Tongcheng-Elong (780 HK) Company Update Summary
Core Content
Tongcheng-Elong (780 HK) reported its third quarter of 2020 (3Q20) results, showing a solid recovery with revenue and adjusted net profit slightly above consensus. However, the company provided a soft revenue guidance for 4Q20, which fell below expectations, but the adjusted net profit guidance exceeded the consensus. The management expects 33% YoY growth in paying users in 2021, with faster hotel growth compared to 2019.
Key Financial Highlights
Earnings Summary (YE 31 Dec)
| Metric |
FY19A |
FY20E |
FY21E |
FY22E |
| Revenue (RMB mn) |
7,393 |
6,038 |
9,248 |
10,926 |
| YoY growth (%) |
NA |
-18.3 |
53.2 |
18.1 |
| Adj. net income (RMB mn) |
1,544 |
970 |
1,896 |
2,449 |
| Adj. EPS (RMB) |
0.74 |
0.47 |
0.91 |
1.18 |
| YoY growth (%) |
68.6 |
-37.2 |
95.5 |
29.1 |
| P/E (x) |
18.0 |
28.7 |
14.7 |
11.4 |
| P/B (x) |
0.4 |
0.4 |
0.4 |
0.3 |
| ROE (%) |
5.6 |
3.7 |
7.5 |
10.5 |
3Q20 Performance
- Revenue: -7% YoY, 1% above estimate
- Adj. net profit: -11% YoY, 4% above estimate
- 4Q20E revenue guidance: -5% to 0% YoY (vs. consensus +2% YoY)
- 4Q20E adj. net profit: beat consensus by 8%
Revenue Breakdown
| Revenue Segment |
1Q19 |
2Q19 |
3Q19 |
4Q19 |
1Q20 |
2Q20 |
3Q20 |
| Accommodation reservation |
489 |
553 |
694 |
622 |
229 |
384 |
685 |
| Transportation ticketing |
1,259 |
937 |
1,140 |
1,182 |
687 |
726 |
1,055 |
| Others |
35 |
100 |
229 |
153 |
89 |
90 |
175 |
Earnings Revision (CMBIS vs Consensus)
| Metric |
CMBIS |
Consensus |
Diff (%) |
| Revenue |
6,038 |
6,116 |
-1.3% |
| Gross Profit |
4,222 |
4,267 |
-1.1% |
| Operating Profit |
588 |
527 |
+11.6% |
| Adj. net profit |
970 |
1,011 |
-4.1% |
| Adj. EPS (RMB) |
0.47 |
0.47 |
-0.1% |
| Gross Margin |
69.9% |
69.8% |
+0.2ppts |
| Operating Margin |
9.7% |
8.6% |
+1.1ppts |
| Adj. net margin |
16.1% |
15.9% |
+0.2ppts |
Outlook for 2021
The company expects a stronger recovery in 2021 compared to 2019, with:
- Paying users growth: 33% YoY
- Hotel growth: faster than previous years
- Recovery drivers: improving travel, cross-selling, offline user acquisition, and narrowed ADR (Average Daily Rate) decrease
Shareholding Structure
| Shareholder |
Percentage |
| Tencent |
22.0% |
| Trip.com |
21.4% |
| Suzhou Industrial Park |
7.7% |
Stock Data
| Metric |
Value (HK$) |
| Market Cap |
31,708 mn |
| Avg 3 mths t/o |
111.04 mn |
| 52w High/Low |
16.48 / 8.74 |
| Total Issued Shares |
2,169 mn |
Share Performance
| Period |
Absolute (%) |
Relative (%) |
| 1-mth |
1.0 |
-6.0 |
| 3-mth |
-0.1 |
-4.6 |
| 6-mth |
10.7 |
2.4 |
Analyst Recommendations
- Maintain BUY with Target Price HK$19.0
- Current Price: HK$14.6
- Up/Downside: +30%
Key Observations
- Stronger recovery in 2021 is anticipated due to better-than-industry performance and productivity enhancement.
- Lower-tier cities showed faster recovery in 3Q20, with room nights nearly +30% YoY.
- Transportation and hotel segments showed mixed performance in 3Q20, with transportation ticketing volume increasing by over 20% in domestic air and 80% in bus ticketing.
- Offline channels contributed 11% of MPU (Monthly Paying Users) in 3Q20.
- The target price is unchanged at HK$19.0, reflecting a 19x FY21E P/E, in line with the industry average multiple.
Conclusion
Despite a soft 4Q20 revenue guidance, Tongcheng-Elong demonstrated resilience and a strong recovery in 3Q20. The company is expected to outperform the industry in 2021, with a focus on user growth, hotel expansion, and revenue diversification. The BUY rating is maintained, with the target price unchanged, reflecting confidence in the company's long-term recovery potential and operational efficiency.
