Lyon: TRIP.COM-S (09961) short-term profit margin may be under pressure, and it is expected that China's anti-monopoly actions will become more normalized

Lyon releases research report stating that the State Administration for Market Regulation of China has initiated an investigation into the monopolistic practices of Trip.com Group Ltd. Sponsored ADR (09961). Currently, the company is operating normally, but the ADR price of Trip.com Group Ltd. Sponsored ADR (TCOM.US) fell by 17% due to the impact of this news. Lyon estimates that China's anti-monopoly actions may become more normalized. The research firm believes that the investigation into Trip.com Group Ltd. Sponsored ADR may focus on exclusive cooperation rights and whether the platform uses its advantage to pressure merchants. Lyon believes that even if Trip.com Group Ltd. Sponsored ADR loses exclusive cooperation rights with merchants, it can still maintain strong competitiveness with its large transaction volume and long-term partnerships with hotels. However, Trip.com Group Ltd. Sponsored ADR may need to provide more support to merchants, which could temporarily lower profit margins. Lyon expects that Trip.com Group Ltd. Sponsored ADR will have an adjusted operating profit margin of approximately 29% by 2025-26. However, measures to support merchants may pressure profit margins, but given the relatively moderate competition in the online travel market, the firm believes that the company can offset some of the impact by further improving operational efficiency.