The Zhitong Finance App learned that Anxin International released a research report stating that it maintained the Ctrip Group-S (09961) “purchase” rating. In view of Ctrip's record high domestic and outbound bookings during the May 1st holiday, the double-digit increase in domestic travel bookings. Outbound air tickets and hotel reservations were over 20% compared to 2019. Revenue for the 2nd quarter is expected to increase 15% year-on-year, with revenue from lodging reservations/transportation ticketing increasing 15%/9% year on year. The 2024 revenue forecast remained unchanged ($52.7 billion, up 18% year on year), and adjusted net profit for the whole year was raised 13% to 14.8 billion yuan (previous value: 13.1 billion yuan), and the corresponding profit margin was 28.1%. Optimistic about Ctrip's prospects for steady growth and efficiency optimization in domestic business, and medium- to long-term growth potential for outbound and international business, the target price was raised to HK$519.
Anxin International's main views are as follows:
Earnings for the first quarter exceeded expectations:
Net revenue of 11.9 billion yuan, up 29%/15% year over year, slightly exceeding the bank/market expectations of 2%/3%. Among them, accommodation reservation/transportation ticket revenue increased 29%/20% year over year, contributing 38%/42% to net revenue. Adjusted net profit was 4.1 billion yuan, exceeding the bank/market expectations by 41%/45%, mainly due to better marketing efficiency than expected. The adjusted profit margin was 34%, up 12 percentage/month over month, benefiting from strong revenue growth and optimization of operating efficiency.
Domestic air tickets and hotels maintain a higher growth rate than the industry, and users operate in a refined manner:
Domestic hotel and air ticket reservations increased by more than 20% year on year in the first quarter (compared to the first quarter, domestic travel revenue and number of visitors both increased 17% year on year). The year-on-year decline in domestic hotel ADR was affected by industry trends, mainly due to the recovery in hotel supply, the diversion of outbound travel, and an increase in the share of the sinking market. In the era of normalization of the travel market, Ctrip strengthened refined operations on the user side, launched a “concert+hotel stay” package product for young users, and the “Ctrip Friends Club” brand for silver-haired users (accounting for 10%).
Outbound travel continues to grow rapidly:
Outbound hotel and air ticket reservations increased by more than 100% year-on-year in the first quarter. Outbound hotel and air ticket reservations for the Spring Festival and May Day holidays have completely recovered to the same period in 2019, and the degree of recovery is still faster than that of the industry (civil aviation outbound passenger traffic recovered to 78% of 1Q19 in the first quarter). Outbound ticket prices declined year-on-year due to the restoration of supply (estimated to be about -12%), but they still increased 15% over the same period in 2019; ADR for outbound hotels was stable year over year. The Ministry of Culture and Tourism predicts that outbound travel will return to 80% in 2019 by the end of 2024, and the company indicates that the degree of recovery in outbound travel will exceed 20% to 30% of the industry.
The revenue and profit potential of the international OTA business have yet to be unlocked:
The total revenue of the international OTA platform Trip.com increased by about 80% year-on-year in the first quarter, contributing about 10% to total revenue. The Asian market was the main region (accounting for more than 70% of revenue). Future growth drivers are mainly driven by: 1) increased cross-sales of air tickets and hotels (the share of hotel reservation revenue has increased to 35%); 2) continued release of inbound travel potential (inbound travel bookings increased fourfold year-on-year in the first quarter, accounting for 20% of Trip.com revenue); 3) the increase in one-stop reservation services to acquire new customers and increase order frequency. The monetization rate of international business is basically the same as that of outbound travel. Profits at the marginal income level (revenue minus variable costs) have been achieved, and future profit levels depend on scale effects.