Report Interpretation

Overview

The report reassesses Trip.com following its 2Q26 results and 3Q26 outlook. J.P. Morgan now expects the domestic hotel commission reset to last through 4Q26 and 1Q27, prompting material 2027 earnings and target-price reductions, but argues that investors are treating a compression within Trip.com's historical effective commission range as if it were a collapse from the higher nominal rate shown to hotels.

Core views

The central debate is whether September's hotel-tier rules cause lasting structural damage to Trip.com's domestic hotel monetization. J.P. Morgan believes the transition will be later and deeper than it previously expected, extending into 4Q26 and 1Q27. However, it argues that the market is using the wrong starting point: investors appear to be pricing a fall from the 10-15% nominal commission displayed to hotels, while Trip.com's effective group commission rate was already about 9% in 2025. The report's base case is therefore an effective commission rate settling at 8-10%, representing compression within the existing range rather than a reset from the nominal headline rate. The volume and market-share evidence does not yet indicate a severe competitive break. Domestic hotel bookings grew at a mid-single-digit rate in 2Q26, and J.P. Morgan expects 3Q volumes to be flat to slightly positive, broadly matching peers. Revenue is expected to trail booking-volume growth by about 5 percentage points because both average daily room rates and the blended take rate are declining. The report assumes hotels will renegotiate and list across multiple platforms instead of abandoning Trip.com, and it sees no visible share shift to Meituan or Douyin. That distinction is important: weaker monetization during re-contracting reduces near-term revenue and margins, but stable booking share would leave room for earnings to recover once the transition is complete. Buybacks cushion the earnings reset but do not eliminate it. In 2Q26, non-GAAP EPADS increased to Rmb7.27 from Rmb7.20 a year earlier even though adjusted EBITDA declined 6% year on year, because the share count fell 5%. J.P. Morgan expects a roughly 31% non-GAAP operating margin in 3Q26 and further share-count reduction, supporting run-rate EPS growth when the prior-year MakeMyTrip gain is excluded. The financial model projects shares outstanding declining from 698 million in FY25 to 635 million in FY26, 592 million in FY27 and 569 million in FY28. International expansion is the second earnings cushion. Trip.com's international platform revenue grew more than 50% year on year in 2Q26, and J.P. Morgan forecasts 40-50% growth in 3Q26. It estimates that incremental international revenue now exceeds incremental cost and that mature markets are profitable. Nevertheless, the overall international platform remains loss-making and is expected to dilute the group's 4Q26 margin, so international growth offsets only part of the domestic hotel reset in the near term. The revised forecasts reflect weaker domestic hotel monetization during the transition and lower domestic transportation commissions. J.P. Morgan cuts 2026E non-GAAP EPS by 4%, from Rmb27.11 to Rmb26.08, and 2027E EPS by 13%, from Rmb32.45 to Rmb28.33. The updated model forecasts revenue of Rmb66,558 million in 2026, Rmb73,994 million in 2027 and Rmb84,424 million in 2028, with year-on-year growth of 6.7%, 11.2% and 14.1%. Adjusted EBITDA is forecast at Rmb13,786 million, Rmb21,036 million and Rmb23,904 million, while the EBITDA margin falls from 30.7% in 2025 to 20.7% in 2026 before recovering to 28.4% in 2027 and 28.3% in 2028. Adjusted EPS is forecast to decline 42.8% in 2026, then grow 8.6% in 2027 and 18.1% in 2028. The particularly high 2025 comparison includes the prior-year MakeMyTrip gain. The report maintains Overweight on the expectation of 2027 earnings normalization. Its Jun-27 target for the U.S. ADR is reduced from US$72 to US$62, while the Hong Kong target falls from HK$560 to HK$490. Both are based on an unchanged 15x 2027E P/E, in line with tier-1 China Internet peers; the Hong Kong target is derived from the ADR target using HK$7.8 per US$1. J.P. Morgan says the multiple is supported by Trip.com's growth outlook, stronger competitive position versus peers and three-year earnings trajectory. The thesis depends on effective hotel commissions remaining within 8-10%, booking growth broadly tracking peers and no visible loss of share after re-contracting.

Analysis framework

J.P. Morgan begins with the difference between nominal and effective hotel commissions, then tests whether lower monetization is accompanied by weaker bookings or market-share loss. It next evaluates how share repurchases and international platform growth affect earnings during the transition, revises the financial forecasts, and applies an unchanged peer-based 2027 P/E multiple to derive the two listing-specific price targets.

Methodology notes

• Industry AnalysisVolume-price decomposition

  Booking-volume, ADR and take-rate decomposition

  The report separates hotel booking-volume growth from average daily room rates and commission take rates. This explains why revenue can trail bookings by about 5 percentage points even if Trip.com's booking share remains stable.

• Valuation methodsP/E and PEG Valuation

  Peer-based forward P/E valuation

  J.P. Morgan applies an unchanged 15x multiple to its 2027E earnings estimate, aligned with tier-1 China Internet peers, to derive the US$62 ADR target and then converts it into the HK$490 H-share target.

Asset mapping & comparison

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

• Trip.com Group Ltd ADR (TCOM.US)

  Primary covered U.S.-listed security; J.P. Morgan maintains Overweight and sets a Jun-27 target of US$62.

  Strengths

  International revenue growth, ongoing buybacks, stable booking share and stronger competitive positioning versus peers support the 2027 normalization thesis.

  Weaknesses

  Domestic hotel monetization is resetting later and more deeply than previously expected, while transportation commissions and near-term margins are under pressure.

  Comparison

  Valued at 15x 2027E P/E, in line with tier-1 China Internet peers.

  Risks

  Commission below 8%, booking growth materially below peers, visible share loss, further airline commission pressure, slower travel recovery, competition and macroeconomic weakness.

• Trip.com Group Ltd - H (09961.HK)

  Primary covered Hong Kong-listed security; J.P. Morgan maintains Overweight and sets a Jun-27 target of HK$490.

  Strengths

  The same buyback, international-growth and 2027 earnings-normalization drivers apply to the Hong Kong listing.

  Weaknesses

  The listing reflects the same domestic hotel monetization and margin pressures as the ADR.

  Comparison

  The HK$490 target is derived from the US$62 ADR target using HK$7.8 per US$1.

  Risks

  Commission below 8%, booking growth materially below peers, visible share loss, further airline commission pressure, slower travel recovery, competition and macroeconomic weakness.

Key data

• Effective group commission rateAbout 9% in 2025; expected to settle at 8-10%The report contrasts this effective rate with the 10-15% nominal commission shown to hotels.
• Domestic hotel bookingsMid-single-digit growth in 2Q26J.P. Morgan expects 3Q26 volumes to be flat to slightly positive and broadly in line with peers.
• Revenue versus booking volumeRevenue expected to trail volume by approximately 5 percentage pointsAttributed to lower ADR and a lower blended take rate.
• 2Q26 non-GAAP EPADSRmb7.27Up from Rmb7.20 in 2Q25 despite a 6% year-on-year decline in adjusted EBITDA.
• Share-count change-5% in 2Q26Buybacks helped non-GAAP EPADS rise despite weaker adjusted EBITDA.
• 3Q26 non-GAAP operating marginApproximately 31%J.P. Morgan forecast.
• International platform revenue growthMore than 50% year on year in 2Q26; 40-50% expected in 3Q26Incremental revenue is estimated to exceed incremental cost, although the platform remains loss-making overall.
• 2026E non-GAAP EPSRmb26.08Reduced by 4% from Rmb27.11.
• 2027E non-GAAP EPSRmb28.33Reduced by 13% from Rmb32.45.
• 2026E/2027E revenueRmb66,558 million / Rmb73,994 millionThe 2027E revenue forecast was reduced by 6% from Rmb78,707 million.
• U.S. ADR price targetUS$62.00 for Jun-27Reduced from US$72.00; based on 15x 2027E P/E.
• Hong Kong price targetHK$490.00 for Jun-27Reduced from HK$560.00 and derived from the ADR target using HK$7.8 per US$1.

Impact & implications

J.P. Morgan expects a pronounced 2026 profitability reset followed by recovery into 2027 as domestic hotel re-contracting matures, international revenue scales and buybacks reduce the share count. Its constructive view requires the disruption to remain a monetization issue rather than becoming a market-share problem; the unchanged 15x valuation multiple indicates that the lower targets principally reflect reduced earnings estimates rather than a lower assigned valuation framework.

Risks

• The normalization thesis would weaken if the effective hotel commission rate settles below 8%.
• Domestic hotel booking growth could materially lag peers or Trip.com could lose visible market share after hotel re-contracting.
• Further pressure on airline commissions could reduce transportation monetization.
• A slower-than-expected travel-market recovery could delay earnings improvement.
• More intense industry competition could pressure bookings, commissions and margins.
• A macroeconomic slowdown could weaken travel demand.

What to watch

• Track whether the effective group hotel commission rate stabilizes within the report's 8-10% expected range.
• Compare Trip.com's domestic hotel booking growth with peers and monitor for visible share shifts after re-contracting.
• Monitor the approximately 5-percentage-point gap between booking-volume growth and revenue growth as ADR and take rates reset.
• Track whether international platform growth remains 40-50% year on year in 3Q26 and whether mature markets continue to be profitable.
• Watch the duration of the monetization reset through 4Q26 and 1Q27 and the expected earnings normalization during 2027.
• Monitor further share-count reductions and their contribution to per-share earnings.