20201022-招银国际-同程艺龙-00780.HK-Solid_3Q20E_ahead_4页_881kb

Tongcheng-Elong (780 HK) Company Update Summary

Core Content

CMB International Securities has issued a company update on Tongcheng-Elong (TC), focusing on its financial performance and outlook for the third quarter of 2020 (3Q20E) and beyond. The report highlights the company's recovery from the impact of the pandemic, its performance in key segments, and its potential for future growth.

Main Points

• 3Q20E Performance:

  • Revenue is expected to decline by -8% YoY, slightly 1% above consensus.
  • Adjusted net profit is forecasted to decline by -14% YoY, 0% above consensus.
  • Excluding overseas business and pre-purchase factors, revenue growth is estimated at 0% to 5% YoY.

• Segment Performance:

  • Hotel Segment:
    • Revenue decline of -9% YoY, better than the previous guidance of -15% to -20% YoY.
    • Room nights growth is expected to be double-digit YoY, and take rate remains strong at 9%.
    • ADR (Average Daily Rate) is expected to decline YoY, with a -25% decline in 3Q20E.
  • Transportation Segment:
    • Revenue is expected to decline -6% YoY, with 0% to 5% YoY growth if excluding international business.
    • Air ticketing volume is forecasted to grow 10% YoY, driven by higher user safety awareness and lower prices.
    • Ground transportation revenue is expected to decline 8% YoY.
    • Transportation take rate is expected to normalize in 3Q20E, with intact margins YoY.
    • Bus tickets business is noted as a new driver for user expansion.

• Golden Week Momentum:

  • TC delivered strong growth during the Golden Week holiday, with transportation and hotel volume up 20% and 44% YoY, respectively.
  • This outperformed the industry's -21% YoY decline.
  • TC is expected to recover faster in lower-tier cities, with room nights growth of +25% YoY in 3Q20E.

• Earnings and Margins:

  • Adjusted net margin is expected to remain stable at 20% in 2H20E, despite increased S&M efforts.
  • 4Q20E topline growth may be dragged down by high comps from early 2020 CNY, overseas business, and pre-purchase hotel bookings.
  • A potential second wave of the epidemic could further impact performance.

• Earnings Forecast Revision:

  • Earnings forecast is slightly cut by 8.1% / 1.5% / 1.3% for FY20/21/22E.
  • Target price remains HK$19, with a 18x FY21E P/E.
  • BUY rating is maintained, reflecting confidence in its recovery and ROI-driven expenses.

Key Financial Highlights

Revenue and Growth

• FY19A: RMB 7,393 million, -17.3% YoY
• FY20E: RMB 6,113 million, -8% YoY
• FY21E: RMB 9,330 million, +52.6% YoY
• FY22E: RMB 11,017 million, +18.1% YoY

Adjusted Net Profit

• FY19A: RMB 1,544 million
• FY20E: RMB 971 million, -37.1% YoY
• FY21E: RMB 1,979 million, +103.8% YoY
• FY22E: RMB 2,464 million, +24.5% YoY

Adjusted EPS

• FY19A: RMB 0.74
• FY20E: RMB 0.47, -37.1% YoY
• FY21E: RMB 0.95, +103.8% YoY
• FY22E: RMB 1.19, +24.5% YoY

P/E Ratio

• FY19A: 18.0x
• FY20E: 28.7x
• FY21E: 14.1x
• FY22E: 11.3x

Shareholding Structure

• Tencent: 22.4%
• Ctrip: 21.9%
• Suzhou Industrial Park: 7.8%

Stock Performance

• 1-month: 0.8% absolute, 0.4% relative
• 3-months: 3.8% absolute, 5.9% relative
• 6-months: 18.7% absolute, 17.5% relative

Current Price and Target Price

• Current Price: HK$14.1
• Target Price: HK$19.0
• Target Price Change: +35% upside

Conclusion

The report maintains a BUY rating for Tongcheng-Elong, citing its strong recovery performance, faster-than-industry growth in lower-tier cities, and positive momentum during the Golden Week. However, the 4Q20E is expected to face pressure from high comps and potential second wave of the epidemic, leading to a slight cut in earnings forecasts. The company is expected to maintain stable margins and expand its user base through the bus tickets business. The target price remains unchanged at HK$19, with a 18x P/E multiple.

Analyst and Disclaimer

• Analyst: Sophie Huang

• Auditor: PwC

• Related Reports:

  1. Earnings intact despite mixed 3Q guidance - 31 Aug 2020
  2. Solid recovery ahead - 28 Jul 2020
  3. Moving to 2H20E recovery - 22 May 2020

• Important Disclosures:

  • CMBIS does not provide individually tailored investment advice.
  • The report is for intended recipients only and may not be reproduced or distributed without prior written consent.
  • There are risks involved in trading securities, and past performance is not indicative of future results.
  • The information is based on analyses and interpretations of publicly available data and is not guaranteed.
  • CMBIS may have conflicts of interest and is not liable for any loss incurred from reliance on the report.

• CMBIS Ratings:

  • BUY: Potential return of over 15% over next 12 months
  • HOLD: Potential return of +15% to -10%
  • SELL: Potential loss of over 10%
  • NOT RATED: Not rated by CMBIS
  • OUTPERFORM: Industry expected to outperform the broad market
  • MARKET-PERFORM: Industry expected to perform in line with the broad market
  • UNDERPERFORM: Industry expected to underperform the broad market