CICC has released a research report revising its earnings estimates for TravelSky Technology (00696), lowering the 2026 and 2027 profit forecasts by 4% each to RMB 2.482 billion and RMB 2.662 billion respectively. The adjustment primarily reflects the expectation that elevated fuel surcharges may continue to dampen passenger travel volumes, prompting a modest downward revision to system processing volume assumptions. The current share price corresponds to 8.5 times and 7.7 times the projected 2026 and 2027 price-to-earnings ratios. The firm maintains its outperform industry rating while reducing the target price by 15% to HK$11, which equates to 11 times the 2026 price-to-earnings ratio (down from the previous 13 times, mainly due to weakened market preference for the sector amid sluggish resident travel growth). This target implies a 32% upside from the current share price.
First-half 2026 results align with expectations
The company posted first-half 2026 revenue of RMB 4.112 billion, representing a 6% year-on-year increase, while net profit attributable to shareholders reached RMB 1.543 billion, up 7% from the prior year. These results broadly matched the firm's projections. Although revenue from aviation information technology services saw a slight decline, the airport digitalization business and travel intelligence products and services delivered standout performances.
Airport digitalization and smart travel products drive growth
During the first half of 2026, the aviation information platform services segment generated revenue of RMB 2.352 billion, reflecting a 2% year-on-year decrease, with system processing volumes remaining roughly flat. This softness was primarily attributed to the significant negative impact of higher fuel surcharges on passenger travel since April. Additionally, the firm estimates that currency fluctuations exerted some downward pressure on revenue from foreign airlines. In contrast, the airport digitalization business surged 44% year-on-year, while revenue from travel intelligence products and services climbed 15%, collectively propelling overall revenue growth.
Cost control remains steady
Operating costs in the first half of 2026 dipped 0.4% year-on-year, supported by an 8% decline in technical support and maintenance fees due to research project progress, an 8% reduction in departure and distribution support costs, and a 49% drop in hardware and software costs related to airport digitalization. Furthermore, the company recorded a credit impairment reversal of RMB 0.16 billion in the first half, benefiting from improved customer payment collections, though this was down from the RMB 1.77 billion reversal seen in the first half of 2025.
Monitoring travel trends amid high fuel prices and AI investments
In July 2026, domestic and international airline system processing volumes grew 4% and 8% year-on-year respectively. Despite persistently high fuel surcharges, the firm believes that airlines' sales strategies may exert a more positive influence on passenger traffic and recommends continued monitoring. Additionally, based on the company's interim report, it is actively advancing the integration of AI with aviation and travel services, and the firm suggests watching the potential effects on both the cost and revenue fronts.
Comments