Earnings First Take: Tongcheng Travel (780 HK) – 1Q22 results above market expectations
• Revenue in 1Q22 increased by 6.5% y-o-y to Rmb1,718m, above market expectations of c.3% growth
• The better-than-expected performance was mainly due to higher room nights sold in lower-tier cities
• Adjusted net profit decreased by 18% to Rmb250m, above consensus of c.25% decline
• Expect positive share price reaction
What’s New
– Tongcheng Travel (780 HK) announced its 1Q22 results today after HK market close.
– Revenue increased by 6.5% y-o-y to Rmb1,718m, above market expectations of c.3% growth.
– Segment wise, accommodation reservation services revenue increased by 18% to Rmb543m, driven by higher room nights sold in lower-tier cities.
– Transportation ticketing services revenue decreased by 1% to Rmb1,017m; others (including advertising revenue) grew by 20% to Rmb158m.
– Adjusted net profit decreased by 18% to Rmb245m, slightly above market consensus of c.25% decline.
– Average MAUs increased by 4.5% to 245m and monthly paying users (MPUs) increased by 16.1% to 31.7m in 1Q22.
Our View:
– We expect positive share price reaction to the resilient results.
– The outperformance was due to better than expected hotel room nights sold in lower-tier cities, driven by higher cross-selling ratio across transportation and accommodation segments.
– We expect a weak performance in 2Q22 caused by the resurgence of Covid. Yet, the company should be able to outpace the industry given its strong advantages in lower-tier cities, which are relatively less impacted by Covid.
– We currently rate BUY with TP of HK$25.