New Street: TCOM Upgrade from NEUTRAL to BUY - Omicron Pullback Looks To be a Buying Opportunity

What's new: Shares of Trip.com were down 27% in 2021 compared to that of KWEB (-52%) and Nasdaq (+21%). The underperformance was driven by lumpy recovery in the domestic market coupled with muted international and outbound travel market. Furthermore, part of the recent selloff was due to resurgence of cases in major cities such as Xi’an, and concerns that international could be further pushed out until end of FY22 due to Omicron. Despite Omicron concerns, early statistics suggest that the new variant is less severe compared to that of Delta. Hence, potential reopening of international and outbound market in 2H of 2022 could still potentially remain intact. We believe that outbound travel could start to open on a limited basis starting 2H of 2022 as popular tourist destination such as Japan, South Korea, and Thailand could reach herd immunity with high vaccination rate. The recovery in the international and outbound market would be a significant contribution to the bottom line as the segment is much more profitable compared to that of the domestic market. Amid potential recovery in the international and outbound market, we upgrade shares of TCOM from NEUTRAL to BUY rating and maintain PT at USD 30 which implies 57.7x FY22E P/E multiple.

Analysts:
Jin Yoon