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Recovery Pushed Out Further, but Long-Term Thesis for Is Intact

Kai Wang, CFA Senior Equity Analyst

Business Strategy and Outlook

| Kai Wang, CFA |

Narrow-moat competes in China’s crowded online travel agent (OTA) industry by leveraging the largest selection of both domestic and international hotels in China on its platform and relying on user stickiness as a one-stop shop for travel ticketing, accommodations, and packaged tours. The platform is now also generating revenue from advertisement in which it hopes to take 3%-5% of the ad market, but nearly all its revenue streams are travel-related, and coronavirus lockdowns in China has cratered demand due to the inability to travel or unwillingness to quarantine.

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Business Description is the largest online travel agent in China and is positioned to benefit from the country's rising demand for higher-margin outbound travel as passport penetration is only 12% in China. The company generated about 78% of sales from accommodation reservations and transportation ticketing in 2020. The rest of revenue comes from package tours and corporate travel. Prior to the pandemic in 2019, the company generated 25% of revenue from international business, which is important to its margin expansion. Most of sales come from websites and mobile platforms, while the rest come from call centers. The competes in a crowded OTA industry in China, including Meituan, Alibaba-backed Fliggy, Toncheng, and Qunar. The company was founded in 1999 and listed on the Nasdaq in December 2003.

968 Jin Zhong Road
Shanghai, 200335, China, People's Republic of
T +86 2134064880
Sector Consumer Cyclical
Industry Travel Services
Most Recent Earnings Dec 31, 2021
Fiscal Year End Dec 31, 2022
Stock Type
Employees 33,732 Group Ltd ADR's Related News