Tongcheng-Elong (780 HK) Company Update Summary
Core Content Overview
This report provides an equity research update on Tongcheng-Elong (780 HK), focusing on its 2Q21 performance, guidance for 3Q21E and 4Q21E, and long-term growth prospects. The analysis also includes financial summaries, key ratios, and investment ratings.
Main Points
2Q21 Performance
- Revenue increased by +78% YoY to RMB 2,138 million, +0% vs. consensus.
- Adj. net profit rose by +103% YoY to RMB 398 million, +7% vs. consensus.
- Segment Performance:
- Accommodation reservation revenue up +93% YoY.
- Transportation ticketing revenue up +70% YoY.
- User Growth:
- MAU increased by +58.3% YoY.
- MPU up +79.6% YoY.
- APU up +20% YoY.
- Key Drivers:
- Release of pent-up travel demand.
- Innovative products and emerging channels.
3Q21E Guidance
- Revenue expected to decline -10% to -5% YoY vs. 3Q19, midpoint 30% below consensus.
- Adj. net profit guidance at RMB 300–350 million, midpoint 29% below consensus.
- Reasons for Caution:
- Stricter travel restrictions due to resurgence of the pandemic.
- Floods and softened consumption sentiment.
4Q21E Outlook
- Revenue is expected to rebound as the impact of the pandemic lessens.
- Adj. net profit is projected to grow due to pent-up demand and reaccelerating growth.
- Long-term fundamentals remain intact.
Key Financial Metrics
Earnings Forecast (FY21E–FY23E)
| Metric |
FY21E (RMB mn) |
FY22E (RMB mn) |
FY23E (RMB mn) |
| Revenue |
7,856 |
9,795 |
11,550 |
| Adj. net profit |
1,360 |
1,729 |
2,132 |
| Adj. EPS (RMB) |
0.61 |
0.78 |
0.96 |
| P/E (x) |
21.4 |
16.8 |
13.6 |
Earnings Revisions
- Revenue forecast reduced by 10–23% due to weaker travel demand.
- Adj. net profit forecast reduced by 10.4–23.2%.
- Target Price reduced to HK$20 from HK$21, 21x FY22E P/E.
Key Ratios
| Ratio |
FY19A (%) |
FY20A (%) |
FY21E (%) |
FY22E (%) |
FY23E (%) |
| Gross Margin |
68.6 |
71.4 |
72.8 |
73.4 |
74.1 |
| Adj. net margin |
20.9 |
16.1 |
17.3 |
17.7 |
18.5 |
| ROE |
5.6 |
2.4 |
3.6 |
5.8 |
7.4 |
| ROA |
3.8 |
1.7 |
2.7 |
4.2 |
5.3 |
| Current ratio |
1.7 |
2.1 |
2.3 |
2.4 |
2.5 |
| Net debt/equity ratio |
Net cash |
Net cash |
Net cash |
Net cash |
Net cash |
Long-term Upside Potential
- Growth Drivers:
- Lower-tier cities with 20% accommodation penetration.
- Cross-selling with 50% of bus vending machine users being new to TC.
- Margin Trends:
- Gross margin is expected to rise to 72.8% in 2Q21.
- Operating margin is projected to increase to 15.7%.
- Adj. net margin is expected to reach 18.6% in 2Q21.
Investment Recommendation
- Rating: BUY (Maintain).
- Target Price: HK$20.0 (Down from HK$21.0).
- Upside Potential: +33.3%.
- Current Price: HK$15.8.
- Key Note: Close monitoring of COVID-19 in China is recommended.
Shareholding and Stock Data
| Metric |
Value (HK$) |
| Market Cap |
34,993 |
| Avg 3 mths t/o |
115.63 |
| 52w High/Low |
21.35 / 12.50 |
| Total Issued Shares |
2,212 |
Share Performance
| Period |
Absolute (%) |
Relative (%) |
| 1-month |
-14.0 |
-4.1 |
| 3-months |
-22.6 |
-11.3 |
| 6-months |
-5.6 |
+15.2 |
Auditor and Related Reports
- Auditor: PwC.
- Related Reports:
- Looking into 2Q21E recovery acceleration – 18 May 2021.
- 2Q21E rebound in sight – 24 Mar 2021.
- Moving into 2021 recovery – 3 Mar 2021.
Analyst Certification
- The analyst certifies that the views expressed accurately reflect their personal views.
- No part of their compensation is related to the specific views in the report.
- Confirmed no trading or investment in the stock within 30 days prior to the report's release.
- Will not trade in the stock within 3 business days after release.
- No financial interests in the listed companies covered in the report.
CMBIS Ratings
| Rating |
Description |
| BUY |
>15% return in 12 months |
| HOLD |
15% to -10% return in 12 months |
| SELL |
< -10% return in 12 months |
| NOT RATED |
No rating provided |
| OUTPERFORM |
Industry outperforms the market |
| MARKET-PERFORM |
Industry performs in line with the market |
| UNDERPERFORM |
Industry underperforms the market |
Disclaimer
- Risks: Involved in trading securities.
- No Investment Advice: Provided individually.
- Accuracy: Not guaranteed.
- Responsibility: CMBIS is not liable for losses or damages from reliance on the report.
- Use: Intended for intended recipients only.
- Conflicts of Interest: CMBIS may have investment banking relationships with companies mentioned.
