Expecting resilient core business earnings growth in 2026

Expecting resilient core business earningsgrowth in 2026 Target PriceHK$25.50(Previous TPHK$25.40)Up/Downside36.0%Current PriceHK$18.75 Tongcheng Travel (TC) reported(24 Mar)its 4Q25 results: total revenue wasRMB4.8bn, up 14.2% YoY,and 2%/1% above our forecast and Bloombergconsensus estimates, respectively. Adjusted net profit was RMB780mn, up 18%YoY, and 4% ahead of both our forecast and consensus. Both revenue andOPM of the core OTA business (28.4%, flat YoY) came in line withourestimates.Following the results, we raised our 2026E/2027E non-GAAP netprofit forecasts by5%, driven by better-than-expected gross profit marginexpansion, supported by a higher contribution from the relatively higher-margincore OTA business. We expect 15% YoY growth in operating profit of the coreOTA business (or c.13% YoY excluding the consolidation impact of WandaHotel Management) in 2026, supported by resilient travel demand.OurDCF-derivedtarget price is slightly revised up to HK$25.5, implying 14.3x 2026E non-GAAP P/E.Maintain BUY rating. China Internet Saiyi HE, CFA(852) 3916 1739hesaiyi@cmbi.com.hk Ye TAO, CFA(852) 3850 5226franktao@cmbi.com.hk Core OTA businessdelivered inline revenueand earningsgrowth.In4Q25, TC’s core OTA business revenue reached RMB4.1bn (83.9% of totalrevenue), up 17.5% YoY (3Q25: 14.9% YoY), largely in line withconsensus.Revenue from transportation ticketing services, accommodation reservationservices,and other services grew by 6.5%/15.4%/53.0%YoY (3Q25:9.0%/14.7%/34.9%).The rolling 12-month number of travelers servedreached 2.0bn as of end-December, up 5.5% YoY, compared with a 6.0%YoY increase in annual paying users (APU) over the same period. Onprofitability, the 28.4% OPM of the core OTA business in 4Q25 came in linewith our estimates. Wentao LU, CFAluwentao@cmbi.com.hk Shuyin GUO(852) 3916 3716guoshuyin@cmbi.com.hk 1Q26outlook: expectingresilient revenue and earningsgrowthincoreOTA business.For 1Q26E, we estimate TCto achievetotal revenue ofRMB4.9bn, up 12.7% YoY, driven by 15.9% YoY growth in the core OTAsegment, partially offset by a 7.5% YoY decline in tourism revenue.Withinthe core OTA business, we expect 7.6%/12.9%/49.0% YoY revenue growthfor transportation ticketing, accommodation reservation (AR), and otherbusinesses, respectively. We forecast core OTA operating profit to grow16% YoY in 1Q26, translating into an OPM of 29.2%, stable YoY.For non-GAAP net profit, weare forecasting17% YoY growth to RMB922mn, drivenby revenue growth and the consolidation of Wanda Hotel Management,implying a non-GAAP net margin of 18.7% (1Q25: 18.0%). 2026E outlook.For 2026E, we expect total revenue to grow 12.5% YoY,including 14.7% YoY growth in the core OTA business and flat tourismrevenue. We forecast 15%/17% YoY growth in core OTA operating profitand group-level non-GAAP net income, respectively. Source: FactSet Disclosures& Disclaimers Analyst CertificationThe research analyst who is primary responsible for thecontent of this research report, in whole or in part, certifies that with respect to the securities or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about the subject securitiesor issuer; and (2)no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by that analyst in this report.Besides, the analyst confirms that neither the analyst nor his/her associates (asdefined in the code of conduct issued by The Hong Kong Securities and Futures Commission) (1) have dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to thedate of issue of this report; (2) willdeal in or trade in the stock(s) covered in this research report 3 business days after the date of issue of this report; (3) serve as an officer of any of the HongKong listed companies covered in this report; and (4) have any financial interests in the Hong Kong listedcompanies covered in this report. CMBIGM RatingsBUY : Stock with potential return of over 15% over next 12 monthsHOLD: Stock with potential return of +15% to-10% over next 12 monthsSELL: Stock with potential loss of over 10% over next 12monthsNOT RATED: Stock is not rated byCMBIGM :Industry expected to outperform the relevant broad market benchmark over next 12 months:Industry expected to perform in-line with the relevantbroad market benchmark over next 12 months:Industry expected to underperform the relevant broad market benchmark over next 12 months Address: 45/F, Champion Tower, 3 Garden Road,Hong Kong, Tel: (852) 3900 0888 Fax: (852) 3900 0800CMB InternationalGlobal MarketsLimited (“CMBIGM”) is a wholly owned subsidiary of CMB International Capital Corporation Limited (a wholly ownedsubsidiary of China Merchants Bank) ImportantDisclosuresThere are risks involved in transacting in any securities. The information contained in this report may not be suitable forthe purposes of all in