CITIC SEC: TONGCHENGTRAVEL (00780) acquires Wanda Hotels & Resorts in its entirety, maintains "buy" rating.

CITIC SEC released a research report stating that TONGCHENG TRAVEL (00780) recently announced the full acquisition of Wanda Hotel Management (Hong Kong) Company for 2.497 billion yuan, further improving its hotel management business layout. The target of this acquisition, Wanda Hotel Management, adopts a light asset operation model, currently managing 204 high-end and luxury hotels, and has 17 million high-end members, which complements the existing membership system of Ctrip Hotel Management. In the medium to long term, the company's core OTA business is expected to continue to lead the industry with traffic advantages and technological empowerment. The company is expected to gradually transform from an OTA platform to a comprehensive travel service platform through the development of new businesses such as PMS, travel agencies, and hotel management through internal and external expansion, maintaining a "buy" rating. From a valuation perspective, this acquisition corresponds to an EV/EBITDA multiple of 9.5 times in 2023, which is in line with the valuation of comparable companies such as Huazhu and Jinjiang. Considering the brand scarcity of Wanda Hotel Management in the high-end hotel market, the transaction pricing is reasonable. It is estimated that after the acquisition is completed, Wanda Hotel Management will contribute over 200 million yuan in incremental pre-tax profit to Tongcheng annually. Tongcheng has accelerated its layout in the hotel management business since 2021, successfully completing its blank in the luxury and high-end hotel market through this acquisition, and forming a complete brand matrix from economy to luxury and from limited service to full service for Ctrip Hotel Management Technology.