Earnings Alert: 4Q23 revenue surged 105%; further recovery in outbound travel supports growth ahead
- 4Q23 revenue surged 105% y-o-y to Rmb10.3bn, in line; earnings beat consensus by 68% on lower marketing expenses
- Outbound hotel and air reservations in 4Q23 recovered to c.80% of 2019 level, outpacing the industry’s 60% level
- Raised FY24F/FY25F adjusted earnings by 9%/9% to reflect better operating leverage
- Maintain BUY on solid growth profile with higher TPs of HK$541/US$72
4Q23 results highlights
Revenue increased by 105% y-o-y to Rmb10.3bn, in line with market expectations, surpassing 4Q19’s level by 24%.
By segment, accommodation reservation revenue surged 131% y-o-y to Rmb3.9bn, with domestic hotel bookings jumping by 130% y-o-y. Transportation ticketing revenue increased by 86% y-o-y to Rmb4.1bn. Package tours increased by 329% y-o-y to Rmb704m. Corporate travel revenue surged 129% y-o-y to Rmb634m.
Sales and marketing expenses increased by 103% y-o-y to Rmb2.3bn, 21% lower than market expectations due to fewer marketing promotion activities during the non-peak season. The opex ratio contracted substantially by 22 ppts from 81% in 4Q22 to 59% in 4Q23.
Non-GAAP net profit was Rmb2.7bn (vs 4Q19’s Rmb1.2bn and 4Q22’s Rmb498m), exceeding market expectations by 68%.
Outlook
Trip.com’s overall recovery pace is on track and in line with market expectations. Moreover, its outbound hotel and air reservations both recovered to over 80% of pre-Covid level in 4Q23, ahead of 60% for the industry in terms of international air passenger volume. Its global OTA platform registered 70% increase y-o-y, or 100% compared to 2019 level.
During the Chinese New Year, the number of domestic tourist trips and domestic tourism spending in China increased 34% y-o-y and 47% y-o-y respectively, representing 119% and 108% of the levels in 2019, according to MCT Gov data. The outbound flight capacity has reached 70% of 2019’s level during CNY. Trip.com’s growth has outpaced the industry, with its domestic hotel and air reservations bookings increasing by 60% and 50% y-o-y respectively. Its outbound travel has surpassed 2019 level. Looking ahead, we expect domestic revenue to grow by 14% in FY24.
International business is the key growth engine of Trip.com. Management reiterated its target of mid-double-digit growth and 15-20% revenue contribution for the group in the next 3-5 years (up from high-single digit in FY23) and to turn profitable during the same time frame. Trip.com now ranks No.1 in Hong Kong, and No.2 in ASEAN region (behind Agoda).
Overall, we expect revenue to grow by 26% in 1Q24, supported by robust domestic travel demand and gradual recovery of outbound flight capacity as well as ongoing international market expansion.
We revised up our FY24F/FY25F non-GAAP net profit by 9%/9% after incorporating higher operating margins. We now forecast FY24F/FY25F revenue growth of 18%/16% and non-GAAP net profit to reach Rmb13.7bn/ Rmb15.5bn, respectively. The stock is trading at 17x FY24F PE, c.1.1 SD below its 5-year historical average. We are positive on Trip.com’s long-term growth prospects, supported by structural changes in customer travel preferences, new revenue expansion from inbound business and active expansion in overseas markets. We maintain our BUY rating and revise our TPs to HK$541/US$72 based on 24x FY24F non-GAAP net income.
