Citigroup: OTA industry valuations are close to low, reaffirming the “buy” ratings of Ctrip (TCOM.US) and Tongcheng Travel (00780)

The Zhitong Finance App learned that Citi released a research report saying that the OTA industry's valuation is close to low. Currently, it has reaffirmed the “buy” ratings for Ctrip (TCOM.US) and Tongcheng Travel (00780). The target price for Tongcheng Travel is HK$22, and the target price for Ctrip's US stock is 61 US dollars. The bank also expects Ctrip's performance to outperform in 2027, as pressure on commission rates and demand base will gradually ease.

The bank also said that China's online travel platform (OTA) is about to usher in festivals such as Mid-Autumn Festival and the “Eleventh” National Day Golden Week. Although the overall performance of travel demand in the third quarter was lackluster due to weak macroeconomic conditions, extreme weather and high fuel prices, there was a slight improvement in market demand in August. Coupled with the fact that Mid-Autumn Festival is closer to the National Day, it is believed that more travelers may extend their vacations in line with annual leave, improving overall travel demand.

The bank expects the profit margins of the two OTAs to be relatively stable under strict cost control. The bank currently predicts that Ctrip's adjusted operating profit margin for the third quarter will narrow by about 200 basis points year on year, and narrow or expand slightly in the fourth quarter due to reduced pressure on commission rates throughout the quarter; it is expected that Tongcheng's adjusted net interest rate will remain roughly the same year on year.