CICC has issued a research report, largely keeping its 2026 revenue forecast for TONGCHENGTRAVEL (00780) unchanged at RMB 21.7 billion. Considering the company's optimized operational efficiency, the firm raised its 2026 profit forecast by 1% to RMB 3.92 billion. It also introduced 2027 revenue and non-IFRS net profit forecasts of RMB 23.8 billion and RMB 4.49 billion, respectively. CICC maintained its Outperform industry rating and target price of HK$28, which corresponds to 15x and 13x 2026/2027 non-IFRS price-to-earnings ratios. This implies a potential upside of 49%. The stock is currently trading at 10x and 9x 2026/2027 non-IFRS P/E ratios. CICC's main points are as follows:

Fourth-quarter 2025 results were largely in line with market expectations. TONGCHENGTRAVEL's Q4 2025 revenue increased 14% year-on-year to RMB 4.84 billion, basically meeting expectations. Non-IFRS net profit attributable to shareholders was RMB 760 million, with a profit margin of 15.7%, also largely aligning with market forecasts.

Travel demand remains robust, with increased demand for high-quality hotels. In the accommodation segment, Q4 2025 revenue grew 15% year-on-year, with an increase in average daily rate. The sales proportion of high-quality hotels rose by approximately 5 percentage points in 2025. During the Spring Festival holiday, average daily room nights increased 30% year-on-year. It is projected that Q1 2026 hotel revenue will grow 10-15% year-on-year, with a mid-single-digit percentage increase in ADR and a stable commission rate.

In the transportation segment, Q4 2025 revenue increased 6.5% year-on-year. It is anticipated that Q1 2026 transportation revenue will grow 5-10% year-on-year, as the company focuses on revenue monetization.

Outbound business is becoming profitable, and Wanda's hotel management arm is contributing as a new growth engine. In Q4 2025, revenue from the outbound business accounted for about 6% of the combined hotel and transportation revenue. International room nights for the full year 2025 increased nearly 30% year-on-year. Through enhanced pricing control, optimized marketing efficiency, and promoting cross-selling of travel products from flights to accommodations, the outbound business achieved breakeven for the full year 2025. It is projected that the operating profit margin could reach approximately 10% in 2026.

Regarding the hotel management business, as of the end of December 2025, the number of operating hotels under the group's management platform had grown to over 3,000, with an additional 1,800 hotels in preparation. The successful integration of Wanda's hotel management has enabled resource sharing, and the addition of Wanda's premium brands has enhanced the company's brand portfolio, further strengthening its accommodation supply chain capabilities.

The company is actively embracing AI through both in-house development and partnerships. Since December of last year, users searching for travel itineraries on the Yuanbao App can directly jump to TONGCHENGTRAVEL's WeChat mini-program to complete bookings. On the other hand, the company's self-developed AI travel planning tool, DeepTrip, has served approximately 6.8 million users. AI currently handles about 80% of user inquiries. It is believed that AI is unlikely to quickly overcome the barriers of OTA services and supply chains in the short term, but the company's comprehensive strategy helps maintain competitiveness at various stages of development.

Risks include macroeconomic uncertainty, potential underperformance in cost control, investment and merger risks, and regulatory risks.