Trip.com (9961 HK, HK$305.20, HK$198bn) Macro and regulatory headwinds cap near-term performance

Trip.com posted 1Q26 revenue of RMB16.2bn (+17% YoY / +5% QoQ), driven by Chinese New Year travel and overseas expansion. Net profit fell 41% YoY to RMB2.5bn on one-off investment losses, while adjusted net profit declined just 7% YoY to RMB3.9bn. Looking forward, management trim 2Q26 guidance to 3%-8% YoY growth due to the macro headwinds, while the ongoing antitrust investigation continues to weigh on both sentiment and earnings visibility.

Accommodation - Spring Festival travel demand drives growth: revenue reached RMB6.5bn (+17% YoY / +3% QoQ), accounting for 40% of total. Growth was driven by resilient travel demand during the Chinese New Year holiday and steady expansion in overseas hotel bookings. The management expects to sustain its resilience in 2Q26, as domestic hotel ADR has shown modest YoY growth.

Transport ticketing - momentum fading going into Q2: revenue reached RMB6.1bn (+12% YoY / +13% QoQ), accounting for 38% of total. The growth was also driven by travel demand during the Chinese New Year holiday, as well as support from international air tickets and ground transportation demand. Management expects transport ticketing to face headwinds in 2Q26 from elevated energy prices weighing on aviation demand, and from proactive compliance adjustments to high-margin railway ancillary services, such as fare-accelerator packs and seat selection, which are expected to weigh on railway ticketing profitability.

Advertising, packaged tours and corporate travel beat expectations: Other revenue (mainly advertising) rose 33% YoY to RMB1.8bn, moderating from the exceptional 54% growth in 4Q25 due to high base. Packaged tours revenue grew 19% YoY to RMB1.1bn (+7% QoQ), driven by resilient outbound vacation demand and seasonal tailwinds during the Chinese New Year holiday. Corporate travel revenue increased 20% YoY to RMB0.7bn (-15% QoQ), supported by steady growth in corporate bookings and benefited from the overseas expansion of Chinese enterprises.

Overseas business momentum builds further: the company served 7mn inbound travelers in 1Q26 (+90% YoY), thanks to the easing of China’s visa‑free policies which now cover more than 80 countries. The average stay lengthened to 5.1 days, up 11% YoY, with travelers from Europe and the United States accounting for around 25% of the total. Moreover, the platform connected over 110k local partners to international demand, of which nearly 14k secured their first overseas orders. The company has reaffirmed its five‑year target of 200mn inbound visitors.

International OTA platform bookings grew roughly 65% YoY in 1Q26, with mobile App volume reaching record high. A broad-based growth was observed across key source markets, with APAC remaining the largest while Europe and the US both registered robust growths. 

Core profitability beat expectations in 1Q26: GPM eased further to 79.6% mainly due to a higher mix of lower-margin international businesses. Core operating profit rose 11% YoY to RMB4.0bn, capped by a 17% YoY jump in operating expenses. However, net profit declined 41% YoY to RMB2.5bn, with NPM falling to 16% both YoY and QoQ, primarily attributable to mark-to-market losses from investment portfolio. Excluding these fair value fluctuations and share-based compensation, the adjusted net profit attributable to shareholders reached RMB3.9bn, down only 7% YoY and up 11% QoQ, underscoring the resilience of the core businesses.

Our views: Management's downward revision of its 2Q26 guidance triggered a sharp sell-off in the shares. However, it is believed that the adjustment was a prudent assessment of the macro consumption trends and did not embed the potential regulatory risk of a take rate cap on accommodation. The company's near-term outlook is constrained by three factors namely, a sluggish consumption recovery, lingering antitrust overhang, and margin erosion from international expansion. 

The key issue for the market is no longer whether a fine will be imposed, but whether the regulatory outcome extends to a cap on accommodation take rates. A one-off penalty would likely present a manageable near-term impact, while the take‑rate restriction would impose structural headwinds to profitability and valuation. The counter is trading at 10x FY26E PE. (Research Department)