Tongcheng Travel reported 2Q25 revenue of Rmb4.67bn (+10% YoY) and adjustednet profit of Rmb775m (+18% YoY), in line with our expectations. We maintain 25EEPS forecast of Rmb1.41, 26E forecast of Rmb1.57, and 27E forecast of Rmb1.74.
　　We maintain target price of HK$26.5 with 35% upside potential, we maintain a Buyrating.
　　Solid growth in domestic operations. In 2Q25, the company’s core OTA revenueincreased by 14% YoY, with accommodation reservation revenue up 15% YoY. Theaverage daily room nights hit a record high, mainly thanks to the active exploration ofemerging accommodation booking scenarios such as weekend getaways, concertsand sports events. The average daily rate (ADR) saw a positive YoY growth, attributedto the increased proportion of three-star and above hotels. Revenue fromtransportation ticketing grew by 8% YoY, and revenue from other businessesincreased by 28% YoY, mainly benefiting from the growth of hotel managementbusiness. The number of annual paying users (APU) rose by 10% YoY to 251.7m, alsoa record high.
　　The outbound travel business is expected to turn from loss to profit this year. In2Q25, outbound air tickets contributed c.6% of transportation revenue, and outboundhotels accounted for a low single-digit percentage of hotel room nights. The volume ofinternational air tickets in 2Q25 increased by nearly 30% YoY, hitting a record high.
　　Maintain Buy. We are optimistic about the growth certainty of the online travelindustry and the stability of its competitive landscape. Tongcheng Travel is ahigh-certainty target in domestic demand consumption. The improvement in marketingefficiency and the expansion of outbound travel are expected to drive marginenhancement, while the hotel management business is also poised to provideadditional growth drivers. We maintain a Buy rating.
　　Risks. Revenue growth may fall short of expectations. Intensified competition couldlead to margin erosion.