Tongcheng Travel (TC) reported (25 Nov) 3Q25 results: total revenue wasRMB5.5bn, up 10.4% YoY, and was 1% better than both our forecast andBloomberg consensus estimates; adjusted NP was RMB1.06bn, up 16.5% YoY,and was 4/2% better than our forecast/consensus, driven by better-thanexpectedoperating leverage of core OTA business. OPM of the core OTAbusiness expanded to 31.2% in 3Q25 (3Q24: 31.1%), 0.1ppts ahead of ourforecast. We have lifted 2025E-2027E revenue forecast by 1-3% to factor inincremental revenue contribution from the consolidation of Wanda HotelManagement (WHM) since Oct 2025, and adjusted down non-GAAP NP by 1-2% to factor in TC’s incremental marketing investment on user acquisition. Weroll forward our valuation window to 2026E, and our DCF-based TP is lifted toHK$25.4, translating into 14.5x 26E PE (non-GAAP). We are anticipating14%/12% YoY growth in revenue/adjusted NP for TC in 2026E. Maintain BUY.
　　Core OTA business delivered healthy growth. In 3Q25, TC’s core OTAbusiness revenue reached RMB4.6bn (83.7% of total revenue), up 14.9%YoY (2Q25: 13.7% YoY), and was 0.4% ahead of consensus driven bybetter-than-expected revenue growth in accommodation reservationservices and others. In 3Q25, transportation ticketing services/accommodation reservation services/other revenue achieved YoY growthof 9.0%/14.7%/34.9% (2Q25: 7.9%/15.2%/27.5%). The 12-monthaccumulated number of travellers served reached 2.0bn by end-Sep, up7.3% YoY, compared to annual paying users (APU) increase of 8.8% YoYduring the same period.
　　4Q25 outlook: expecting healthy revenue growth of core OTAbusiness to sustain. For 4Q25E, we estimate TC to ink total revenue ofRMB4.76bn, up 12.4% YoY, driven by 17.4% YoY revenue growth of coreOTA segment, but offset by a 10.0% YoY decline in tourism revenue. Withinthe core OTA business, we are looking for 8.3/14.6/48.9% YoY revenuegrowth for transportation ticketing/accommodation reservation (AR)/otherbusiness. We are estimating RMB170mn incremental revenue contributionfrom the consolidation of WHM since Oct 2025. Excluding the revenuecontribution from WHM, we are forecasting 12.5% YoY growth in revenueof core OTA business.
　　Expecting a stable OPM for core OTA business YoY for 4Q25E on highbase. TC’s overall OPM reached 21.1% in 3Q25, up from 19.6% in 3Q24,among which OPM of core OTA business improved to 31.2% (3Q24:31.1%), thanks to solid revenue growth which helped unleash operatingleverage. We forecast OPM of core OTA business to remain stable YoY at28.4% in 4Q25E, as TC faces a high base and expects to continueincreasing marketing spend for new user acquisition, albeit at a disciplinedpace. For non-GAAP net profit, we are anticipating 14.0% YoY growth toRMB752mn driven by revenue growth, translating into 15.8% non-GAAP netmargin (4Q24: 15.6%).