A report from China Securities maintains a "Buy" rating on Trip.com Group-S (09961), stating that its fourth-quarter performance slightly exceeded expectations. Revenue surpassed the firm's and market expectations by 5% and 4% respectively, while adjusted net profit exceeded expectations by 5% and 8%. The contribution of international business to total revenue is projected to increase to 40% in 2025, with management emphasizing investment in international operations and artificial intelligence. The firm maintains its 2026 revenue forecast but lowers the adjusted net profit estimate by 5%. A valuation of 16 times 2026 price-to-earnings ratio (unchanged) is applied, with a slight reduction in the target price to HKD 541 (9961.HK) / USD 69 (TCOM.US). Key points from China Securities are as follows:
Report Summary: Q4 2025 performance slightly exceeded expectations. Net revenue reached RMB 154 billion, a year-on-year increase of 21%, surpassing the firm's and market expectations by 5% and 4%. Accommodation reservations grew 15% year-on-year, and transportation ticketing revenue grew 12% year-on-year, accounting for 41% and 35% of total revenue respectively, and contributing 42% and 22% of the net revenue increment. Gross profit increased 20% year-on-year, with the gross profit margin remaining stable at 79%. Operating profit was RMB 25 billion, a year-on-year increase of 10%, slightly below the firm's and market expectations by 2% and 4%. Adjusted net profit attributable to shareholders was RMB 35 billion, exceeding the firm's and market expectations by 5% and 8%.
Key Operational Data for 2025: 1) GMV: Gross Merchandise Volume for the core OTA business in 2025 was RMB 11 trillion, an 8% decrease year-on-year. Accommodation reservations and air ticket bookings were approximately RMB 280 billion and RMB 550 billion respectively. 2) International Business: In 2025, total bookings on international OTA platforms increased approximately 60% year-on-year, serving about 20 million inbound travelers (with APAC as the primary source), and connecting over 150,000 hotels. International platform bookings hit a record high in Q4 2025. For the full year 2025, international business contributed approximately 40% of total revenue and bookings, up from 35% in 2024. 3) Ecosystem Investment: In 2025, RMB 29 billion was invested in enhancing user experience, and over RMB 10 billion was invested in inbound tourism. Management highlighted that current investment priorities are inbound tourism, social responsibility, and AI innovation.
Q1 2026 Operational Data Update: Based on earnings call information, during the Spring Festival holiday, domestic travel bookings on the Trip.com platform saw double-digit year-on-year growth, with Average Daily Rate (ADR) slightly increasing year-on-year. Outbound travel also experienced double-digit growth. For the first quarter to date, bookings on international OTA platforms increased 60% year-on-year. Future strategic focuses include enhancing brand influence and increasing the supply of localized products. The firm anticipates Q1 total revenue to grow 15% year-on-year, with accommodation reservations and transportation bookings growing 16% and 10% year-on-year respectively.
For the full year 2026, the firm maintains its expectation of 13% year-on-year growth in total revenue. Considering increased investment in international business and its rising revenue contribution, the adjusted net profit forecast for 2026 is lowered by 5% to RMB 202 billion, implying a profit margin of 28.6%. The firm remains optimistic about the company's advantages in domestic supply-side capabilities, maintaining relatively stable market share, sustained high growth in international business, and medium-to-long-term profit margins above 30%. The current share price is believed to already reflect potential impacts from regulatory developments and business adjustments.
Risk warnings include weak consumer spending affecting travel expenditure, international business progress falling short of expectations, and extreme weather impacting travel.
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