20220823-招银国际-同程旅行-00780.HK-Recovery_on_good_track_4页_871kb

Tongcheng Travel (780 HK) Company Update Summary

Core Content

Tongcheng Travel (780 HK) reported its 2Q22 results, showing better-than-expected performance with revenue and adjusted net profit declining by -38%/-73% YoY, respectively, but still surpassing the consensus estimates by 5%/49%. The company's management provided guidance indicating that revenue for 3Q22E would grow by 5%-10% YoY, with adjusted net profit at RMB300-350mn. This improvement is attributed to strong hotel recovery starting from mid-June.

Main Points

• 2Q22 Performance:

  • Revenue: -38% YoY, above consensus by 5%.
  • Adjusted net profit: -73% YoY, above consensus by 49%.
  • Accommodation revenue: -27% YoY, better than the estimated -38%.
  • Hotel take rate: rose to 11%, driven by higher value-added service (VAS) mix.

• 3Q22E Outlook:

  • Revenue expected to grow by 22% YoY.
  • Take rate expected to be >9%.
  • ADR (Average Daily Rate) is projected to rise to RMB200.
  • Transportation revenue is forecasted to decline by 2% YoY, but with stable take rates.
  • Other revenue is expected to increase by 22% YoY.

• Full Year 2022 Expectations:

  • Top line (revenue) is projected to decline by 7% YoY.
  • Bottom line (adjusted net profit) is estimated to drop by 27% YoY.
  • Adjusted net margin is expected to be 13.4%.

• Earnings Forecast Update:

  • CMB International Global Markets (CMBIGM) lifted the FY23-24E earnings forecast by 1-2% to reflect improved recovery.
  • Target price was adjusted to HK$20.0, up from HK$18.0, representing a 20.5% upside from the current price of HK$16.6.

• Key Financials (YE 31 Dec):

  • Revenue: FY21A: RMB7,538m, FY22E: RMB7,039m, FY23E: RMB8,417m, FY24E: RMB9,694m.
  • Adjusted Net Profit: FY21A: RMB1,296m, FY22E: RMB943m, FY23E: RMB1,444m, FY24E: RMB1,737m.
  • Adjusted EPS: FY21A: RMB0.59, FY22E: RMB0.43, FY23E: RMB0.65, FY24E: RMB0.78.
  • P/E Ratio: FY21A: 24.4x, FY22E: 33.5x, FY23E: 21.9x, FY24E: 18.2x.
  • P/B Ratio: FY21A: 1.3x, FY22E: 1.2x, FY23E: 1.2x, FY24E: 1.1x.
  • ROE: FY21A: 5.0%, FY22E: 2.3%, FY23E: 4.7%, FY24E: 5.8%.

• Segment Breakdown:

  • Accommodation Reservation: FY21A: RMB2,409m, FY22E: RMB2,440m, FY23E: RMB2,852m, FY24E: RMB3,472m.
  • Transportation Ticketing: FY21A: RMB4,458m, FY22E: RMB3,747m, FY23E: RMB4,457m, FY24E: RMB4,893m.
  • Others: FY21A: RMB671m, FY22E: RMB852m, FY23E: RMB1,108m, FY24E: RMB1,330m.

• Stock Performance:

  • Market Cap: HK$35,816m.
  • Shareholding Structure: Tencent (21.43%), Trip.com (20.91%), T Rowe Price (5.97%).
  • Share Performance (12mth): Absolute: -4.6%, Relative: 16.7%.
  • Price Performance: 12-month chart shows a relative performance of 16.7% compared to the market.

Key Information

• Analyst Rating: BUY, with a new target price of HK$20.0.
• Recovery Outlook: The company is expected to recover faster than the industry, particularly in the hotel segment.
• Industry Position: Tongcheng is anticipated to deliver above-industry growth in the second half of 2022.
• 4Q22E Forecast: Better recovery expected due to stabilization of the pandemic and potential easing of lockdowns.
• Financial Outlook:
  • The company is expected to maintain a strong position in the market with improved earnings forecasts.
  • The adjusted net margin is projected to improve from 13.4% to 17.2% and 17.9% in FY23E and FY24E respectively.

Summary

Tongcheng Travel (780 HK) is showing signs of recovery, with better-than-expected results in 2Q22 and improved guidance for 3Q22E. The company's hotel segment is performing strongly, contributing to a higher-than-anticipated revenue growth. While transportation remains under pressure, the overall performance is expected to outpace the industry in the second half of 2022. CMBIGM has upgraded the earnings forecast and increased the target price, maintaining a BUY rating with a 26x FY23E P/E. The company's financial health and growth potential are positive, with a focus on improved monetization and strong recovery in the hotel sector.