HSBC Research: TONGCHENG's Q3 performance meets expectations, more optimistic about Trip.com in the industry

HSBC's research report indicates that TONGCHENGTRAVEL (00780.HK) third-quarter performance met expectations, with a 14.9% growth in its core online travel agency (OTA) business, supported by a 15% increase in hotel booking revenue. The adjusted core OTA business profit margin was 31.2%, up 0.1 percentage points year-on-year, but 0.3 percentage points lower than the bank's expectations, as operational efficiency improvements from reduced service development and administrative costs were offset by higher marketing expenditures. The adjusted net profit reached RMB 1.06 billion, exceeding the bank's and market expectations by 3%.

The bank expects that fourth-quarter core OTA business revenue will grow by 20% year-on-year, with the adjusted core OTA business operating profit margin increasing by 0.6 percentage points to 29%, and the adjusted net profit at RMB 773 million. The bank also mentioned that it anticipates the recent cancellations of flights on the China-Japan routes will have a controllable impact on the company's core OTA business, but tourism-related businesses may be somewhat affected.

The bank maintains a target price of HKD 26 for TONGCHENGTRAVEL and a "Buy" rating, preferring online travel platforms over airlines within the sector, while being more optimistic about Trip.com (09961.HK) than TONGCHENGTRAVEL