Key Takeaways
Shares of Tongcheng Travel (0780.HK) fell more than 5% after at least five brokerages, including Goldman Sachs and JP Morgan, cut their price targets on the online travel company, citing headwinds from rising costs.
"1Q26 results were in line, but rising fuel surcharges put pressure on long-haul and air travel," Goldman Sachs, which lowered its target to HKD 25.30 from HKD 29, said in a note. The bank maintained its Buy rating but cut earnings per share forecasts for 2026-28 by 34%.
The wave of revisions followed Tongcheng's first-quarter earnings, which were seen as solid but were overshadowed by a cautious management outlook.
While Tongcheng’s first-quarter net profit of RMB 779 million beat some expectations, the company’s warning on the impact of higher fuel costs and adjustments to train ticket prices has soured the outlook for the second quarter and beyond.
Analysts broadly agreed that while first-quarter performance was stable, the external environment presents significant challenges. Citi noted that the surge in oil prices had a "greater-than-expected impact on domestic travel demand." While the bank expects margin expansion from optimized operating expenses, the top-line pressure was a key reason for its target price reduction to HKD 25.
JP Morgan, which holds a Neutral rating, said that while the company's valuation is not demanding, "catalysts are lacking." CLSA echoed this sentiment, stating that a re-rating for the stock is unlikely until the core online travel agency (OTA) platform shows a recovery in growth.
The downward revisions suggest a consensus that macroeconomic headwinds will likely suppress short-term revenue growth. The stock's decline reflects investor concerns about profitability in the travel sector. Investors will be closely watching for any signs of stabilizing fuel costs or a rebound in consumer travel demand in the company's next earnings report.
This article is for informational purposes only and does not constitute investment advice.
