The adjusted net profit growth rate remained flat month-on-month in the second quarter of 2024, and the decline in OTA business profit margins narrowed.
2024Q2 achieved revenue of 4.24 billion yuan, net profit of 0.43 billion yuan, and adjusted net profit of 0.66 billion yuan, with year-on-year increases of 48.1%/19.3%/10.9%, respectively. Previously, the Q1 growth rate was 49.5%/5.6%/10.9%. Among them, the difference between net profit to mother and adjusted growth rate was mainly due to changes in exchange losses. Among them: 1) OTA platform revenue reached 3.53 billion yuan, up 23.0% year on year; OTA platform operating margin was 24.3%, down 2.2 pct year on year, narrower than -3.7 pct in Q1. 2) The vacation business achieved 0.72 billion yuan, mainly due to offline travel agencies and scenic spot operations that were consolidated in December last year. The profit margin for the second quarter was 0.1% compared to off-season operations.
The structural impact has led to a steady growth rate of GMV and an increase in per capita consumption. The GMV of the 2024Q2 platform was 62.3 billion yuan, up 4.4% year on year, and narrowed from 15.2% in Q1. It is expected to be mainly due to the decline in airline ticket prices and hotel room prices in the industry, as well as disturbances in the decline in part of ground transportation share. Among them, compared to medium- and low-star hotels, which account for a higher share of companies, the industry still showed price resilience; while the increase in the online penetration rate of the sinking market and the boost in company share drove an increase in core business volume. Q2 ticket volume increased nearly 20% year over year, and night volume between hotels increased 10% year on year. The number of monthly paying users of the 2024Q2 platform increased 0.7% year over year, the annual user purchase frequency increased from 6.6 in the same period in 2023 to 8.1, and the cross-selling rate increased to 12%.
Flexible reduction in subsidy monetization rate improvement is expected to balance income growth and benefit development in the short term. Based on the normalized growth of domestic travel, the company's commission subsidies are more controlled and refined. On the one hand, the Q2 commission rate (revenue/GMV) increased 2.0/0.9 pct year over year, and Q2 transportation and lodging business revenue increased 16.6% and 12.8% year over year, respectively. Combined with volume and price increases, the accommodation commission rate is expected to improve well. In the current consumer environment, the company is expected to maintain dynamically adjusted subsidies. On the other hand, the company actively improved marketing results, and the decline in the profit margin of the main OTA business in Q2 was narrower than in Q1. On the new business side, the international business began increasing investment in the second half of last year, and after Q1 significantly dragged down profit margins, it is currently undergoing rapid expansion on a low base (Q2 international ticket volume/international night volume increased by more than 160%/nearly 140%). It is expected that short-term disturbances will be reduced through strengthened revenue management. The company's public exchange meeting is expected to be higher than domestic profit margins. On the traffic side, WeChat traffic is still contributing to the basic market. At the end of July, the company re-signed an agreement with Tencent, and the growth is relatively manageable; at the same time, the company also focuses on cultivating higher-frequency, high-customer app traffic as an incremental channel.
Risk warning: The recovery in travel fell short of expectations, competition in the industry intensified, and the drag on new businesses increased.
Investment advice: Considering current industry volume and price trends, we lowered the company's 2024-2026 adjusted net profit to 2.62/3.09/3.58 billion yuan (previously 2.74/3.39/4.08 billion yuan) and dynamic PE to 11/9/8x, which already reflects concerns about the industry's growth rate and profit margin to a certain extent. We believe that the company's core business is still benefiting from increased online penetration in the sinking market. The increase in air and hotel ticket volume is better than that of the industry, while medium- and low-star hotel prices are relatively resilient. In the current industry environment, subsidies are controlled and refined, taking into account the harmonious development of revenue and benefits, which is expected to drive a steady recovery in profit margins in the second half of the year and maintain a “superior to the market” rating.