TRIP.COM(09961) 华泰证券·2024-11-29 08:35Investment Rating and Target Price - The report initiates coverage on Trip.com Group (9961 HK) with a "Buy" rating and a target price of HKD 582.2 [1] - The target price is based on an 18x PE multiple for 2025, reflecting a discount to the peer average of 21.9x due to recent valuation increases in US peers [6] Core Investment Thesis - Trip.com is a global leader in the OTA (Online Travel Agency) industry, with a strong position in China's high-end travel market and rapid global expansion [1] - The company benefits from increasing online penetration in domestic travel and structural growth in outbound travel, with its international platform Trip.com in a rapid growth phase [1] - Domestic market stability, rising profitability from outbound travel, and operational efficiency improvements are expected to drive sustained profit growth [1] Market Outlook and Industry Trends - Domestic tourism in China has recovered to 92% of 2019 levels in terms of trips and 100% in terms of revenue as of Q3 2024, with outbound and inbound travel expected to reach 80% of 2019 levels by 2024 [2] - China's tourism online penetration rate was 37% in 2022, significantly lower than the global average of 66%, indicating room for OTA platforms to outperform the broader tourism market [2] - Outbound travel is expected to benefit from international flight capacity recovery and policy support, with structural growth driven by expanding travel radius and increasing penetration in lower-tier cities [2] Accommodation Business - Trip.com has a strong foothold in China's high-star hotel market, with a stable supply chain and high user stickiness in high-tier cities [3] - The company's accommodation business is expected to maintain high growth from 2024-2026, driven by further online penetration in domestic hotels and rapid growth in overseas hotel bookings [3] - Trip.com's ADR (Average Daily Rate) and Take Rate are expected to remain stable, supporting revenue growth [3] Transportation Business - Transportation services, a key traffic driver for Trip.com, accounted for 56% of China's online air ticket booking market in 2019 [4] - Domestic transportation growth is expected to align with industry trends, while outbound travel demand is expected to drive higher-margin international ticket sales [4] - The business model relies on cross-selling to higher-margin accommodation and travel services, with over 30% of transportation users converting to other services as of H1 2024 [80] Financial Performance and Valuation - Revenue is forecasted to grow at a CAGR of 17% from 2024-2026, reaching RMB 72.5 billion in 2026, with adjusted net profit growing at a CAGR of 22% to RMB 23.6 billion [6] - The company's adjusted net profit margin improved significantly to 29.4% in 2023, up from 7.0% in 2022, driven by strong revenue recovery and cost control [45] - Trip.com's EV/EBITDA multiple is expected to decline from 11.3x in 2024 to 7.3x in 2026, reflecting improving profitability and cash flow [8] International Expansion - Trip.com's international platform, Trip.com, is in a rapid growth phase, with international OTA platform revenue growing 60% YoY in Q3 2024 [34] - The company aims to increase the contribution of international business to 40-50% of total revenue, leveraging its strong position in the Asia-Pacific region and growing outbound demand from China [72] Competitive Positioning - Trip.com maintains a strong competitive position in China's high-end travel market, with a differentiated brand image compared to competitors like Meituan and Tongcheng, which focus on lower-tier markets [21] - The company's high ADR (Average Daily Rate) in the accommodation segment, averaging RMB 331, is significantly higher than competitors, supporting its leading position in GMV (Gross Merchandise Value) [68]