-year, outperforming the industry. The revenue from the lodging business reached 1.19 billion yuan, up 12.8% year over year. Among them, the number of nights in hotel rooms increased steadily by 10% year-on-year, indicating that the results of the company's cross-selling strategy are gradually showing. International business maintained high growth, with airline tickets/hotels growing 160%/140% year-on-year respectively, reflecting the progress of international business. Other businesses achieved revenue of 0.59 billion yuan, an increase of 87.3% year over year. Among them, the main contributions come from advertising, Black Whale membership business, and the growth of the hotel business; of these, the number of hotels operating is about 1,900 (24Q1 was more than 1,600), and more than 1,000 are under construction. Judging from the growth rate of stores, it is also in a leading position among leading hotel groups.

The number of paying users is generally stable, and customer consumption frequency/monetization rate supports growth. As of 24Q2, Tongcheng had 0.23 billion paying users in the past year. The per capita consumption frequency increased from 6.6 times in the same period of the previous year to 8.1 times, and the number of service users reached 1.86 billion yuan, an increase of 29.9% over the previous year; it achieved GMV of 623 billion yuan, a year-on-year growth rate of 4.4%, and the average number of monthly paying users reached 42.5 million, an increase of 0.7% over the previous year. Judging from the fact that the GMV growth rate is higher than the MPU growth rate, the company's logic of improving ARPU through integrated marketing and cross-selling strategies has been verified. The increase in the consumption frequency of paying users has supported GMV's growth; at the same time, the increase in OTA business revenue growth higher than GMV also reflects the positive effects of increasing the monetization rate.

Investment advice: Tongcheng continues to cultivate mass market and WeChat traffic. Through excellent operation, service and innovation capabilities, Tongcheng continues to attract new users and increase payment rates to provide impetus for the company's development. At the same time, Tongcheng has penetrated the industrial chain through mergers and acquisitions to improve the layout of sectors such as accommodation, vacation and outbound travel, thereby deepening the company's competitive advantage and voice. Considering the slowing growth in the number of paying users, we lowered the company's profit forecast. We expect the company's net profit to be 2.008 billion yuan, 2.307 billion yuan, and 2.567 billion yuan respectively in 2024-2026. The corresponding PE is 14x/13x/11x, respectively, maintaining the “recommended” rating.

Risk warning: industry competition risk, policy risk, risk of macroeconomic recovery falling short of expectations.