Trip.com: Lowering Fair Value by 15% As China Travel Recovery Is Likely Running Out of Steam

We lower our fair value estimate for Trip.com by 15% to USD 36 (HKD 290) from USD 42.50 (HKD 339), due to our view that the recovery for travel demand may be fizzling out. We estimate that both ground and air transportation are at significantly lower-than-expected levels and believe that weakness during Golden Week 2023 is likely an inflection point for the deceleration of travel demand. There appears to be a significant decline in the number of travelers compared with 2019, which could signal some upcoming weakness for the fourth quarter. We believe this could linger into 2024 and beyond and could also disrupt margin expansion progress. Therefore, we lowered our revenue in 2024 by 7% to CNY 51.9 billion, based on the reduction of accommodation revenue estimates by 11% and transportation estimates by 3% next year. While long-term revenue would still gradually grow, we take a much less bullish stance in the near term in terms of its growth trajectory, given the recent Golden Week data.