Incident: On November 19, Ctrip (9961.HK/TCOM) released its 2024 three-quarter report. Q3 achieved net revenue of 15.873 billion yuan, yoy +15.5% (surpassing Bloomberg's unanimous expectations); net profit to mother of 6.765 billion yuan, yoy +46.6%; non-GAAP net profit to mother of 5.963 billion yuan, yoy +21.8% (Dachuo Bloomberg's agreed forecast of 4.773 billion yuan), corresponding to non-GAAP net profit 37.6%, yoy+1.9pct

Revenue and profit both exceeded expectations, with outbound & overseas as the main driving force. 1) In terms of revenue division, hotel accommodation is 6.802 billion yuan, yoy +21.7%, qoq +32.4%; transportation ticketing 5.65 billion yuan, yoy +5.3%, qoq +16.0%; vacation income 1.558 billion yuan, yoy +17.3%, qoq +52.0%; business travel 0.656 billion yuan, yoy +11.0%, qoq +3.6%. The hotel accommodation business is still driving growth. 2) Looking at the subregion, Q3 outbound hotels and air tickets have fully recovered to 120% in the same period in 2019, and the recovery rate is 40% faster than the industry market; while the company's international OTA platform hotel & ticket bookings increased by more than 60% year on year, and the international market is still maintaining a high growth trend.

Costs and expenses are well controlled, and sales expenses are lower than expected. Q3 gross margin reached 82.4%, yoy+0.3pct, qoq+0.5pct; after deducting SBC, R&D expense ratio 21.5%, yoy-2.7pct; sales expense ratio 21.1%, yoy+1.3pct; management expense ratio 5.3%, yoy-0.5pct; sales expenses were slightly higher than Bloomberg's agreed expectations, and other cost rates were well controlled. The Q3 non-GAAP operating margin (excluding SBC) reached 34.4%, yoy+2.3 pct, and summer profitability reached a high level.

Asia Pacific is still the main region for Trip, and multiple markets are performing well. The company's bookings from the Asia-Pacific region have increased by more than 70%, and it has become the most downloaded OTA app in various markets such as Hong Kong, Macau, Taiwan, South Korea, Singapore, and Malaysia. Ctrip is also promoting inbound tourism. In the third quarter, inbound hotel orders increased by about 100% year on year, and reservations for many hotels participating in overseas promotions increased by more than 200% year over year.

Investment advice: The Ctrip brand has deep advantages, high-quality platform users and strong payment capacity (the average user expenditure is consistent with last year, and 20% higher than in 2019). The competitive advantage is expected to be prominent. The company's deep domestic & overseas supply chain is expected to meet the domestic travel market demand and the growing demand for outbound travel. We believe that Ctrip's outbound travel business is expected to continue to outperform industry performance. The rapid growth of Trip.com is expected to drive international business expansion and remain optimistic about the company's development. It is estimated that the company's FY2024-2026 non-GAAP net profit will be 17.417 billion yuan, 18.997 billion yuan, 21.407 billion yuan, and non-GAAP EPS will be 25.48 yuan, 27.79 yuan, and 31.32 yuan respectively, corresponding to the closing price on November 20 The adjusted PE was 18 times, 17 times, and 15 times, respectively, maintaining the “recommended” rating.

Risk warning: 1) the risk that travel consumption performance falls short of expectations; 2) the risk of external competition increasing the risk; 3) the risk of changes in industry policies; 4) the risk of falling commission rates; 5) the impact of major negative events.