by winston » Wed Mar 08, 2023 10:48 am
not vested
Trip.com Group Ltd (9961 HK/TCOM US)
Bouncing back stronger
4Q22 revenue grew 7% y-o-y to Rmb5bn, driven by strong transportation ticketing growth
Non-GAAP earnings soared by 61% to Rmb439m, better than consensus of Rmb97m loss due to cost control
Raised FY23F/FY24F adjusted earnings by 4%/1% to reflect stronger travel demand
Earnings Alert: 4Q22 Non-GAAP net profit soared 61%, above market expectations, faster recovery pace ahead
4Q22 revenue grew 7% y-o-y to Rmb5bn, driven by strong transportation ticketing growth
Non-GAAP earnings soared by 61% to Rmb439m, better than consensus of Rmb97m loss due to cost control
Raised FY23F/FY24F adjusted earnings by 4%/1% to reflect stronger travel demand
Maintain BUY with higher TP of HK$400/ US$53
4Q22 Result Highlights
- 4Q22 revenue increased by 7% y-o-y to Rmb5bn, above market expectations.
- Segment-wise, accommodation reservation revenue decreased by 12% to Rmb1.7bn. Transportation ticketing services revenue grew by 45% to Rmb2.2bn. The strong growth was due to the strong recovery of overseas markets during the period, while outbound air-ticket bookings and hotel bookings increased by over 200% and 140% y-o-y in 4Q22.
- Corporate travel revenue decreased 25% to Rmb277m; packaged tour revenue decreased by 7% to Rmb370m.
- The opex ratio narrowed by 10 ppts from 91% in 4Q21 to 81% in 4Q22, mainly driven by 15% y-o-y decline in marketing expense amid the Covid outbreak and continued cost control efforts in several business lines.
- Non-GAAP net profit grew by 61% to Rmb498m, above market consensus of Rmb97m loss. The outperformance was mainly driven by stronger-than-expected overseas market growth and solid operating efficiency improvement.
Our view
--Management disclosed they have seen strong recovery of China’s outbound travel since the beginning of the year and expect faster growth in overseas markets in coming quarters.
- Looking into 1Q23, management shared that air ticketing and hotel bookings in domestic market have surpassed the same period in 2019, while outbound travel bookings increased 300% y-o-y (or 40% of 2019 level). We expect outbound travel growth will further release in 2Q and 3Q23 along with increased capacity of outbound routes. We expect 1Q23 revenue will recover to c.90% of the 1Q19 level, or growing 80% y-o-y, mainly driven by strong pent-up travel demand and resumption of business travel.
-In terms of margin, we expect Trip.com can achieve mid-teen operating margin in FY23, largely recovering to pre-Covid level, and an improvement from low-single digit margin in FY22. Management maintains confidence to achieve 20-30% operating margin in mid-long term, backed by larger business scale and improved operating efficiency across business lines.
- We revised up FY23F/FY24F Non-GAAP net profit earnings by 4%/1%, factoring in the faster-than-expected travel recovery pace. The earnings growth has adjusted to reflect higher marketing expenses after reopening. We now forecast FY23F / FY24F revenue growth of 65%/ 28% for FY23F/ FY24F, and non-GAAP net profit to increase by 320%/63% to reach Rmb5.4bn/ Rmb8.9bn in FY23F/FY24F.
- We believe Trip.com’s long-term growth profile remains robust, supported by structural changes in customer travel preference and further penetration in lower tier cities as well as solid expansion in overseas markets. We maintain our BUY rating and revise our TP to HK$400 / US$53 based on 25x FY24F adjusted net profit.
Source: DBS
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