Zhitong Finance APP learned that Huachuang Securities released a research report stating to maintain a "recommended" rating for Ctrip Group-S (09961). Based on the company's Q3 outperformance, revenue and profit forecasts have been raised, with expected revenues of 53, 60.6, and 68.9 billion yuan for 2024 to 2026, and non-GAAP net income expected to be 17.9, 20, and 22.7 billion yuan respectively, with a target price of 570 Hong Kong dollars per share. Domestic consumer policy is inclined to be proactive, and tourism, as a driving force for service consumption and a necessity for spiritual culture, shows resilience in the medium to long term. The OTA industry also has the logic of increased online penetration and benefits from industry development.

Event: In Q3 2024, the company achieved net revenue of 15.87 billion yuan, a year-on-year increase of 15.5%. Adjusted operating profit (non-GAAP OP) was 5.47 billion yuan, a year-on-year increase of 23.7%; net income was 6.82 billion yuan, a year-on-year increase of 47.1%; non-GAAP net profit attributable to shareholders was 5.96 billion yuan, a year-on-year increase of 21.8%. The company's gross margin in Q3 2024 was 82.4%, up 0.3 percentage points year-on-year and up 0.5 percentage points quarter-on-quarter. Adjusted operating profit margin was 34.4%, up 2.3 percentage points year-on-year and up 1.3 percentage points quarter-on-quarter.

Huachuang Securities' main views are as follows:

In Q3 2024, the company's revenue and profit both exceeded expectations.

Looking at revenue by sector, in Q3 2024, lodging, transportation, vacation travel, and other sectors grew by 21.7%, 5.3%, 17.3%, 11.0%, and 40.9% year-on-year, respectively. Both lodging and transportation sector revenues slightly exceeded expectations, with lodging revenue accounting for 42.9%, up 2.2 percentage points year-on-year and up 2.6 percentage points quarter-on-quarter, supporting the increase in gross margin and operating net margin both year-on-year and quarter-on-quarter.

Domestic performance remains stable, while outbound and overseas markets maintain high growth.

From a domestic and international perspective, domestic performance is relatively stable, with outbound hotel and flight bookings recovering to 120% of the 2019 level (in Q2, the company returned to the 2019 level; according to Flight Butler, the volume of international flights in China's civil aviation in Q3 2024 recovered to 78.3% of 2019); international OTA platform Trip saw hotel and flight bookings increase by more than 60% year-on-year, maintaining rapid growth.

The company's overall expense control performance is excellent.

In Q3 2024, the company's R&D expense ratio is 22.9%, down 3.1 percentage points year-on-year and down 0.5 percentage points quarter-on-quarter; the management expense ratio is 6.6%, down 0.9 percentage points year-on-year and down 1.8 percentage points quarter-on-quarter, showing a significant year-on-year decline. The marketing expense ratio is 21.3%, up 1.2 percentage points year-on-year, mainly due to accelerated overseas investment.

The fourth quarter is the off-season for domestic tourism, with a relatively stable economic climate. Hotel price pressures are expected to gradually ease, and the impact of commission charges related to flight supplements is diminishing, returning to normal. In Q4, overseas tourism is relatively strong, and the share of Trip's revenue is expected to increase, possibly raising the sales expense ratio on a year-on-year and quarter-on-quarter basis.

Risk warning: Domestic consumer demand is weak, the recovery of outbound flights is less than expected, international relations or security events may restrict entry and exit, and industry competition is intensifying.