The performance of the hotel business was better than expected, the growth of the transportation business returned to normal, and the 2024/25 revenue forecast was raised by 4%/6%. Trip.com is expected to continue to contribute to revenue growth and manageable investment and losses. We adjusted the valuation benchmark to 2025, corresponding to the industry average of 20 times the 2025 price-earnings ratio, and raised the target price to HK$605/$78 (TCOM US) (TCOM US) to maintain the buying rating.

Results for the 3rd quarter of 2024: Revenue of 15.9 billion yuan (RMB, same below), up 16% year over year, higher than our/Bloomberg market expectations of 2%, including +22% /transportation +5% /vacations +17% /business travel +11%. The number of nights in mainland hotels increased 15% + year over year, and ADR was still under pressure but the decline narrowed to a low single digit; outbound machine wine reservations resumed to 120% in 2019, leading the recovery rate of 80% + for international flights; and Trip.com's revenue growth rate was 60% +, accounting for about 9% of revenue. Adjusted net profit increased 22% year over year to $6 billion, exceeding our/Bloomberg market expectations by 24%/25%, thanks to continued cross-selling optimization and effective fee control. Marketing campaigns continued under market recovery. Adjusted marketing expenses increased 23% year on year, lower than our expectations of 5%, accounting for 21% of revenue, which was basically stable year over year.

Fourth quarter results preview: Revenue is expected to increase 19% year over year to 12.3 billion yuan, compared with Bloomberg's forecast of 12.1 billion yuan, of which +29% /transportation +13% /vacation +9% /business travel +1%. The ADR pressure on mainland hotels continues to weaken, and the change in the growth rate of airline ticket revenue is leading to a 13-14% increase in mainland revenue. Outbound recovery continues the trend of the 3rd quarter, leading the industry, and is expected to grow by about 30%. The fourth quarter is the peak overseas season for Trip.com, and the contribution to revenue is expected to increase to 12%. The adjusted operating profit is estimated to be 2.6 billion yuan, the same as the previous year.