In-Depth Equity Analysis: Trip.com and its Competitors

Date of Report: 20 November 2024

Broker Name: OCBC Investment Research Private Limited

Trip.com: Leading the Travel Industry Recovery

Trip.com, founded in 1999, stands as a global leader in the travel platform sector, renowned for its comprehensive suite of travel products and services. The company’s strategic initiatives and robust market presence have positioned it to leverage the ongoing recovery in the travel industry, particularly in China. Despite pricing challenges domestically, Trip.com’s international expansion serves as a cornerstone for its long-term growth strategy. The company’s recent financial performance underscores its resilience, with a notable 15.5% year-on-year increase in net revenue for the third quarter of 2024, reaching CNY15.9 billion. This growth was fueled by robust domestic and international travel demand across various segments, including accommodations, transportation, and corporate travel. Additionally, Trip.com has demonstrated a strong recovery in outbound travel, with hotel and air ticket bookings surpassing pre-pandemic levels by 20%.

Investment Thesis and Future Outlook

Trip.com aims to dominate the Asian online travel agency (OTA) market while expanding its services globally. The company’s strategic focus on its international platform not only acts as a key investment area but also as a long-term growth driver. Management’s positive outlook for the fourth quarter of 2024 anticipates accelerated revenue growth driven by robust outbound travel demand and expanding international business. The company’s efforts to strengthen its international OTA platform have resulted in significant market share gains, as evidenced by the app’s leading download rates in several Asian markets.

ESG and Corporate Governance

Trip.com’s commitment to environmental, social, and governance (ESG) principles has been recognized with an upgraded rating in June 2024. The company’s initiatives to reduce carbon emissions and maintain high cybersecurity standards set it apart from industry peers. However, Trip.com’s corporate governance practices still lag behind global standards, with concerns over board composition and potential entrenchment.

Expedia Group Inc: A Global Travel Powerhouse

Expedia Group Inc, a prominent name in the travel industry, continues to showcase its strength through strategic positioning and a diverse portfolio. With a forward price-to-earnings (P/E) ratio of 15.1 for FY2024, Expedia exhibits a solid valuation compared to its peers. The company’s enterprise value to EBITDA (EV/EBITDA) ratio of 20.3 further highlights its operational efficiency. Despite these positive indicators, the company faces challenges such as intense competition and regulatory risks, particularly concerning US-listed ADRs.

Booking Holdings Inc: Dominating the Online Travel Space

Booking Holdings Inc, another giant in the travel sector, maintains a significant presence with its strong financial metrics. The company boasts a forward P/E ratio of 27.3 for FY2024, reflecting investor confidence in its growth prospects. Booking Holdings’ focus on maintaining a robust balance sheet and a strategic approach to market expansion underpins its long-term success. However, the company’s high valuation may pose challenges in an evolving competitive landscape.

Tongcheng Travel Holdings Ltd: Navigating Growth Opportunities

Tongcheng Travel Holdings Ltd, with a forward P/E ratio of 14.3 for FY2024, presents an attractive investment opportunity in the travel sector. The company’s strategic focus on penetrating lower-tier cities and enhancing its service offerings positions it well for future growth. However, Tongcheng Travel must navigate potential regulatory hurdles and competitive pressures to sustain its momentum.

Meituan: Diversifying Beyond Travel

Meituan, a multifaceted company, extends its operations beyond travel, offering a range of services that cater to diverse consumer needs. The company’s forward P/E ratio of 23.7 for FY2024 reflects its strong market position and growth potential. Meituan’s strategic diversification and focus on expanding its service portfolio underpin its resilience in a dynamic market environment. Nevertheless, Meituan faces challenges related to regulatory scrutiny and market competition.

Conclusion

The equity analysis of Trip.com and its competitors highlights the diverse strategies and growth prospects within the travel industry. Trip.com’s strategic focus on international expansion and robust ESG practices position it well for long-term success. Meanwhile, companies like Expedia, Booking Holdings, Tongcheng Travel, and Meituan continue to navigate opportunities and challenges in their respective markets. Investors are advised to consider these factors alongside market dynamics when making investment decisions.