For 2Q25, we expect Tongcheng Travel (TC) to record revenue of RMB4.6bn, up 9.3% YoY, and ink non-GAAP net profit of RMB738mn, up 12.4% YoY, both are largely unchanged compared to our previous forecasts, and are inline with Bloomberg consensus. For 2Q25, we expect stronger revenue growth in accommodation reservation than we previously anticipated, primarily aided by likely stronger-than-expected expansion of take rate. However, we expect this to be offset by slower-than-expected transportation ticketing services revenue growth owing to milder-than-expected air ticketing volume growth in the near term, as well as likely slower than our previously expected revenue growth recovery for offline Tourism business. As we expect the impact to persist in 2H25, we lower 2025E revenue forecast by 1.7%, but we lift non-GAAP NP forecast by 1.3% to account for likely better-than-expected margin expansion aided by more optimized-than-expected sales and marketing spending. We are now looking for 10%/20% YoY growth (was 12/18%) in group-level revenue/non-GAAP NP in 2025E. Our 2025E non-GAAP net profit forecast is 1.6% ahead of consensus. We keep our DCF-based TP unchanged at HK$24.0, and maintain BUY rating.
　　2Q25 results preview: expecting inline core OTA business revenue and earnings growth. For 2Q25E, we estimate TC could ink total revenue of RMB4.6bn, up 9.3% YoY, among which we are anticipating 13.1% YoY revenue growth for core OTA business, and 9.5% YoY decline in Tourism business. We are anticipating core OTA non-GAAP operating profit of RMB1.0bn, up 18.5% YoY, and translating into non-GAAP OPM of 25.5% ( up 1.2ppts YoY), primarily driven by optimization in sales and marketing spending.
　　Change in forecasts. We nudge down 2025-2027E revenue forecasts by 1.7% to reflect likely slower than our previously expected revenue growth recovery for offline Tourism business, as well as likely milder-than-expected air ticketing volume growth in the near term. However, we lift 2025-2027E non-GAAP net profit forecasts by 1.2-1.3% to account for better-than- expected margin expansion aided by more optimized-than-expected sales and marketing spending. We maintain our DCF-based TP unchanged at HK$24.0 per share (WACC of 13.0%; terminal growth of 1.0%), translating into 15.4x 2025E PE. Key risks: 1) more severe-than-expected macro headwinds weigh on revenue growth; 2) slower-than-expected pace in margin expansion.