It covered Ctrip (9961 HK) for the first time and gave it a “buy” rating, with a target price of HK$582.2. The world's leading one-stop OTA platform, the domestic high-end vertical traffic+high-star hotel supply chain has stabilized its leading position, and globalization is expanding rapidly. Looking ahead to the future, the overseas platform Trip is in a period of rapid growth due to the increase in the rate of online domestic travel bookings and the structural growth of outbound travel. The domestic pattern is stable, the share of high-margin outbound business is increased, and the company's own operating efficiency is improved, and profits are expected to continue to grow.
Inbound and outbound tourism has great potential for growth. The increase in the online rate of online tourism is expected to outperform the OTA growth rate by 11% and 19%, respectively. Due to the decline in the epidemic in 20-22, the number of 1-3Q24 people and revenue recovered to 192% and 100% in the same period, respectively. It is expected to become normalized in the future, and tourism shows strong demand resilience with its low-frequency immediate demand characteristics. We expect inbound and outbound travel to recover to 80% in 24 years. With the restoration of international flight supply, the expansion of the travel radius combined with the decline in the passenger base contributed to the structural growth of outbound travel; favorable policies also contributed to the rapid growth of inbound travel. There is still a gap between the 37% online rate of domestic travel in '22 compared to 66% globally, and the OTA growth rate may outperform the travel market.
The lodging business has a basic domestic high-star hotel market, and overseas expansion+online contribution, Ctrip has a basic domestic high-star hotel market, and its competitive position is stable. On the demand side, it has vertical traffic from domestic high-tier cities and high-end users, and users are highly sticky; on the supply side, it is more difficult to be shaken by competitors when it is deeply involved in the hotel supply chain. Looking ahead, the further penetration of online domestic hotels combined with rapid growth in overseas hotel business will drive an increase in overnight volume. The revenue growth center for 24-26 is likely to remain high against the backdrop of stabilizing ADR (average room price) and takeRate (commission rate).
The transportation business is driven by high-frequency drainage, and the overall growth is steady
The transportation business uses its high-frequency and standardized characteristics as an important drainage channel for Ctrip. Ctrip (Ctrip, Where to Go) had a market share of 56% in 2019, holding a huge traffic portal for online travel.
In the context of online domestic ticketing saturation, Ctrip, as a leader, is basically growing at the same rate as the industry. It is expected that subsequent outbound demand will drive the growth of high-profit outbound air tickets, and the pure overseas business will continue to expand or contribute momentum.
How we differ from the market view
The market is concerned about macro-fluctuations affecting tourism demand. We believe that tourism is essentially a low-frequency demand. In the context of normalized domestic development, structural upgrading of outbound travel and demand for inbound travel are also growing. At the same time, there is still room for improvement in the online rate of domestic travel, causing OTA platforms to grow at a faster rate or remain superior to the market.
Profit forecasting and valuation
We forecast the company's 24-26 revenue of 52.9/62/72.5 billion, yoy +18.8%/17.2%/16.9%, adjusted net profit 17.6/20.3/23.6 billion yuan, yoy +34.7%/15.3%/16.1%. Referring to the 25-year adjusted average PE of comparable companies, the average PE is 21.9 times. Considering that the recent rapid rise in stock prices of comparable companies in the US has led to a significant increase in valuation, a certain discount is given on the basis of the average PE value of comparable companies, 18 times PE over 25 years, corresponding to the target price of HK$582.2.
Risk warning: The macroeconomy is weak; industry competition is intensifying; airline supply recovery is slower than expected.