Tongcheng Travel Shares Rise on Higher Net, Improved Outlook

By Jiahui Huang

Tongcheng Travel shares rose sharply in Hong Kong after the company reported a sharply higher net profit on improved revenue and as investors turned more upbeat on its outlook.

The Chinese travel company's shares rose 9.6% to 14.38 Hong Kong dollars, the equivalent of US$1.85, early Wednesday, on track for its largest one-day percentage gain in more than eight months.

The surge came after Tongcheng Travel's second-quarter net profit jumped on higher revenue and on analysts' positive outlook for its profitability in the second half of the year.

"Despite slower revenue growth assumption, we see enhanced earnings visibility ahead for Tongcheng for more quality growth," Citi analysts led by Brain Gong wrote in a note.

The company's plan to prioritize quality growth, referring to users of its Tongcheng travel app, may mean less subsidies will be needed for low quality users, especially those on WeChat, the analysts added. Its gross profit margin is also likely to improve sequentially thanks to higher sales and lower marketing expenses, they said.

Tongcheng Travel's second-quarter net profit rose 22%, compared with the same period a year earlier, to 433.7 million yuan, or US$60.8 million, while revenue rose 48% to 4.24 billion yuan.

Looking ahead, the company may book decent growth on hotel bookings and airline tickets in the third quarter, as it is the peak season for outbound travel in China, the analysts say.

Write to Jiahui Huang at jiahui.huang@wsj.com

(END) Dow Jones Newswires

August 21, 2024 00:03 ET (04:03 GMT)

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