CITIC Securities: TONGCHENGTRAVEL fully acquires Wanda Hotels and maintains a "Buy" rating

According to the Zhitong Finance APP, CITIC Securities released a research report stating that TONGCHENGTRAVEL (00780) recently announced a full acquisition of Wanda Hotel Management (Hong Kong) Company for HKD 2.497 billion, further improving its hotel management business layout. The acquisition target, Wanda Hotel Management, operates under a light asset model and currently manages 204 high-end and luxury hotels, possessing a resource pool of 17 million high-end members, which complements the existing membership system of eLong Hotel Management well. In the medium to long term, the company's core OTA business is expected to continue leading the industry with its traffic advantages and technological empowerment. The company is likely 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, maintaining a "buy" rating.

From a valuation perspective, this acquisition corresponds to a 2023 EV/EBITDA of 9.5 times, which is in line with the valuation median 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 expected that after the acquisition is completed, Wanda Hotel Management will contribute over HKD 200 million in incremental pre-tax profit to TONGCHENGTRAVEL annually. Since 2021, TONGCHENGTRAVEL has accelerated its layout in the hotel management business, and through this acquisition, it has successfully filled its gap in the luxury and high-end hotel market, forming a complete brand matrix from economy to luxury and from limited service to full service for eLong Hotel Management Technology