"Big Banks" JP Morgan: Ctrip's structural risks are limited, and its current undervaluation is not significantly underestimated

JP Morgan's report indicates that the State Administration for Market Regulation has launched an antitrust investigation into Trip.com (09961.HK), but has not disclosed the specific behaviors under review. The bank's basic assumption is that the focus of the investigation is on Trip.com's reported "price adjustment tool"—an automatic repricing mechanism that can reset certain hotel prices on Trip.com to the lowest prices available online, resulting in effects similar to most-favored-nation treatment or price consistency clauses. To analyze the potential impact, the bank referenced Booking.com's long regulatory history in Europe, where its price consistency clauses have gradually been restricted and ultimately removed.

The bank's conclusion is constructive: even if the State Administration for Market Regulation requires Trip.com to stop automatic price adjustments (or otherwise limit the results of price consistency), the bank expects this will not cause substantial disruption to Trip.com's domestic hotel distribution model. Considering that Trip.com holds a dominant position in the online travel agency market (approximately 70% to 80%), hotels have a strong incentive to maintain competitive prices on the Trip.com platform to protect their exposure and booking volume, which limits the likelihood of significant deviations from Trip.com's platform for repricing.

From a financial perspective, JP Morgan believes the main impact channel is on profit margins rather than total transaction volume. The removal of the automatic pricing mechanism may create localized price discrepancies in segments with higher price elasticity, prompting the platform to adopt selective incentives/coupons or offer small rebates to defend conversion rates. However, consistent with the experience of Booking.com, even if price dispersion increases, the demand diversion capability, service value proposition, and conversion advantages of dominant online travel agencies tend to be maintained, indicating that the impact on profitability is only a gradual headwind rather than a structural loss of market share.

JP Morgan suggests that for investors with a holding period of more than 6 months, the bank recommends buying on dips, although the stock price may remain range-bound in the next 4 to 6 months (until the State Administration for Market Regulation announces the conclusion of the investigation). For investors with a shorter holding period, the bank suggests waiting for two potential entry points: 1) an attractive entry price with significant margin of safety (based on a 12 times 2026 forecast P/E ratio, corresponding to about $50); and 2) the announcement of the investigation conclusion by the State Administration for Market Regulation, which the bank expects will be an event that eliminates uncertainty.

Trip.com (TCOM.US) ADR closed at a price corresponding to a 15 times 2026 forecast P/E ratio on January 16, 2026. The bank believes this is not a clearly undervalued level, for the following reasons: 1) a 15 times P/E ratio is at the lower end of the valuation range for first-tier internet stocks in China (i.e., attractive but not absolutely mispriced); and 2) the current market consensus expectations have not yet reflected Trip.com's potential intention to lower its earnings during the investigation and/or rectification period. Therefore, in the bank's view, the 15 times P/E ratio based on current market consensus expectations does not provide sufficient margin of safety. The rating is "Overweight," with a target price of $90 for Trip.com (TCOM.US) ADR; H-share target price of HKD 700