Tongcheng Travel: Solid 1Q26, but near-term demand uncertainty rises; maintain Neutral

Overview

This report is JPMorgan's earnings review and valuation update on Tongcheng Travel. The report acknowledges that the company delivered solid execution and a sound fundamental performance in 1Q26, but argues that market attention has shifted to demand visibility in 2Q and beyond. As high oil prices, elevated airfares, and seasonal weakness may weigh on price-sensitive leisure travel, the research team has cut near-term growth and earnings forecasts while maintaining a Neutral rating.

Core views

The core view is to be cautious first. Tongcheng Travel's 1Q26 revenue grew 14% y/y, non-IFRS net margin expanded to 19%, and profit rose 19% y/y, indicating good earnings quality; however, management's comments on near-term demand, especially transportation ticketing, were clearly more conservative. JPMorgan expects 2Q core OTA revenue growth to slow to 9%, transportation ticketing to turn from +6% in 1Q to -4%, and accommodation booking growth to slow from 15% to 10%. Although lower sales and marketing expenses and improved administrative efficiency may support about 100 bps of net margin expansion, that is not enough to offset the slowdown in revenue momentum, and 2Q non-IFRS net profit growth is expected to slow to 14%.

Analysis framework

The report mainly combines actual 1Q26 results, management's conference-call remarks, industry channel checks, revenue assumptions by segment, margin assumptions, and a P/E valuation approach to re-estimate the company's near-term earnings and target price. For valuation, a 10x P/E is used, implying a Dec 2026 target price of HK$17.50, down from the previous HK$21.50 target.

Methodology notes

• Valuation methodsP/E valuation method

  Target price based on 10x P/E

  JPMorgan set Tongcheng Travel's target price at HK$17.50 using a 10x P/E, down from about 12x previously and roughly 30% below the historical trading multiple, to reflect near-term demand uncertainty and slowing growth momentum.

• Earnings forecastSegment revenue and margin forecasting

  Assumptions for OTA, transportation ticketing, accommodation booking, and net margin

  The report lowers the 2Q core OTA revenue growth assumption to 9%, transportation ticketing to -4%, accommodation booking to +10%, and overall revenue growth to +7%, while assuming non-IFRS net margin expands by about 100 bps y/y.

• Fundamental validationIndustry checks and management guidance interpretation

  Validation of near-term demand trends

  The research team said industry checks showed volatile trends in May, and management sounded more cautious than before about visibility for 2Q and 2H26, leading to a lower near-term earnings outlook.

Asset mapping & comparison

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

• Tongcheng Travel 00780.HK

  Core coverage name

  Strengths

  Stable execution, 1Q26 results better than expected, continued non-IFRS net margin expansion, and resilient fundamentals.

  Weaknesses

  Growth momentum may keep slowing, transportation ticketing is under near-term pressure, and hotel franchising plus offline travel agency acquisitions add business complexity and reduce earnings visibility.

  Comparison

  Compared with a pure OTA model, the company's new businesses and acquisitions may justify a lower valuation multiple; the report also notes that its valuation is cheaper than TCOM, which could be an upside risk.

  Risks

  Macro uncertainty, weaker-than-expected domestic travel demand, overinvestment in new businesses, intensifying competition in lower-tier cities, and insufficient demand visibility in 2H26.

Key data

• 1Q26 revenue growth+14% y/yRevenue beat consensus by about 3%.
• 1Q26 non-IFRS net margin19%, +80bps y/yMargin expansion remained healthy even after consolidating Wanda Hotel.
• 1Q26 profit growth+19% y/yProfit beat consensus by about 3%.
• 2Q26 core OTA revenue growth forecast+9% y/yA clear slowdown from +17% in 1Q26.
• 2Q26 transportation ticketing revenue growth forecast-4% y/yTurns negative from +6% in 1Q26 and is the main pressure point in 2Q.
• 2Q26 accommodation booking revenue growth forecast+10% y/yBelow the +15% in 1Q26.
• FY26E revenue growth forecast+9%Previous forecast was +13%.
• FY26E net profit growth forecast+14%Previous forecast was +18%.
• Target priceHK$17.50Previous target was HK$21.50.
• Valuation multiple10x P/EAbout 30% below the historical trading multiple.

Impact & implications

The report is moderately neutral on the stock's implications: Tongcheng Travel looks inexpensive on valuation, but the cheapness may persist without a clear catalyst. The market may not aggressively buy the stock until there is a clear positive inflection in forward growth or earnings. Maintaining Neutral reflects a roughly balanced risk-reward profile rather than a deterioration severe enough to warrant a bearish view.

Risks

• Domestic travel demand may be weaker than expected, especially if macro conditions remain uncertain, which could weigh on travel consumption.
• Overinvestment in new businesses such as outbound travel, standalone apps, or hotel/offline travel-related operations could drag on margins and valuation.
• Competitive pressure may be stronger than expected, especially from platforms such as Meituan or Douyin in lower-tier cities.
• High oil prices and elevated airfares may continue to squeeze demand from price-sensitive leisure travelers.

What to watch

• Whether 2Q26 transportation ticketing revenue turns negative as expected and whether demand improves ahead of the summer peak season.
• Whether accommodation booking growth can stay in double digits and offset pressure from transportation ticketing.
• Whether lower sales and marketing expenses and better G&A efficiency can support net margin expansion.
• Whether management's demand outlook for 2H26 becomes more explicit or more upbeat.
• Whether new business initiatives and M&A integration increase earnings volatility or valuation discounts.