Ctrip Group-S (09961.HK), a one-stop travel platform that returned to Hong Kong for its second listing in April this year, has shrunk by nearly 30% from the current price of HK$268.00, and after announcing its third quarter results for the third quarter ended 30 September 2021, the stock price seems to have improved.
Results for the 3rd quarter and the first three quarters of 2021
Ctrip's revenue mainly comes from other businesses such as hotel reservations, transportation ticketing, vacation products, business travel, and online advertising and financial services, of which hotel reservation and transportation ticketing are the main source of revenue, accounting for more than half of the total revenue.
In the third quarter of 2021, Ctrip's hotel booking and transportation ticketing revenue decreased by 11.50% and 4.57% year-on-year to RMB2,194 million (in RMB, the same below) and RMB1,817 million, offsetting a 23.50% increase in overall revenue from vacation products, business travel and other businesses, dragging down the Company's net quarterly revenue by 2.16% year-on-year to RMB5,344 million.
As a result, adjusted EBITDA declined 66.83% year-on-year to $537 million in the third quarter, while non-accounting standard net profit (i.e., net profit after the impact of non-operating items such as fair value changes and share-for-wages) declined 62.62% year-on-year to $523 million.
However, in the first three quarters of 2021, Ctrip's revenue increased by 14.90% year-on-year to RMB15.342 billion, adjusted EBITDA increased by 42.51% year-on-year to RMB1.237 billion, and non-accounting standard net profit turned into a profit, recording a net profit of RMB1.047 billion, compared to a net loss of RMB1.976 billion in the same period last year.
Compare with peers
Relatively speaking, Ctrip's revenue growth performance is inferior to that of its peers. In the third quarter of 2021, Meituan (03690. HK) revenue from the Arrivals, Hospitality & Travel segment increased by 33.08% year-on-year to RMB8,621 million, further distancing itself from Ctrip, which has a 26.98% interest in Tongcheng eLong (00780.HK). HK) revenue for the third quarter increased by 1.30% year-on-year to MOP1,939 million, driven by a 6.60% year-on-year increase in revenue from traffic ticketing services.
See the chart below, during the Q1 2020 pandemic, the industry as a whole hit rock bottom.
However, after the second quarter, with the epidemic under control, Meituan's in-store business rebounded rapidly and gradually improved, and the revenue in the first three quarters of 2021 was 49.56% higher than that of the first three quarters of 2019 before the epidemic; while Ctrip, although it rebounded, it fluctuated and did not form a clear recovery trend, and the revenue of the first three quarters of this year was only equivalent to 56.13% of the total revenue scale of the first three quarters of 2019 before the epidemic; Tongcheng eLong restored the pre-epidemic level in 2021. Its combined revenue in the first three quarters of this year has been more than 300 million yuan higher than that of the first three quarters of 2019.
It can be seen that although Ctrip's performance in the latest quarter is satisfactory compared with market expectations, it is significantly inferior to its peers.
In the third quarter of 2021, the operating profit margin of the branch of Meituan's store-to-store business was 43.89%, and the operating profit scale was 4.32 times that of its takeaway business, which can be said to be the profit of Meituan. Tongcheng eLong's operating profit after deducting sales costs, service development expenses, sales and marketing expenses and administrative expenses was 207 million yuan, which was still positive income despite a decrease of 17.53% over the same period last year. However, Ctrip incurred an operating loss of 246 million yuan during the period, compared with an operating profit of 790 million yuan in the same period of the previous year, which was compared to that of its peers.
Ctrip's gross profit margin in the third quarter was actually not low, reaching 77.11%, much higher than Tongcheng eLong's 73.88%, but Ctrip's operating expenses were relatively large, and the proportion of product development, sales and marketing, as well as general and administrative expenses to revenue reached 43.13%, 23.76% and 14.82% respectively, totaling 81.72%. Relatively speaking, Tongcheng eLong's service development, sales and marketing and administrative expenses accounted for 16.65%, 40.58% and 5.97% of revenue in the third quarter, respectively, a total of 63.20%, which was nearly 19 percentage points lower than Ctrip.
From the above data, it can be seen that product development is Ctrip's most important expenditure. According to Ctrip's definition, product development costs mainly include the cost of developing a network of ecosystem partners, as well as the cost of maintaining, monitoring and managing the platform. As can be seen from the chart below, the proportion of development expenditure has increased due to the contraction of the scale of income, or it means that the expenditure is more fixed, and the income generated by the unit expenditure has decreased.
However, it is worth noting that after the epidemic, the competitive situation in the industry has changed, as can be seen from the above figure, Meituan's store-to-store business has successfully risen and surpassed Ctrip, and even the smaller Tongcheng eLong is quite resilient and quickly recovered to the pre-epidemic level. In the face of such a competitive situation, Ctrip may not be able to restore the efficiency of product development before the epidemic.
Industry Outlook
In 2021, the epidemic situation at home and abroad has recurred, and the tourism industry has not returned to the level before the epidemic. It can be seen from the airline's data that the number of international flights has not yet rebounded, and the number of domestic flights is only about half of what it was before the epidemic, and it should be difficult for the tourism industry to return to the pre-epidemic level in the short term, of which outbound tourism has been the most seriously affected.
However, compared to the low base in 2020, the overall market performance in 2021 has improved. According to iResearch, the online travel market will achieve partial recovery growth in 2021, with the annual transaction size or increase by 34.8% year-on-year to 1.33 trillion yuan. Among them, the online accommodation market and the online vacation market will become the main force of growth, and the transaction scale may increase by 35.6% and 94.7% year-on-year respectively to 230.33 billion yuan and 121.01 billion yuan; while the online travel market may still maintain an increase of about 29.6%, and the transaction scale is expected to reach 979.37 billion yuan.
Looking ahead to 2022, iResearch expects China's online travel market to recover further from 2021 levels, but judging by its data, it may still not be able to catch up with the pre-epidemic level.
The agency expects that in 2022, the transaction scale of China's online travel, online accommodation and online vacation markets may increase by 20.8%, 26.2% and 39.9% year-on-year, respectively, to 1.18 trillion yuan, 290.6 billion yuan and 169.34 billion yuan, and the overall online travel traffic scale may increase by 23.4% year-on-year to 1.64 trillion yuan, as shown in the chart below.
Ctrip's revenue growth in the first three quarters of 2021 was only 14.90%, which is obviously much lower than the 2021 growth level estimated by iResearch (that is, 34.8%). As a one-stop online travel platform, Ctrip attracts streams through content, platform services, etc., and recently its senior management has also promoted services and brands through new marketing methods such as live broadcasting, trying new marketing methods, and the effect is to be determined.
Meituan has the traffic of Dianping and its own service ecosystem, and because of its diversified service ecology and high community activity, the competitiveness of its content should not be underestimated.
Ctrip is the largest shareholder of Tongcheng eLong, while Tongcheng eLong's second largest shareholder is Tencent (00700.HK), which holds 21.98% of the shares. HK）。 As the largest social platform in China, Tencent provides traffic entrance for Tongcheng eLong, which can establish multiple traffic channels under Tencent's service ecosystem, which is its traffic advantage. In addition, the deep cultivation in the sinking market also gives Tongcheng eLong more advantages than later entrants such as Ctrip.
Therefore, as far as domestic business is concerned, Ctrip's competitiveness is not necessarily particularly prominent. However, its overseas operations are expected to be an important driver of recovery.
Ctrip's global brands mainly include an online travel platform for global travelers Trip.com and Skyscanner, a global travel information search company that provides user traffic to the former, while the former provides diversified products and services that enhance conversions and synergies on Skyscanner's platform.
In addition, Ctrip can provide a wider range of global services, which should be its advantage from its peers such as Meituan. As of December 31, 2020, Ctrip's platform provides more than 1.2 million global accommodation services, covering hotels, motels, resorts, residences, apartments, homestays, guest houses, etc., and the air ticket business covers more than 2,600 airports in more than 200 countries and regions, providing more than 310,000 destination activities worldwide.
With tourism recovering in Europe and the United States after the pandemic, Ctrip should be able to seize the opportunity to achieve substantial growth.
In addition, Ctrip's vacation products and business travel businesses are also more competitive, and these two businesses have shrunk significantly due to the impact of the epidemic, but after the epidemic, its business advantages should be reflected.
Mao Ting