[Sinolink Business & Society] Trip.com Penalty Lands, Travel Sector Recovery Rally

English summary

Company received administrative penalty decision from Market Supervision Administration, fined approximately 5.3 billion yuan for violating the anti-monopoly law. This decision is the specific details after the company received investigation notice from SAMR in 26Q1. The overall penalty amount is better than expected (less than 10%). After this penalty, the company can no longer sign exclusive terms with high-star hotels, so hotels can list on other platforms simultaneously to meet their operational needs. We believe after this event lands, company's high-star hotel order changes remain limited, consumers still value platform service guarantee and quality for booking services. Special brand gold commission rates expected to decrease orderly, causing overall take rate to decline in the short term, estimated revenue impact about 3%. But long term, the company is expected to offset impact through other forms such as advertising fees. We believe at this stage, after the shoe drops, company's valuation bottom has appeared, the penalty does not affect its industry position, company's service quality and quality management still have a big gap with other OTA platforms, Matthew effect continues to strengthen. ...