Citi: OTA industry valuations have neared lows; reiterates "Buy" ratings on Trip.com Group Ltd. Sponsored ADR (TCOM.US) and TONGCHENGTRAVEL (00780)

Citi issued a research report stating that OTA industry valuations have neared lows, and it currently reiterates "Buy" ratings on Trip.com Group Ltd. Sponsored ADR (TCOM.US) and TONGCHENGTRAVEL (00780), with a target price of HK$22 for TONGCHENGTRAVEL and US$61 for Trip.com Group Ltd. Sponsored ADR. The bank also expects Trip.com Group Ltd. Sponsored ADR to outperform in 2027, as pressure on commission rates and the demand base will gradually ease. The bank also noted that Chinese online travel platforms (OTAs) are about to usher in festive periods including the Mid-Autumn Festival and the "October 1st" National Day Golden Week. Although overall travel demand in the third quarter was lackluster due to softer macro conditions, extreme weather, and high oil prices, market demand improved slightly in August. In addition, with the Mid-Autumn Festival and National Day close together, it believes more travelers may combine annual leave to extend their holidays, which should lead to an improvement in overall travel demand. The bank expects the two OTAs to post relatively steady profit margins under strict cost control. The bank currently forecasts that Trip.com Group Ltd. Sponsored ADR's third-quarter adjusted operating margin will narrow by about 200 basis points year on year, while the narrowing in the fourth quarter may slightly expand due to reduced commission rate pressure for the full quarter; it expects TONGCHENGTRAVEL's adjusted net margin to be roughly flat year on year.