Morgan Stanley has released a research report indicating a revision to its earnings forecasts for TravelSky Technology (00696). The firm has lowered its earnings per share (EPS) projections for 2026 and 2027 by 7.6% and 8.6%, respectively, reflecting an anticipated slowdown in revenue growth due to soft air travel demand amid global energy market pressures.

The report also introduces an EPS forecast of RMB 0.88 for 2028. Consequently, Morgan Stanley has reduced its target price for TravelSky Technology from HK$10.20 to HK$8.80, representing a 14% cut, while maintaining an Underweight rating on the stock.

The downward adjustment in the target price exceeds the reduction in earnings forecasts due to several factors impacting the base-case scenario valuation. These include a weaker growth outlook from 2026 through 2028 and beyond, lower-than-expected shareholder returns for the 2025 fiscal year, and a slight downward revision to the assumed dividend payout ratio for 2026-2027. This collectively implies a lower target valuation multiple.

Morgan Stanley notes that while China's reopening has supported TravelSky's profit growth trajectory, traffic growth in 2026 may decelerate due to macroeconomic challenges. Furthermore, slower-than-expected growth in foreign airline traffic is weighing on average selling prices (ASP), and labor cost inflation could slow the pace of margin improvement.

TRAVELSKY TECH (00696)

Morgan Stanley has lowered its target price for the stock to HK$8.80 from HK$10.20 and reiterated its Underweight rating.