2Q24 revenue was generally in line with consistent expectations, and non-standard net profit was significantly higher than agreed expectations
The company announced 2Q results: gross revenue also increased 14% to 12.8 billion yuan, which is basically in line with consistent expectations; non-general standard net profit was 5 billion yuan (net profit margin 39%), which greatly exceeded market expectations by 40%. The main reason was that fee control exceeded expectations, and profit and loss in profits of joint ventures exceeded expectations.
Development trends
Demand for tourism is being released steadily, and Ctrip is quantitatively driven by steady growth, and the competitive landscape is being optimized. 1) Domestic:
Domestic flights increased by more than 15% at night in 2Q, and air ticket volume increased by a single digit, faster than the industry; since summer, even with a high base last year, the company expects its growth rate to be maintained, indicating that the company has competitive strength; 2) Departure: 2Q outbound flights and alcohol reservations have returned to the same period before the epidemic, and the recovery rate is stable 2-3 percent faster than the industry, and outbound group tours have recovered to 50% of the same period before the epidemic; the company expects cross-border demand to improve during the summer, and return to 115% and 120% for the same period before the epidemic, respectively Revenue from group tours has further recovered to 60%. Considering the year-on-year pressure on domestic accommodation and cross-border air ticket prices, and the short-term negative impact of traffic monetization rate adjustments, we expect 3Q revenue to increase by 13%; considering the weakening of the 4Q base effect, we expect 4Q revenue growth to accelerate, and revenue to increase by 18% for the whole year.
Trip.com is expected to maintain medium to high double-digit growth. 2Q Trip.com's revenue also increased by about 70% (of which Asia Pacific revenue also increased 76%), accounting for 10.5% of the Group's revenue; since the beginning of July, the company expects Trip.com's revenue to continue its medium to high double-digit growth trend, mainly due to: 1) Further increase in the share of accommodation revenue: 2Q benefits from faster growth, and the share of Trip.com accommodation revenue exceeds 35-40% (35% compared to 1Q); 2) The share of mobile bookings is stable: currently, Trip.com accounts for 65% of mobile bookings, the main Asian market Over 75% (higher than Booking's 53% and Airbnb's 55%), we think it is expected to generate stronger stickiness; 3) Inbound travel has surpassed expectations: 1H inbound wine bookings also increased 200%, and inbound tours contributed 25% to Trip.com's revenue, up 5ppt from month to month; profit margins for the whole year may be flat year over year. Considering the increase in marketing investment in 2H's international business, and the company maintains a marketing expense ratio of 23% for the whole year, we expect the Group's non-standard operating profit margin of 31.2% in '24. Furthermore, the company continues to promote AI innovation (including trend lists and travel assistant TripGenie). Relying on a streamlined internal team and large external model, we expect overall costs to be manageable, which will improve the user experience in the long term, or improve operational efficiency.
Profit forecasting and valuation
We have basically kept our revenue forecast for 2024 and 2025 unchanged. Considering that the company's profit release exceeded expectations, we raised our non-generic standard net profit forecast by 11% and 3% to $167 and 19.7 billion yuan for 2024 and 2025. Maintaining an outperforming industry rating, considering the downward trend in the industry valuation center, we maintained the target prices of US stocks and Hong Kong stocks at HK$63.5 and HK$492.4 (lowering the 2024 non-standard price-earnings ratio estimates for US stocks and Hong Kong stocks to 18 times and 18 times). There is 50% and 47% upward space, respectively, from the current stock price. The company currently trades 12 times and 10 times US stocks, and 13 times and 11 times Hong Kong stocks.
risks
Cost reduction and efficiency fell short of expectations, and market demand fell short of expectations.