Lifting Trip.com FVE to USD 31 Due to Revised Reopening Policies, but V-Shaped Recovery Not Expected

We are raising our fair value estimate for Trip.com to USD 31 (or HKD 249) from USD 24 and HKD 191, respectively, after the National Health Commission of the People's Republic of China released the latest official guidance on COVID-19 controlling measures on Nov. 11. The change to our valuation reflects greater steps toward reopening and specifically scrapping international flight bans. This should favor Trip.com’s international business, which contributed 25% of Trip.com revenue before the pandemic but dropped to 10%-15% of total revenue in 2022. Although sentiment around the Chinese travel industry may improve as a result of the announcement, we do not expect a V-shaped recovery in 2023, but rather a gradual revitalization of the travel industry. This is given that the inbound quarantine was only reduced to eight days from 10, which may still deter travelers. As the policy does not represent a full reopening of borders, we don't expect a recovery of international revenue to prepandemic levels in our model until at least 2025.