Citigroup: The worst case for Ctrip Group-S (09961) may have passed, and next year is expected to outperform the market

The Zhitong Finance App learned that Citi released a research report stating that it maintains Ctrip (TCOM.US)'s “buy” rating for US stocks, with a target price of 61 US dollars. The bank held a post-performance conference call with the Ctrip Group-S (09961) investor relations manager. The discussions included more details of the hotel partner's rectification, further explanation of the domestic transportation business, the strong momentum of Trip.com and the narrowing loss rate, and management's views on profit margins. The bank believes that the worst may be over. Ctrip is expected to outperform the market in 2027. Due to industry demand and the base effect of commission rates, the base effect will begin in the second quarter of 2027, while domestic hotel commission rates are expected to gradually recover.

In terms of hotel partner rectification, as the fourth quarter of 2026 will reflect the full quarter's impact, management expects hotel commissions in the fourth quarter to fluctuate in the short term compared to part of the third quarter. Under the new commission policy, Ctrip will charge a basic commission rate and provide upward sales monetization based on hotel partners' demand for traffic and exposure, while balancing hotel partner rankings based on more dimensions such as hotel information quality, user reviews, graphics, and transaction volume. Management said that due to the increased flexibility of hotel partners, it will take time to observe the full impact of commission rates, including seasonality, but they are still confident that they will maintain stable commission rates over the long term.

In terms of domestic transportation business, management said that airline ticket commission rates were affected by the reduction of fixed commissions by major domestic airlines. In terms of value-added services, Ctrip continues to adjust revenue sources according to user needs, but growth has narrowed due to declining demand for travel insurance, especially after the pandemic. The train business situation is similar, and the operation of value-added services is getting tighter. Management will focus on directing domestic transportation business traffic to other cross-selling opportunities, particularly the hotel business, to offset the operating costs associated with domestic transportation business while the overall commission rate narrows.

In terms of international business, despite a high base, international platform revenue increased by more than 50% year-on-year in the second quarter of 2026, mainly driven by stronger business in the Asia-Pacific region. Management will focus on revenue growth and market share to expand scale, while gradually improving profitability under return-on-investment, and recorded narrowing loss rates in various markets starting in the second quarter.

In terms of overall profit margins, management believes that many factors affect short-term visibility: the domestic hotel business will increase favorable profit margins, and Ctrip will also maintain discipline on AI investment and operating costs; the international business is in a period of high growth, and even if the loss rate gradually narrows, it may dilute the Group's profit margin. Management will strictly control costs in the long run.