Core views

2024Q3 Ctrip Group achieved revenue of 15.9 billion yuan, an increase of 15.63% year on year, and achieved non-GAAP net profit of 5.963 billion yuan, an increase of 21.77% year over year. Both revenue and net profit exceeded Bloomberg's agreed expectations. Cross-border travel is the main driver for the company to continue to maintain steady growth under the premise of a high base. In terms of outbound travel, Ctrip's outbound hotel and air ticket reservations recovered to 120% of pre-pandemic levels this quarter, surpassing the industry average. In terms of inbound travel, Ctrip's inbound hotel bookings increased by about 100% year-on-year in this quarter. Pay attention to changes in the landscape in domestic wine tourism, the progress of international capacity recovery, and the pace of company profit release.

occurrences

On November 19, 2024, Ctrip Group released its results report for the third quarter of 2024. In 2024Q3, Ctrip Group achieved revenue of 15.9 billion yuan, an increase of 15.63% year on year, and achieved non-GAAP net profit of 5.963 billion yuan, an increase of 21.77% year on year. Both revenue and net profit exceeded Bloomberg's agreed expectations.

Brief review

Cross-border business repairs continue to be realized. In the third quarter, the company achieved revenue of 15.9 billion yuan, a year-on-year increase of 15.63%, slightly higher than Bloomberg's agreed expectations. Among them, accommodation reservation revenue was 6.8 billion yuan, up 21.7% year on year; transportation ticket revenue was 5.65 billion yuan, up 5.27% year on year; travel and vacation business revenue was 1.558 billion yuan, up 17.32% year on year; and business travel management revenue was 0.656 billion yuan, up 11% year on year. In terms of domestic business, the domestic hotel revenue growth rate is expected to return to close to 20% in the fourth quarter. As the impact of value-added services gradually returns to a clean base, the growth rate of domestic transportation business, which the market paid much attention to in the early stages, is expected to recover in the fourth quarter. Cross-border travel is the main driver for the company to continue to maintain steady growth under the premise of a high base. In terms of outbound travel, international capacity recovered to 80% before the pandemic this quarter, and Ctrip's outbound hotel and air ticket reservations returned to 120% before the pandemic, surpassing the industry average. In terms of inbound travel, the number of inbound hotel reservations increased by about 100% year on year in the third quarter. The number of hotel reservations participating in overseas promotion increased by more than 200% year on year. More than 8,000 day travel products were launched on the Ctrip overseas platform. Inbound travel orders from related travel agencies exceeded 15 times year on year. In the third quarter, international ticket vending machines were added to 28 scenic spots to facilitate offline ticket bookings for international tourists. On the international side, Trip.com's revenue increased 50%-60% year-on-year in this quarter, and Skyscanner maintained medium to high single-digit growth. It is expected that the growth rate of Trip.com in the fourth quarter will further accelerate due to incremental investment, but we also need to pay attention to the increase in international revenue share and the disturbance of increased investment on the company's margin side.

Net interest rates remain high. Ctrip achieved gross profit of 13.073 billion yuan in the third quarter, up 15.97% year on year, and gross margin reached 82.36%, up 0.31 pct year on year. In terms of expenses for the period, the R&D expenditure rate for the quarter was 22.93%, down 3.10pct year on year, the sales expense ratio was 21.31%, up 1.23pct year on year, and the management expense ratio was 6.58%, down 0.9 pct year on year. In view of the increase in the share of international revenue and potential incremental investment, the expense ratio is expected to rise again during the fourth quarter. On the profit side, benefiting from increased gross margin and period expense ratio optimization, etc., the company achieved a record high of 5.963 billion yuan in non-GAAP net profit in the third quarter, corresponding to a net interest rate of 37.57%, which was higher than Bloomberg's unanimous expectations.

Profit forecast and valuation: We expect Ctrip's revenue for 2024-2025 to be 52.832 billion yuan and 62,018 billion yuan, respectively, up 18.73% and 17.39% year-on-year, and non-GAAP net profit of 17.772 billion yuan and 21.016 billion yuan, respectively, with corresponding net interest rates of 33.64% and 33.89%, respectively. Maintaining a “buy” rating, the target price is HK$562.97, corresponding to 20X PE in 2024.

Risk warning: Weak outlook in wine tourism; macroeconomic recovery falls short of expectations, affecting residents' spending power; transportation and ticketing business growth falls short of expectations; travel and vacation business growth falls short of expectations; business travel business growth falls short of expectations; international capacity returns to low expectations and outbound travel recovery falls short of expectations; impact of pan-ecological internet giants such as Meituan and Douyin on the competitive landscape; risk of impairment of goodwill; risk of impairment of goodwill; risk of weakening of the Chinese stock market; risk of US stock market withdrawal; risk of US inflation exceeding expectations, the Federal Reserve's interest rate cut process is low expectations; The renminbi depreciated beyond expectations; other overseas risk factors affecting the overall performance of China Internet.