1Q26 results met expectations, but slower long-haul travel weighed on revenue guidance; Goldman Sachs maintains Buy on Tongcheng

Overview

This report reviews Tongcheng Travel Holdings' 1Q26 results, changes to 2Q26 and FY26 guidance, segment performance, AI progress, valuation, and risks. 1Q26 profit and revenue were broadly in line with expectations, and margin improvement was supported by a higher mix from accommodation and better expense efficiency. However, management became more cautious on subsequent demand, mainly because high airfares are suppressing long-haul travel, airline passenger traffic declined year over year during the Labor Day holiday, and short-haul travel plus local leisure demand in lower-tier cities partially offset the weakness.

Core views

Goldman Sachs' core view is that Tongcheng's near-term revenue growth is under pressure, but fundamentals have not deteriorated meaningfully and the Buy case still holds. Accommodation bookings continued to grow 15% year over year, short-haul travel in lower-tier cities remains relatively resilient, and membership, hotel management, and other businesses continue to add incremental contribution; meanwhile, the company is using AI and personnel cost savings to maintain guidance for 0.5-1 percentage point margin expansion. The negative factors are that weaker transportation ticketing and long-haul travel demand led to lower 2Q26 and full-year revenue guidance, and could raise investor concerns about TCOM's own guidance.

Analysis framework

The report analyzes the company using 1Q26 actual results, segment revenue and margin changes, management call guidance, industry transportation and hotel data, valuation multiples, and Goldman Sachs' target price framework. Goldman Sachs also compares Tongcheng's relative performance and valuation with Trip.com Group, H World, the Hang Seng Index, and other Asia leisure coverage names.

Methodology notes

• Valuation methodsWeighted target price valuation method

  Weighted blend of fundamental value and M&A value

  Goldman Sachs' target price uses an 85% weighting for fundamental value and 15% for M&A value. Fundamental value is HK$24.0/share, based on 14x FY26E P/E; M&A value is HK$33.2/share, based on 22x FY26E P/E.

• Factor analysisGS Factor Profile

  Growth, Financial Returns, Multiple, and Integrated factor percentiles

  Relative to the Asia leisure sector, Tongcheng ranks higher on Financial Returns and Integrated factors, is mid-range on Growth, and lower on Multiple, indicating that valuation is not high while earnings return quality is relatively strong.

• M&A scenarioM&A Rank

  Tiered scoring for M&A probability

  Goldman Sachs' M&A Rank is 2, indicating a medium probability of M&A, and therefore M&A value is included at a 15% weight in the target price.

• Earnings forecastGuidance and margin bridge

  Assumptions on revenue segments, gross margin, SG&A ratio, R&D and management expense ratio

  The 2Q26E model assumes revenue of Rmb4.8-5.0bn, gross margin of 65.5%, a sales and marketing expense ratio of 32.3%, and combined service development and management expenses of about 15%, implying adjusted net profit of Rmb868mn.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Tongcheng Travel Holdings (0780.HK)

  Report subject; Hong Kong-listed online travel company

  Strengths

  High exposure to lower-tier cities and short-haul domestic travel, steady accommodation booking growth, improving ARPU, better expense efficiency, and valuation near historical lows.

  Weaknesses

  Slowing transportation ticketing growth, long-haul travel demand pressured by high airfares, and lower full-year revenue guidance.

  Comparison

  Current P/E trades at about a 20% discount to TCOM; the historical discount range is about 20%-30%; over the past month the stock fell 13%, while TCOM and HTHT fell about 10% and 15%, respectively.

  Risks

  Continued weakness in long-haul travel demand, declining transportation ticketing take rate, valuation debate over the dependency on Tencent/WeChat ecosystem, and a weaker-than-expected macro environment.

• Trip.com Group / TCOM

  Industry comparable and potential read-through reference

  Strengths

  A broader online travel platform, and the report believes 1Q26 results likely met prior guidance for 12%-17% revenue growth and a 1.4 percentage point year-over-year decline in EBIT margin.

  Weaknesses

  Investors may worry about TCOM's 2Q26 outlook after Tongcheng's guidance cut.

  Comparison

  Tongcheng currently trades at about a 20% discount to TCOM; Tongcheng has more exposure to lower-tier cities and short-haul domestic travel, while TCOM has a broader coverage base.

  Risks

  If long-haul demand and airfare pressure persist across the industry, TCOM could also face the risk of revenue guidance cuts.

• China online travel and leisure sector

  Industry backdrop and relative valuation benchmark

  Strengths

  Short-haul travel, staycations, and lower-tier city demand partially offset long-haul pressure, and hotel ADR still has room to improve.

  Weaknesses

  Weakening airline passenger traffic and long-haul travel, along with rising fuel surcharges and airfares, are suppressing demand.

  Comparison

  Tongcheng scores relatively well on Financial Returns and Integrated factors versus the Asia leisure sector in the GS Factor Profile, while the Multiple factor is lower.

  Risks

  Rising competition, especially from platforms such as Douyin; regulatory restrictions on ticket-snatching businesses; and weak macro consumption.

Key data

• 1Q26 revenueRmb5.0bn, +14% yoyNear the upper end of the company's 10%-15% guidance.
• 1Q26 headline net profitRmb941mn, +19% yoy1% above Goldman Sachs' forecast and 2% above Visible Alpha consensus.
• 1Q26 net margin20.8%, +0.8ppt yoySupported by a higher mix from accommodation and lower service development and administrative expense ratios.
• Core OTA revenueRmb4.5bn, +17% yoyAbove or near the upper end of the 12%-17% guidance.
• Travel business revenueRmb556mn, -5% yoyIn line with the -10% to -5% guidance range.
• Accommodation booking revenue growth+15% yoyDriven by about 10% growth in room nights and a mid-single-digit improvement in ADR.
• Transportation ticketing revenue growth+6% yoySlower than the 9% and 7% growth seen in the prior two quarters, but in line with the 5%-10% guidance.
• Annual paying users253.9mnBroadly stable versus 252.6mn at the end of 4Q25.
• Trailing 12-month ARPURmb78.9, +9% yoyReflects the company's greater focus on monetization rather than pure acquisition.
• 2Q26 revenue guidanceRmb4.8-5.0bn, +3%-8% yoyCore OTA guidance is +5%-10%, and travel business guidance is -5% to 0%.
• FY26 revenue guidance+6%-11% yoyPreviously +10%-15%; core OTA guidance was cut from +12%-17% to +8%-13%.
• FY26E earnings forecastRmb3.86bn, +14% yoyAfter lowering guidance, Goldman Sachs still expects full-year earnings to grow at a double-digit pace.
• Target priceHK$25.30Cut from HK$29.0 to reflect revisions to earnings and net debt.
• Valuation8.5x FY26E P/EGoldman Sachs believes this is near historical lows and is not demanding.

Impact & implications

The investment implication of this report for Tongcheng is that near-term revenue expectations need to be revised down, but much of the demand concern has already been reflected in the share price pullback. If short-haul travel, lower-tier city demand, accommodation ADR, and operating efficiency continue to play out, the current valuation could still offer upside. At the industry level, Tongcheng's more cautious 2Q26 guidance may lead investors to worry that TCOM could also lower guidance, but Goldman Sachs believes TCOM's 1Q26 results are likely to have broadly met prior guidance.

Risks

• Rising competition, especially from platforms such as Douyin.
• Transportation ticketing take rate declines more than expected, or the company fails to share in the benefits of potential ASP increases.
• The market may dispute the appropriate valuation multiple given Tongcheng's high dependence on the Tencent/WeChat ecosystem.
• A weaker-than-expected macro environment pressures travel and leisure spending.
• High airfares continue to weigh on long-haul travel demand and affect accommodation cross-selling.
• Regulatory restrictions on OTA ticket-snatching businesses could affect transportation ticketing revenue, although the company believes the segment accounts for only a low-single-digit share and the impact is limited.

What to watch

• Whether 2Q26 actual revenue lands within the Rmb4.8-5.0bn guidance range and whether core OTA growth reaches 5%-10%.
• Whether airline passenger traffic and long-haul travel demand deteriorate further after the Labor Day holiday.
• Whether accommodation room nights, ADR, and the share of higher-star hotels can continue to rise.
• Whether the sales and marketing expense ratio and the service development and management expense ratio can support 0.5-1 percentage point margin expansion.
• Whether traffic conversion from DeepTrip, Tencent Yuanbao entry points, and third-party AI platforms begins to contribute visible traffic and conversions.
• Whether TCOM's subsequent earnings call lowers 2Q26 guidance and the impact that would have on sentiment toward the online travel sector.
• The actual impact of 12306-related regulation on OTA ticket-snatching and transportation ticketing value-added services.