Tongcheng Travel's 1Q results were in line, with slower long-haul travel weighing on revenue guidance but Goldman Sachs maintaining Buy

Overview

This report is Goldman Sachs' commentary on Tongcheng Travel Holdings' 1Q26 results. The company's first-quarter revenue, net profit, and core OTA business were generally in line with Goldman Sachs' and market expectations, while margins benefited from an improved revenue mix and better cost efficiency. However, management turned more cautious on the outlook during the call, mainly because high airfares weakened long-haul travel demand, with air passenger volumes falling during the Labor Day holiday and softening further recently. Goldman Sachs therefore cut earnings forecasts and the target price, but believes the stock's recent pullback has brought valuation close to historical lows and still maintains a Buy rating.

Core views

The core view is: first, Tongcheng delivered good 1Q26 earnings quality, with accommodation booking and cost control offsetting the pressure from slower transportation ticketing and a higher sales and marketing expense ratio; second, short trips, local vacations, and demand from lower-tier cities help partially offset weakness in long-haul travel; third, the full-year revenue growth guidance cut shows higher demand uncertainty, but the company still expects 0.5-1 percentage point margin expansion; fourth, valuation has already discounted much of the bad news, and an 8.5x FY26E P/E and discount to Trip.com keep Goldman Sachs constructive on the risk-reward; fifth, Tongcheng's more cautious 2Q26 outlook may lead investors to worry that Trip.com will also cut guidance, but Goldman Sachs expects Trip.com 1Q26 results to be broadly in line with prior guidance.

Analysis framework

The report analyzes earnings breakdown, revenue growth by segment, user and ARPU metrics, expense ratio changes, management guidance, industry travel data, and the valuation framework. Goldman Sachs focuses on the growth momentum of accommodation booking, transportation ticketing, travel and other businesses, and links slower long-haul travel, air passenger volumes, domestic hotel indicators, and air ticket price indices to changes in the company's revenue guidance. At the same time, the report uses target P/E, fundamental value, and M&A value weighting to estimate the 12-month target price.

Methodology notes

• 估值目标市盈率与M&A加权估值

  The 12-month target price consists of 85% fundamental value and 15% 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. The weighted average of the two yields a target price of HK$25.3.

• 因子分析GS Factor Profile

  Measures a stock's relative position versus the market and the sector across growth, financial returns, valuation multiples, and composite factors.

  The chart shows that 0780.HK is strong on financial returns and the composite factor, with a moderately high growth factor and a low valuation multiple factor, meaning valuation is not expensive while fundamental quality is relatively strong.

• 行业读数出行需求与票价指标

  Air, rail passenger volumes and domestic hotel RevPAR, ADR, and occupancy are used to judge the strength of travel demand.

  High airfares and slower long-haul travel are the main backdrop for the guidance cut, while short trips and local vacation demand in lower-tier cities provide some support.

Asset mapping & comparison

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

• Tongcheng Travel Holdings 0780.HK

  Report subject; Goldman Sachs maintains a Buy rating.

  Strengths

  Solid accommodation booking growth, improving ARPU, margin expansion, resilience in lower-tier city and short-trip demand, and valuation at a not-expensive level.

  Weaknesses

  Slower transportation ticketing growth, long-haul travel and air passenger volumes pressured by high airfares, full-year revenue guidance cut, and limited current traffic contribution from AI channels.

  Comparison

  Current P/E is about a 20% discount to Trip.com, narrower than the historical 20%-30% discount range; the stock has fallen 13% over the past month, in line with the broader tourism sector pullback.

  Risks

  A decline in transportation take rate, macro conditions weaker than expected, valuation debates stemming from reliance on the Tencent/WeChat ecosystem, ticketing regulation impacts, and further slowing in long-haul travel demand.

• Trip.com Group 9961.HK / TCOM

  Peer read-through and potential transmission object; Goldman Sachs reiterates a Buy rating on Trip.com.

  Strengths

  The report believes Trip.com's 1Q26 results are likely to be broadly in line with prior revenue and margin guidance.

  Weaknesses

  Tongcheng's lowered 2Q26 outlook may trigger market concern that Trip.com could also cut future guidance.

  Comparison

  Over the past month, Tongcheng shares fell 13%, Trip.com about 10%, Huazhu about 15%, and the Hang Seng Index about 3%.

  Risks

  If pressure from long-haul travel and high airfares persists, Trip.com's forward guidance could come under pressure.

Key data

• 1Q26 revenueRMB 5.0 billion, up 14% YoYClose to the top end of the company's 10%-15% revenue growth guidance.
• 1Q26 adjusted net profitRMB 941 million, up 19% YoY1% and 2% above Goldman Sachs' and Visible Alpha consensus estimates, respectively.
• 1Q26 net margin20.8%, up 0.8ppt YoYSupported by a higher share of high-margin accommodation booking and lower service development and administrative expense ratios.
• Core OTA revenueRMB 4.5 billion, up 17% YoYAbove or near the top end of the 12%-17% guidance range.
• Accommodation booking revenueup 15% YoYDriven by about 10% growth in room nights and a mid-single-digit improvement in ADR.
• Transportation ticketing revenueup 6% YoYGrowth slowed further from 9% and 7% in 3Q25 and 4Q25, respectively.
• Annual paying users253.9 millionBroadly stable versus 252.6 million at the end of 4Q25, showing the company is prioritizing monetization over user acquisition.
• Past 12 months ARPURMB 78.9, up 9% YoYReflects improved monetization capability.
• 2Q26 revenue guidanceRMB 4.8 billion-RMB 5.0 billion, up 3%-8% YoYCore OTA is expected to grow 5%-10%, while travel services are expected to decline 5% YoY to flat.
• FY26 revenue guidanceup 6%-11% YoYPrior guidance was 10%-15%, while core OTA revenue guidance was cut from 12%-17% to 8%-13%.
• FY26E Goldman Sachs earnings forecastRMB 3.86 billion, up 14% YoYBased on the assumption of 12% YoY revenue growth.
• Target priceHK$25.30Cut from HK$29.0, reflecting revisions to earnings and net debt forecasts.

Impact & implications

The direct implication for Tongcheng is that earnings resilience remains intact, but revenue growth visibility has weakened, and the market may continue to focus on long-haul travel, airfares, and 2Q26 guidance delivery in the near term. The potential implication for Trip.com is that investors may worry Tongcheng's cautious outlook will flow through to Trip.com's 2Q26 guidance; however, Goldman Sachs expects Trip.com's 1Q26 results to be roughly in line with its prior guidance of 12%-17% revenue growth and a 1.4 percentage point YoY decline in EBIT margin. For the travel OTA sector, short trips, lower-tier cities, and accommodation upgrades remain relatively resilient demand areas, while high airfares, weak long-haul travel, and regulatory restrictions on ticketing-related businesses are the main headwinds.

Risks

• Intensifying competition, especially from platforms such as Douyin.
• A larger-than-expected decline in transportation ticketing take rate, or an inability to benefit from a potential increase in ASP.
• The market questioning the valuation multiple because of Tongcheng's high dependence on the Tencent/WeChat ecosystem.
• Macro conditions weaker than expected, hurting travel and leisure spending demand.
• High fuel surcharges and high airfares continuing to suppress long-haul travel demand.
• Regulatory restrictions related to 12306 ticketing operations may affect some transportation ticketing revenue, although the company believes the impact is only a low-single-digit percentage.

What to watch

• Whether 2Q26 revenue lands within the RMB 4.8 billion-RMB 5.0 billion guidance range.
• Whether air passenger volumes, rail passenger volumes, and domestic main route price indices continue to show weak long-haul travel.
• Whether accommodation booking room nights, ADR, and the contribution from higher-tier hotels continue to grow.
• Whether the company delivers on its full-year 0.5-1 percentage point margin expansion target.
• Whether DeepTrip and Tencent ecosystem cooperation can generate meaningful traffic and transaction conversion.
• Whether Trip.com lowers its 2Q26 or full-year guidance when it reports earnings soon.
• The actual impact of ticketing regulation on transportation ticketing and short-distance related services.