Asian Hedge Fund Manager, Long Short Equity, Macro

David Mudd

Equity Bottom-Up

Tongcheng Travel Holdings  / Equity Bottom-Up

<ul>
<li>Hong Kong is showing strong market momentum as consumer staples, consumer discretionary, healthcare and tech surge on increased momentum.</li>
<li><a href="https://www.smartkarma.com/entities/xtep-international-holdings" target="_blank" data-smartkarma-citation="entities:18118:1" rel="noopener">Xtep International (1368 HK)</a> had a good 1H24 and benefited from better consumer sentiment. Analysts are upgrading <a href="https://www.smartkarma.com/entities/tongcheng-travel-holdings-ltd" target="_blank" data-smartkarma-citation="entities:27363:1" rel="noopener">Tongcheng Travel Holdings (780 HK) on an improved outlook.</a></li>
<li>Goldman Sachs upgraded their rating on <a href="https://www.smartkarma.com/entities/bilibili-inc-83a27302-cd7d-4e6a-a1de-bcf93eb022c3" target="_blank" data-smartkarma-citation="entities:32215:1" rel="noopener">Bilibili (9626 HK)</a> , <a href="https://www.smartkarma.com/entities/bilibili-inc" target="_blank" data-smartkarma-citation="entities:26793:1" rel="noopener">Bilibili (BILI US)</a> to a BUY with improving user MAU/DAU measures and the success of its newly launched game.</li>
</ul>


Hong Kong is showing strong market momentum as consumer staples, consumer discretionary, healthcare and tech surge on increased momentum.
Xtep International (1368 HK) had a good 1H24 and benefited from better consumer sentiment. Analysts are upgrading Tongcheng Travel Holdings (780 HK) on an improved outlook.
Goldman Sachs upgraded their rating on Bilibili (9626 HK) , Bilibili (BILI US) to a BUY with improving user MAU/DAU measures and the success of its newly launched game.


BUY/SELL/HOLD: Hong Kong Stock Updates (September 28)

HK/China Equity Long-Short

Osbert Tang, CFA

<ul>
<li>
<a href="https://www.smartkarma.com/entities/tongcheng-travel-holdings-ltd" target="_blank" data-smartkarma-citation="entities:27363:1" rel="noopener">Tongcheng Travel Holdings (780 HK)</a> is still suffering from cost pressure, with adjusted net profit increased by 10.9% in 2Q24, despite a 48.1% revenue growth.</li>
<li>Both GMV and MPU growth rates have slowed in 2Q24 when compared with 1Q24, and revenue may also decelerate in 2H24 given the higher base for comparison.</li>
<li>The market will need some time to see if the moderating earnings trend will sustain, negatively affecting investor interests. Potential earnings downgrade is also a challenge.</li>
</ul>



Tongcheng Travel Holdings (780 HK) is still suffering from cost pressure, with adjusted net profit increased by 10.9% in 2Q24, despite a 48.1% revenue growth.
Both GMV and MPU growth rates have slowed in 2Q24 when compared with 1Q24, and revenue may also decelerate in 2H24 given the higher base for comparison.
The market will need some time to see if the moderating earnings trend will sustain, negatively affecting investor interests. Potential earnings downgrade is also a challenge.


Tongcheng Travel (780 HK): Seems like a Cost Issue

<ul>
<li>The upcoming Chinese New Year travel rush is expected to see air passenger volume reach 80m, a 9.8% increase vs. 2019. <a href="https://www.smartkarma.com/entities/tongcheng-travel-holdings-ltd" target="_blank" data-smartkarma-citation="entities:27363:1" rel="noopener">Tongcheng Travel Holdings (780 HK)</a> is a key beneficiary.</li>
<li>In addition to air ticket booking, Tongcheng can gain from demand for related services and products. The focus on lower-tier cities will make it better satisfy their demand. </li>
<li>Its FY24F PER of 15.2x is lower than sector average of 16.4x, yet 3-year EPS CAGR of 30.7% is higher. Its underperformance against <a href="https://www.smartkarma.com/entities/trip-com-group-ltd" target="_blank" data-smartkarma-citation="entities:180:1" rel="noopener">Trip.com (TCOM US)</a> can be reversed.</li>
</ul>


The upcoming Chinese New Year travel rush is expected to see air passenger volume reach 80m, a 9.8% increase vs. 2019. Tongcheng Travel Holdings (780 HK) is a key beneficiary.
In addition to air ticket booking, Tongcheng can gain from demand for related services and products. The focus on lower-tier cities will make it better satisfy their demand. 
Its FY24F PER of 15.2x is lower than sector average of 16.4x, yet 3-year EPS CAGR of 30.7% is higher. Its underperformance against Trip.com (TCOM US) can be reversed.


<ul>
<li>While adjusted net profit of <a href="https://www.smartkarma.com/entities/tongcheng-elong-holdings-ltd" target="_blank" data-smartkarma-citation="entities:27363:1" rel="noopener">Tongcheng Travel Holdings Ltd (780 HK)</a> plummeted in 4Q22, the positive momentum in 1Q23 as revealed supports a sharp recovery in FY23.</li>
<li>Its huge exposure to lower-tier cities will fuel outlook while increase in monetisation will support profitability rebound. Success at Blackwhale membership program is another growth engine.  </li>
<li>Management is confident that revenue growth and better efficiency will lead the return of FY23 margin to pre-pandemic levels. Net cash position (12% of share price) is an added strength. </li>
</ul>


While adjusted net profit of Tongcheng Travel Holdings Ltd (780 HK) plummeted in 4Q22, the positive momentum in 1Q23 as revealed supports a sharp recovery in FY23.
Its huge exposure to lower-tier cities will fuel outlook while increase in monetisation will support profitability rebound. Success at Blackwhale membership program is another growth engine.  
Management is confident that revenue growth and better efficiency will lead the return of FY23 margin to pre-pandemic levels. Net cash position (12% of share price) is an added strength. 


Tongcheng Travel (780 HK): Best for Capturing Lower-Tier Cities' Growth

<ul>
<li>
<a href="https://www.smartkarma.com/entities/tongcheng-travel-holdings-ltd" target="_blank" data-smartkarma-citation="entities:27363:1" rel="noopener">Tongcheng Travel Holdings (780 HK)</a> has a solid FY23 and 4Q23 with massive net profit recovery. Earnings momentum for FY24 and FY25 look to stay impressive.</li>
<li>FY23 is a record year of profit, demonstrating its ability to gain market share after COVID-19 disruption. Further volume growth will lead to better operating leverage.</li>
<li>Net cash reached Rmb2.3bn, up 90.4% YoY, showcasing its cash-generating ability. The first-time dividend payout also reflected management's confidence on the outlook.</li>
</ul>



Tongcheng Travel Holdings (780 HK) has a solid FY23 and 4Q23 with massive net profit recovery. Earnings momentum for FY24 and FY25 look to stay impressive.
FY23 is a record year of profit, demonstrating its ability to gain market share after COVID-19 disruption. Further volume growth will lead to better operating leverage.
Net cash reached Rmb2.3bn, up 90.4% YoY, showcasing its cash-generating ability. The first-time dividend payout also reflected management's confidence on the outlook.


Tongcheng Travel (780 HK): Riding the High Tide

China

Tongcheng Travel Holdings Limited operates as an online travel agency. The Company provides transportation ticketing, accommodation reservation, value added travel products sales, and other services. Tongcheng Travel Holdings provides its services throughout China.

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Tongcheng Travel Holdings (780 HK)

BUY/SELL/HOLD: Hong Kong Stock Updates (September 28)

Hong Kong market continues to re-rate on the back of PBOC stimulus. XTEP and Tongcheng benefit from improved consumer sentiment and earnings...

David Mudd

Tongcheng Travel (780 HK): Seems like a Cost Issue

Tongcheng Travel faces cost pressure as adjusted net profit rises by 10.9% in 2Q24 despite strong revenue growth. Slowing growth and potential...

Osbert Tang, CFA

Tongcheng Travel (780 HK): We Are Back

CNY travel rush is expected to boost air passenger volume by 9.8% vs. 2019, benefiting Tongcheng. Its focus on lower-tier cities and strong EPS...

Osbert Tang, CFA

Tongcheng Travel (780 HK): Best for Capturing Lower-Tier Cities' Growth

Positive business momentum in 1Q23 supports a sharp recovery in FY23. Huge exposure to lower-tier cities and increase in monetisation will support...

Osbert Tang, CFA

Tongcheng Travel (780 HK): Riding the High Tide

According to www.fliggy.com, outbound travel bookings during the 5-day Labour Day holiday have doubled this year. This was achieved on a high base...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

BUY/SELL/HOLD: Hong Kong Stock Updates (September 28)

Hong Kong market continues to re-rate on the back of PBOC stimulus. XTEP and Tongcheng benefit from improved consumer sentiment and earnings...

David Mudd

Tongcheng Travel (780 HK): Seems like a Cost Issue

​Tongcheng Travel faces cost pressure as adjusted net profit rises by 10.9% in 2Q24 despite strong revenue growth. Slowing growth and potential...

Osbert Tang, CFA

Tongcheng Travel (780 HK): We Are Back

CNY travel rush is expected to boost air passenger volume by 9.8% vs. 2019, benefiting Tongcheng. Its focus on lower-tier cities and strong EPS...

Osbert Tang, CFA

Tongcheng Travel (780 HK): Best for Capturing Lower-Tier Cities' Growth

Positive business momentum in 1Q23 supports a sharp recovery in FY23. Huge exposure to lower-tier cities and increase in monetisation will support...

Osbert Tang, CFA

Tongcheng Travel (780 HK): Riding the High Tide

According to www.fliggy.com, outbound travel bookings during the 5-day Labour Day holiday have doubled this year. This was achieved on a high base...

Osbert Tang, CFA

Tongcheng Travel faces cost pressure as adjusted net profit rises by 10.9% in 2Q24 despite strong revenue growth. Slowing growth and potential...