For 1Q25E, we expect Tongcheng Travel (TC) would record revenue of RMB4.35bn, up 12% YoY, and ink non-GAAP net profit of RMB737mn, up 32% YoY, both inline with Bloomberg consensus. We reiterate our positive view on TC given its robust earnings growth outlook and we believe its business growth is mainly driven by domestic demand and is relatively immune to the impact of tariffs and geopolitical conflicts. Our 25%/18% YoY growth forecast for core OTA OP/total non-GAAP NP in 2025E remains unchanged, and we see supporting factors coming from: 1) resilient travel demand for both domestic and outbound travel, and TC’s ability to achieve further operating efficiency improvement through refined marketing strategies and optimization in user subsidies provided; 2) international business turnaround from the loss-making stage and contribution of profits. Our 2025-2027E financial forecast and DCF-based target price of HK$24.0 are both unchanged. BUY.
　　1Q25 results preview: expecting solid core OTA business revenue and earnings growth. For 1Q25E, we estimate TC could ink total revenue of RMB4.35bn, up 12% YoY (1ppt lower than our previous forecast), among which we are anticipating 17% YoY revenue growth for core OTA business (unchanged), and 11% YoY decline in Tourism business (wider than the 5% YoY decline in our previous forecast). We are expecting more severe impact on Tourism business in 1Q25 as outbound tourism business for the elder customers in popular Southeast Asia tourist destinations looks likely to take longer to recover than we previously expected. However, as overall travel demand remains resilient, and the travel demand in the affected regions could be replaced by other popular destinations, we expect the recovery to be more back-loaded this year and our 2025E forecast for both Tourism revenue and group-level revenue remains unchanged.
　　Overall travel demand remains resilient. For the Qingming Festival in 2025, according to Ministry of Culture and Tourism, the no. of tourists reached 126mn nationwide, up 6.3% YoY, and total tourism income reached RMB57.5bn, up 6.7% YoY. Per National Immigration Administration, the average daily no. of entries and exits through ports nationwide reached 2.07mn during the festival, up 19.7% YoY. These data demonstrated resilient travel demand, in our view, and this could sustain in 2Q25.
　　Valuation and key risks. Our DCF-based valuation derives a TP of HK$24.0 per share (WACC of 13.0%; terminal growth of 1.0%), translating into 15.6x 2025E PE. Key risks: 1) more severe-than-expected macro headwinds weighs on revenue growth; 2) slower-than-expected pace in margin expansion.