KGI: Tongcheng Travel Holdings Limited (780 HK) – Summer holiday to revive the domestic tourism
alanyeo
Buy Entry – 15.8 Target – 17.5 Stop Loss – 15.0
Tongcheng Travel Holdings Ltd, formerly Tongcheng-Elong Holdings Ltd, is a China-based holding company mainly providing online tourism products and services. The Company is mainly engaged in transportation ticketing services, accommodation reservation services and other services. The transportation ticketing services mainly include air ticket and train ticket booking, sales of tourism insurance and other transportation related services. The accommodation reservation services mainly provide accommodation booking services. Other services mainly include attraction ticketing, ancillary value-added user services and advertising services.
The worst could be over. China Tourism Academy released a report stating that domestic tourism had a downturn in 1H22 due to the covid outbreaks and the ensuing lockdowns. In 1H22, travelers made 1.46bn domestic visits, down 22.2% YoY. Revenue dropped by 28.2% YoY to US$173bn. However, the tourism market started to recover in June as the number of travellers recovered to 60% of last year’s level. It is expected to rebound further in July.
Resumption of inter-provincial group tours. At the beginning of June, more than ten Chinese localities moved to restart inter-provincial group tours, after the Ministry of Culture and Tourism (MCT) announced more targeted anti-epidemic measures in an effort to boost tourism.
1Q22 financials and operations review. Revenue grew by 6.5% YoY to RMB1.72bn. Adjusted net profit dropped by 18% YoY to RMB298.9mn. Average MAUs grew by 4.5% YoY to 234.2mn. Average MPUs grew by 16.1% YoY to 27.3mn.
The updated market consensus of the EPS growth in FY22/23 is 17.8%/72.0% YoY, respectively, translating to 36.2×/21.1x forward PE. The current PER is 47.5x. Bloomberg consensus average 12-month target price is HK$17.68.
