Macquarie: CHENGCHENGTRAVEL (00780) benefits from improved profit margins. Target price raised to 25.1 Hong Kong dollars, maintaining an "outperform" rating.

Macquarie released a research report stating that it is expected that TONGCHENGTRAVEL (00780) will see a 16% year-on-year increase in first quarter revenue. Adjusted net profit forecast for the company for the next two years has been raised by 3% and 2%, with the target price of the stock increased from HK$24.3 to HK$25.1. The rating of "outperform" has been reiterated. Considering the narrowing decline in the average daily room rate in the mainland hotel industry, as well as the gradual improvement in actual revenue brought about by subsidy reductions and better sales of value-added services, it is expected that accommodation division sales will increase by 22% year-on-year. Taking into account the high base in the first quarter of last year, it is estimated that transportation business revenue will increase by 12% year-on-year. The bank predicts that the net profit margin of Tongcheng in the first quarter of this year will expand by 2.9 percentage points year-on-year, based on improved monetization, better traffic algorithms, and overall operational efficiency improvements.