Tongcheng Travel: Lowering Fair Value by 19% as Demand Recovery Is Running Into Macro Weakness

We are lowering our fair value estimate for Tongcheng Travel by 19%, to HKD 17 per share from HKD 21, to reflect our view that the recovery in travel demand may be fizzling out. We estimate that ground and air transportation is at significantly lower-than-expected levels and believe weakness during Golden Week 2023 is likely an inflection point for the deceleration of travel demand. There appears to be a significant decline in the number of travelers compared with 2019, which could signal weakness for the fourth quarter. Therefore, we have lowered our 2024 revenue forecast by 5% to CNY 13.6 billion based on the reduction of accommodation revenue estimates by 2% and transportation estimates by 6% next year. While we expect long-term revenue to still gradually grow, we take a much less bullish stance in the near term on Tongcheng's growth trajectory, given recent Golden Week data.