UOB Kay Hian
Date of Report: Tuesday, 19 August 2025
Tongcheng Travel Holdings (780 HK): Robust Q2 Performance and Optimistic Margin Outlook Fuel Bullish Sentiment for 2025

Company Overview: Tongcheng Travel Holdings

Tongcheng Travel Holdings, an innovative one-stop online travel agency (OTA), provides an extensive suite of travel products and services, ranging from transportation ticketing to accommodation reservations and more. The company’s ability to cater to virtually every travel need makes it a compelling choice for users and investors alike.

• Share Price: HK\$19.66
• Target Price: HK\$25.00 (Upside: +27.2%)
• Market Cap: HK\$47.85 billion (US\$6.11 billion)
• Major Shareholders: Tencent Holdings (20.4%), Trip.com Group (19.9%), JPMorgan Chase & Co (6.0%)
• GICS Sector: Consumer Discretionary
• Ticker: 780 HK

Q2 2025 Results: Strong Earnings and Margin Expansion

Tongcheng Travel Holdings reported a solid second quarter for 2025, exceeding analyst expectations on earnings and margin performance. Revenue grew 10% year-over-year to RMB 4.7 billion, aligning with consensus estimates. Adjusted net profit surged by 18% YoY to RMB 775 million, surpassing both company and market guidance.

Segmental Performance and Operational Highlights

• Transportation Ticketing: Revenue reached RMB 1.9 billion, up 8% year-over-year, driven by increased ticketing volume and improved value-added services. Focused marketing investments yielded higher ROI.
• Accommodation Reservation: Revenue soared 15.2% YoY to RMB 1.4 billion, reflecting enhanced monetization capabilities.
• Other Segments: Revenue jumped 25% YoY to RMB 755 million, bolstered by expansion of the hotel management platform, now operating over 2,700 hotels with 1,500 more in the pipeline.
• Tourism: Revenue slid 8% YoY to RMB 662 million, impacted by reduced outbound travel to Southeast Asia due to safety concerns.

Q3 2025 and Full-Year Guidance: Sustained Growth and Margin Expansion

• Q3 Revenue Projection: Expected to grow 7–12% YoY to between RMB 5.3–5.6 billion.
• Core OTA Revenue: Anticipated growth of 10–15% YoY.
• Tourism Revenue: Projected to decline 5–10% YoY.
• Adjusted Net Profit: Target range RMB 1.0–1.05 billion, with ongoing margin expansion.
• Operating Margin: OTA margin to rise to 18–19%, tourism margin to remain profitable at 1–2%.

Key Financials: Multi-Year Forecast

Operating Metrics: User Base and International Expansion

• User Growth: 87% of registered users were from non-Tier 1 cities; 69% of new paying users on the Weixin platform from Tier 3 cities and below.
• Monthly Active Users: 251.7 million (+10.2% YoY).
• Monthly Paying Users: 42.5 million (+9.2% YoY), with a paying ratio at 18.4%.
• International Air Ticket Volume: Up 30% YoY, boosted by international expansion and optimized user subsidies.
• International Contribution: 6% of transportation and 2–3% of hotel revenue.
• Hotel GMV: Mid-single-digit growth; hotel take rate at 9.5–10%.
• Transportation GMV: Single-digit decline; take rate stable at 4%.
• Hotel Booking Volume: Mid- to high-single-digit growth; average daily rate (ADR) up low-single-digit.

Margin Improvement and Segmental Guidance

• Gross Profit Margin: Stable at 65%, unaffected by normalized user subsidies.
• Sales & Marketing Ratio: Up 2ppt YoY to 33% in Q2 2025.
• Adjusted Net Margin: Expanded 1ppt YoY to 16.6%.
• Accommodation Reservation Revenue (Q3 2025): Expected to grow 10–15% YoY, with ADR and order volume growth continuing.
• International Hotel Bookings: Estimated growth of 30% YoY in Q3 and 40% in Q4 2025.
• Transportation Ticketing Revenue (Q3 2025): Projected to rise 7–12% YoY; air ticketing to match industry trends; take rate at 4%.
• Other Revenue: Predicted to accelerate to 30–35% YoY due to robust hotel management business.
• Tourism Revenue: Expected to decline 4–5% YoY in Q3 2025.
• OTA Operating Margins: Anticipated breakeven as the company scales back low-margin projects.

Full-Year 2025 Outlook: Accelerating Core Growth and International Focus

• Core OTA Revenue Growth: Anticipated at 13–18% YoY.
• Accommodation Reservation Revenue: Projected to rise 15–20% YoY.
• Transportation Revenue: Expected increase of 7–12% YoY.
• Other Revenue: Forecasted strong growth of 30–35% YoY.
• Tourism Revenue: Likely to decline by 10%.
• Adjusted Net Profit: Estimated growth of 18–22% YoY to RMB 3.3–3.4 billion.
• International Travel: Will contribute 6–7% of total revenue, with increased investment in overseas hotel business.

Strategic Investments and Business Focus

• Investment in Dalian Shengya: TT, via its subsidiary Shanghai Tongcheng Enterprise Management Partnership, fully subscribed for shares at RMB 24.75 each, totaling RMB 956 million. Dalian Shengya’s attractions include Ocean World and Polar World.
• Focus on Core OTA: Continuing to prioritize its main online travel agency operations.

Earnings Revision, Risks, and Valuation

• Earnings Revision: Q3 2025 and full-year 2025 revenue growth forecasts remain largely unchanged at 11% and 12% YoY, respectively. 2025 adjusted net profit estimates increased by 5%, reflecting margin improvements from international and tourism segments breaking even.
• Risks: Potential intensification of price wars and competition, and normalization of domestic travel demand.
• Valuation: Maintained BUY rating with a target price of HK\$25.00, based on 17x 2026F PE, implying a 1x PEG. Shares trade at 13.6x 2026F PE, below historical mean of 25x.
• Share Price Catalysts: Strong macro recovery, continued travel market growth in H1 2025, and increasing ARPU driven by long-haul travel.

Profit & Loss, Balance Sheet, and Cash Flow Highlights

Conclusion: Investment Thesis for Tongcheng Travel Holdings

Tongcheng Travel Holdings continues to demonstrate exceptional growth momentum, margin expansion, and operational discipline. Its strong Q2 2025 performance, robust guidance for the remainder of the year, and strategic initiatives in international travel and hotel management position it as a leading player in China’s travel sector. With a compelling valuation and multiple catalysts on the horizon, the company presents an attractive opportunity for investors seeking exposure to the growing travel and leisure market in Asia.

Disclosures/Disclaimer

This report is prepared by UOB Kay Hian Private Limited and is intended for general information purposes only. It is not an offer or solicitation to deal in securities or investment advice. Recipients should seek professional financial advice before making investment decisions. The report is confidential and not to be distributed or reproduced without permission. Please refer to jurisdictional guidelines for further details.