Introduction to this report:
Performance exceeded expectations, outbound and overseas contributions increased, and cost control released profits and increased shareholder returns.
Key points of investment:
Maintain an “Overweight” rating. Considering the company's improved benefit pattern and continued improvement in efficiency, the company's adjusted net profit for 2024/25/26 was raised to RMB 163/189/220 (+19.01/+18.25/+24.20) billion yuan, giving the industry an average valuation of 17.4xPE for 25 years, maintaining a target market value of RMB 328.9 billion and maintaining a target price of HK$528.
Performance summary: 24Q2 achieved revenue of 12.788 billion/ +13.55%, of which: hotels +19.86%, transportation +1.18%, group tours +41.97%, and business travel +8.39%. Net profit to mother: 3.833 billion, 23Q2 was 0.631 billion, adjusted mother 4.985 billion +45.17%, adjusted EBITDA was 4.436 billion/ +20.61%, and adjusted EBITDA margin was 34.9%.
Revenue was in line with expectations, and performance exceeded expectations. ① The revenue growth rate is in line with the domestic market demand trend.
Further dividing volume and price, the core is price drag (domestic hotel ADR single digit drop, reservation volume +15%). ② Outbound and overseas (accounting for 15% and 20% of revenue) are the main drivers contributing to revenue side growth. Outbound contributions are greater, with outbound hotel bookings +50% compared to the same period, and Trip hotel bookings +60-70%. ③ The hotel growth rate this season (+19.86% vs. expected +14-19%) exceeded expectations. However, the driving force is not the increase in take-rate, but rather the cross-selling of transportation tickets and the increase in online rates. Also, during the call back, the company emphasized that it will maintain a stable commission rate of 8-10%, and further increase in volume. Considering that Meituan and Douyin generally raise commissions, Ctrip will help consolidate its share advantage over the period.
Outbound and overseas support growth certainty, and cost control releases profits and enhances shareholder returns.
① Short-term outbound and medium-term overseas business expansion have provided some certainty for Ctrip's revenue side growth. We expect the revenue side growth rate to remain in the 10-15% range. ② This season, the company once again demonstrated its ability to control profits. While revenue was at the lower limit of the guideline, despite an increase in sales investment (+1.3 pct yoy), the profit side slightly exceeded expectations by reducing the R&D expenses ratio (-3 pct yoy) (high demand in 23Q2, high incentives), which slightly exceeded expectations on the profit side (adjusted EBITDA of 4.436 billion vs. expected 4.1-4.3 billion). ③ Currently, the platform has generally entered a medium- to low-income growth rate, but profits are released through fee rate control to increase shareholder returns. The certainty of Ctrip's profit release comes from the stability of the pattern.
Risk warning: Economic fluctuations affect domestic business travel demand. Competition in the industry intensified due to the reinvestment of some giants, and the growth rate slowed after the outbound travel base returned to normal.