Tongcheng’s 2Q25 revenue was up 10% YoY to RMB4,377m while adj.
　　NP was up 18% YoY to RMB775m, slightly above our expectations. The results showed Tongcheng’s disciplined cost control and results of its strategic initiatives, including focusing on monetisation and new drivers like outbound travels. Coming into 3Q25, we expect Tongcheng’s core OTA business may face some headwinds, such as adverse weather that could weigh on travel volume, and weaker consumer confidence, as reflected in recent July macro figures.
　　However, we are still positive on Tongcheng’s execution to deliver growth outperforming the overall travel industry with its bundle of products, and its capability to monetise unlikely to be disrupted by new entrants to the OTA industry. Maintain BUY.
　　Key Factors for Rating
　　2Q25 results a slight beat thanks to solid accommodation performance. Tongcheng’s 2Q25 revenue was up 10% YoY to RMB4,377m while adj. NP was up 18% YoY to RMB775m, slightly above our expectations.
　　The numbers reflected solid core OTA segment performance (revenue +16% YoY) unhindered by weak tourism segment business (revenue -8% YoY) due to declining tours to Southeast Asia on safety concerns. Aside from solid cost control demonstrated in the core OTA segment, we also see the performance of accommodation (+15% YoY to RMB1,371m) a positive sign, as Tongcheng recorded ADR (average daily rate) improvement. This shows Tongcheng’s users have opted for more premium hotels (3 stars and above) than before, also a sign of outperformance as overall hotel industry remained weak in 2Q25.
　　Committed to disciplined cost control and rational expansion. We estimated Tongcheng’s take-rate of business lines improved in 2Q25 thanks to: (i) a focus on prompting more cross-selling; (ii) reduction of user subsidies, and (iii) higher contribution from higher take-rate business, such as outbound flights, accounting for 6% of ticketing revenue (+2 ppts YoY). Its mgmt. reiterated that it will remain committed to disciplined cost control and a rational spending on marketing, which we see a good sign as it targets business of outbound flight to breakeven and turn profitable in 2H25.
　　Confident to grow more users despite threats from new entrants.
　　Despite players such as JD.com being more proactive in developing OTA products, Tongcheng remained confident to grow more users with its standalone app, which now accounts for 8% of the total revenue, as mgmt. expected to grow further, a positive signal for it to defend market share.