CMSC released a research report maintaining a "Strong Buy" rating on TONGCHENGTRAVEL (00780). The report highlights that leisure travel demand has continued to recover since the peak summer season, driven by the company's subsidy strategy and an increased proportion of three-star and above hotels, leading to simultaneous growth in both volume and pricing for the hotel business. International operations sustained high growth and achieved preliminary profitability in Q3. Coupled with ongoing cost optimization and refined subsidy measures, the company is expected to maintain strong performance growth.

Key takeaways from CMSC's report include:

**Revenue Growth and Expected Performance** During the reporting period, the company generated revenue of RMB 5.51 billion (+10.4% YoY), adjusted EBITDA of RMB 1.51 billion (+14.5% YoY), and adjusted net profit of RMB 1.06 billion (+16.5% YoY), all in line with expectations. By segment, Q3 2025 revenue breakdown was as follows: - Accommodation bookings: RMB 1.58 billion - Transportation ticketing: RMB 2.21 billion - Vacation services: RMB 900 million - Other businesses: RMB 820 million

The strong performance in other businesses was primarily driven by the hotel management segment, which maintained robust growth momentum. As of September 2025, the group’s hotel management platform operated nearly 3,000 hotels, with an additional 1,500 under preparation. The company completed the acquisition of Wanda Hotel Management Co., Ltd. on October 16, 2025, adding 239 hotels to its portfolio.

**Improved Gross Margin and Profitability** The company’s gross margin rose to 65.7% (+2.3 ppts YoY). Operating expenses ratios for Q3 2025 were: - Management expenses: 5.3% - R&D expenses: 9.3% - Sales expenses: 31.1%

Adjusted net profit margin reached 19.2% (+1.0 ppt YoY), demonstrating steady profitability improvement.

**User Growth and Service Expansion** Average monthly paying users in Q3 2025 increased to 47.7 million (+2.8% YoY), while annual paying users hit a record high of 250 million (+8.8% YoY). Over the past 12 months, the company served 2.02 billion travelers (+7.3% YoY), reflecting sustained growth in paying users.

**Investment Risks** Potential risks include recurring global pandemic waves, economic and consumption downturns, and changes in travel policies.