On August 27, Ctrip Group released its 2024 Q2 financial report. During the reporting period, it achieved operating income of 12.77 billion yuan/ +13.6%, and achieved NON-GAAP net profit of 4.99 billion yuan/ +45.2%. The performance was better than market expectations. Since the summer, with the release of demand for leisure travel and the increase in the number of travelers, the domestic travel business has performed strongly. In the short term, the gradual improvement of the competitive landscape is expected to help the company continue to optimize expenses. In the long run, with outbound travel restoration and the gradual improvement of the company's overseas layout, Trip.com and Skyscanner are expected to be the driving force for the company's revenue growth. Follow-up suggestions focus on the company's outbound travel repair process and overseas market expansion. Maintain a “Highly Recommended” rating.
24Q2 revenue grew steadily, and operating performance exceeded market expectations. 24Q2 achieved operating income of 12.77 billion yuan/ +13.6%, achieved operating profit of 3.56 billion yuan/ +19.4%, and achieved NON-GAAP net profit of 4.99 billion yuan/ +45.2%, of which the associated company profit was 1.09 billion yuan/ +361.4%. Overall, revenue was in line with expectations, and business performance was better than our and market expectations (Bloomberg expected adjusted net profit of 3.57 billion yuan. We expect 4.03 billion yuan billion yuan), mainly driven by a sharp increase in profits of joint ventures and a slight optimization on the cost side. By business type, the company achieved revenue of 51.4/4.87/1.03/0.63 billion yuan respectively, with year-on-year changes of +19.9%/+1.2%/+42.0%/+8.4%, respectively.
The gross margin declined slightly, and the cost side continued to be optimized. The company's comprehensive gross margin was 81.9% /-0.3pct during the reporting period, and the overall gross margin remained stable. The 2024Q2 company's cost rate for the period was 54.1% /-1.6pct, of which the R&D/sales/management expenses ratio was 23.4%/22.2%/8.4%, respectively, with year-on-year changes of -2.8pct/+1.3pct/-0.1pct. During the reporting period, the company's non-GAAP net profit margin was 39.0% /+8.5pct. Profitability improved significantly, mainly due to a slight optimization of expenses and an increase in the share of profits of associated companies.
Outbound machine wine reservations exceeded the same period in 19 years, and the company's international OTA platform Q2 increased by about 70% year-on-year.
The 2024Q2 domestic and foreign travel market recovered strongly. Thanks to the rapid growth of outbound and domestic travel, domestic hotel bookings increased by about 20% year on year, and outbound hotel and air ticket reservations fully recovered to 100% of the same period before the 2019 pandemic, significantly surpassing the industry average of more than 70% of international flight recovery; overseas, the company's total revenue from the international OTA platform Q2 increased by about 70% year on year.
Investment advice: Since the summer, with the release of demand for leisure travel and the increase in the number of travelers, the domestic travel business has performed strongly. In the short term, the gradual improvement of the competitive landscape is expected to help the company continue to optimize expenses. In the long run, with outbound travel restoration and the gradual improvement of the company's overseas layout, Trip.com and Skyscanner are expected to become the driving force for the company's revenue growth. Follow-up recommendations focus on the company's outbound travel repair process and overseas market expansion. We expect the company to achieve adjusted net profit of 16.7/19.6/22.5 billion yuan in 24-26. The current stock price corresponds to the 24-year PE of about 14x, maintaining a “highly recommended” rating.
Risk warning: repeated global epidemics; risk of declining economic consumption; risk of changes in travel policies.