In "The Big Banks," Citigroup expects TONGCHENG's OTA business to grow by 15% in the third quarter, with the target price raised to 22 yuan

Citi published a report, expecting TONGCHENGTRAVEL (00780.HK) to achieve a year-on-year growth of 15% in its core online travel platform (OTA) business in the third quarter, reaching RMB 4.6 billion, with adjusted net profit of RMB 1.03 billion and a profit margin of 19%. Among them, the revenue from accommodation and transportation ticketing businesses is expected to increase by 14% and 10% year-on-year, respectively, while the vacation business may further decline by 13% year-on-year, due to pressure from outbound travel.

Additionally, TONGCHENG's performance during the National Day holiday period met internal expectations. The firm believes that the performance of outbound tourism during the peak season in the fourth quarter will be crucial for the group's growth prospects in 2026.

Recently, the group announced the completion of the acquisition of Wanda Hotel Development (00169.HK). The firm believes that since the group still needs time to establish a development strategy and only has two months left this year, the acquisition will have a limited impact on this year's financial performance. However, the firm believes that the acquisition will enhance the brand value of the group's existing hotel management business and improve earnings per share.

The firm has lowered its revenue forecast for TONGCHENG for 2025 to 2026, due to the expectation of a slower recovery in the vacation business, but slightly raised its adjusted net profit forecast based on improved sales and marketing efficiency; the target price has been raised from HKD 20 to HKD 22, maintaining a "Buy" rating