20220520-招银国际-同程旅行-00780.HK-Looking_into_2H22E_recovery_4页_883kb

Tongcheng-Elong (780 HK) Summary

Core Content

Tongcheng-Elong (TC) is a leading Chinese online travel platform that reported strong performance in 1Q22, with revenue and adjusted net profit rising 6% and falling 17% YoY respectively, surpassing market expectations. The company's management guided that 2Q22E would see a significant revenue decline of 40-45% YoY, with adjusted net profit expected to be between RMB50-100 million. Despite the guidance, the stock price already reflects the softness of the second quarter due to the impact of lockdowns and travel restrictions. The report anticipates a gradual recovery in 2H22E, with revenue expected to stabilize by September and potentially show positive growth in 4Q22E, assuming the epidemic does not worsen.

Main Points

• 1Q22 Performance:

  • Revenue: +6% YoY, +4% above consensus
  • Adjusted net profit: -17% YoY, -12% above consensus
  • Adjusted net profit reached RMB245 million, near the high end of guidance
  • Segment performance:
    • Accommodation: +18% revenue, -1% adjusted net profit
    • Transportation: -1% revenue, +20% others
  • OPM improved to 8% (from 3.5% in 4Q21), while GPM slightly contracted to 72.5% (from 75% in 4Q21)

• 2Q22E Outlook:

  • Revenue: -40 to -45% YoY
  • Adjusted net profit: RMB50-100 million
  • Segment forecast:
    • Accommodation revenue to drop 38% YoY with higher take rate and lower ADR
    • Transportation revenue to fall 48% YoY with stable take rate
  • The quarter is expected to be the worst in 2022, due to the impact of the epidemic resurgence

• Recovery Outlook:

  • Gradual rebound expected from Jul to Aug 2022
  • Revenue to stabilize by September, reaching 2021 levels
  • Positive growth anticipated in 4Q22E if the epidemic remains under control
  • TC is expected to outperform the industry due to lower exposure in high-tier cities

• Full-Year Forecast (FY22E):

  • Revenue: -9.7% YoY
  • Adjusted net profit: -19.0% YoY
  • Adjusted net margin: 15.4%
  • The report estimates a full-year revenue decline of 10% and adjusted net profit decline of 19% YoY

• Earnings Forecast Adjustment:

  • The report trimmed TC's FY22-24E earnings forecast by 21-27% to reflect the impact of temporary travel restrictions
  • Long-term fundamentals are considered intact, with a revised target price of HK$18 (24x FY23E P/E)

Key Financials

Shareholding and Performance

• Major Shareholders:

  • Tencent: 21.47%
  • Trip.com: 20.94%
  • T Rowe Price: 6.02%

• Share Performance:

  • 1-month: -3.6% (Absolute), +4.2% (Relative)
  • 3-month: -17.4% (Absolute), +1.1% (Relative)
  • 6-month: -22.2% (Absolute), -0.8% (Relative)

• Market Data:

  • Market Cap: HK$31,455 million
  • 52-week High/Low: HK$21.35 / HK$9.00

Analyst Recommendation

• Rating: BUY (Maintain)
• Target Price: HK$18 (from previous HK$20)
• 12-month upside: +34.3%
• Current Price: HK$13.4

Conclusion

Despite the challenges posed by the pandemic in 2Q22E, the report anticipates a gradual recovery for Tongcheng-Elong in the second half of 2022. The company's lower exposure in high-tier cities is seen as a positive factor for outperforming the industry. The report maintains a BUY rating, with a revised target price of HK$18, reflecting a more conservative outlook on short-term earnings but confidence in long-term fundamentals.