Guotai Haitong: Maintains "buy" rating for TRIP.COM-S (09961) with stable domestic performance and continued high growth overseas.

Guotai Haitong released a research report stating that it maintains its "buy" rating on TRIP.COM-S (09961), with a target price of HK$733. Domestic growth is stable, overseas growth trend continues, company investment income is increasing, and it continues to expand its user base and influence. Guotai Haitong's main points are as follows: Better than expected performance In the third quarter of 25Q3, revenue reached 18.367 billion yuan, up 15.52% year-on-year, adjusted EBITDA reached 6.346 billion yuan, up 11.73% year-on-year, and adjusted operating profit reached 6.134 billion yuan, up 12.2% year-on-year. Due to gains from selling part of investments, net profit attributable to shareholders reached 19.89 billion yuan, up 194.01% year-on-year, and adjusted net profit attributable to shareholders excluding non-recurring gains reached 19.156 billion yuan, up 221.25% year-on-year. Acceleration in business travel but slowdown in group tours 1) Transportation: The growth rate of transportation slowed in the previous quarter of 25Q2, but accelerated in this quarter due to the peak season and overseas demand, with a month-on-month growth rate of 11.6% compared to 10.8% in 25Q2. 2) Hotels: The growth rate remained in double digits on a year-on-year basis, but continued to slow down on a month-on-month basis. The bank believes that factors such as normalization of domestic and overseas growth rates are at play. 3) The growth rate of group tours has been slowing down since 25Q1 and continued in this quarter. The bank believes that while there is a structural shift in demand towards independent travel, the direct impact of risks in popular destinations in Southeast Asia and East Asia is a more immediate factor, which is expected to continue to have an impact in the short term. 4) A bright spot in this quarter is the rebound in business travel revenue growth, the highest since 24Q1. Although incremental customer contributions played a role, it also reflects a trend of stabilization and improvement in business travel demand. Operational profit maintains steady growth, competition in overseas markets has not affected growth 1) Profit margins have consistently remained stable, with the main decrease in gross profit margin due to the increasing proportion of overseas business and structural factors. 2) Since 25 years, the company has significantly increased its investment in Trip, with marketing expenses being largely in line with previous budgets. The bank believes this is related to increased investment by competitors in some overseas markets. However, this increased marketing has effectively led to rapid growth in overseas Trip and a rapid increase in user share. Therefore, competition will predominantly capture incremental market share in offline markets. 3) Ctrip has seen continued improvement in profitability over multiple quarters, reflecting a favorable competitive landscape, high stability and certainty in profits, and relatively smooth progress in overseas markets. Risk factors Economic fluctuations affecting business travel demand, overseas competition, and risks in outbound destinations.