To The Moon

$Trip.com Group Limited(TCOM)$ jumped 10% after announcing its Q2 2024 results, partly reflecting the recovery in the travel market, especially in the cross-border travel business. $TRIP.COM-S(09961)$

Financial Performance

• Overall Operating Revenue: Total operating revenue for the first half of 2024 amounted to RMB24.709 billion, a year-over-year increase of 20.7%.Of this, total revenue for the second quarter was RMB12.79 billion (approximately US$1.76 billion), up 14% year-over-year, exceeding analysts' expectations of RMB12.75 billion.

• Earnings per share (EPS): Adjusted EPS per ADS for the first half of the year was RMB13.24, up 61.5% year-over-year.EPS for the second quarter was 7.25, an increase of approximately 41.8% year-over-year and significantly higher than analysts' expectations of 5.22.

• Gross Profit: First-half gross profit was CNY20.721 billion, up 19.8% year-over-year, and second-quarter gross profit was CNY10.46 billion, up 13% year-over-year, in line with expectations.

Segment Performance

• Hotel Reservation: Revenue amounted to RMB5.14 billion, representing a 20% year-over-year increase and exceeding market expectations of RMB4.95 billion.Accommodation booking revenue rose 14% YoY, mainly attributable to increasingly strong travel demand during the holiday season

• Transportation Ticketing: Revenue was CNY4.871 billion, up 1.2% year-over-year, below analysts' expectations of CNY4.97 billion, primarily impacted by fluctuations in airfares.

• Travel & Vacation: Revenue was CNY1.025 billion, up 42% year-over-year, in line with expectations.Travel & Resort operating income rose 16% year-over-year, mainly attributable to increasingly strong travel demand during the holiday season

• Business Travel: revenue was CNY633 million, up 8.4% year-over-year, close to analysts' expectations.

Business Growth Drivers

Ctrip's growth was mainly driven by the following factors:

• Cross-border travel led to significant business growth:

  • On the one hand, outbound hotel and airfare bookings fully recovered to the level of the same period in 2019, and the international business grew its revenue by approximately 70% year-on-year in the second quarter.Among them, market expansion as well as incremental growth in Asia was the most significant contribution, and Trip.com became one of the major OTAs in Asia.The visa waiver for Southeast Asian countries that started at the end of last year, as well as the depreciation of the Japanese yen and Korean won this year, have provided a very favorable environment for outbound travel in Asia.

  • On the other hand, with the promotion of 144H visa waiver and other entry facilitation measures, China Travel has become a hot trend among overseas consumers, with bookings for inbound tours in the first half of the year increasing by nearly two times year-on-year, and inbound tours business contributing to 25% of Ctrip's overseas platform revenue

• Domestic travel demand recovered: accommodation bookings on domestic websites grew by approximately 20% year-on-year, and total revenue from the international business grew by approximately 70% year-on-year.Ctrip's outbound hotel and airfare bookings have recovered to pre-2019 epidemic levels.In addition,** travel demand was strong during the holiday season,** especially during the peak holiday season, and travel consumption showed resilience.

• Room for special services such as segmentation of the population.While the domestic tourism market maintains a historically high base, there is a trend of destination diversification.Ctrip provides differentiated services and explores new growth points by targeting the silver-haired people who have money and leisure and are increasingly inclined to customized tours and private tours, as well as by targeting young people and other high-growth potential segments of the travel industry.

• Innovation and technology application: Ctrip demonstrated its efforts in tourism innovation by mentioning the first application of AI Agent in its earnings conference and introduced two newly launched content products.AI Agent provided relatively spot-on help in resolving complex queries and providing personalized services, with a significant increase in return visits from users.And multi-language support and wider service integration to meet the needs of international users.

Outlook and Valuation

Ctrip's stock price has actually been relatively strong since last year, especially in the first half of this year, when the gains were more pronounced, mainly because the market is also more optimistic about the expectations for this year's outbound travel business, and now it is also basically expected to land.

However, from the second half of this year, the global optional consumption have a certain degree of downward trend, the performance of North American airlines is more obvious, and the telephone conference executives also said that the ADR of domestic hotels has declined in recent months, to a large extent by the impact of the diversion of travel preferences to outbound destinations and low-tier cities.In addition, increased hotel and airline supply has also put pressure on short-term prices.

And Ctrip's share price has always been relatively influenced by its capital gearing, as the company's debt levels are high.