Morgan Stanley lowered its target price for Tongcheng-Elong Holdings (00780) to HK$17 from HK$19 and maintained its "overweight" rating.
The research house said Tongcheng-Elong's revenue could decelerate further in 3Q with lower transport take rate. Its 2Q revenue of Rmb1.59bn (+21%) was in line with Morgan's estimate. Adjusted net profit of Rmb346mn (+60%) was 9% above Morgan's estimate, with
a net margin of 21.7%.
The company's full-year revenue guidance of 20-25% YoY assumes growth reacceleration in 4Q, driven by a more cross-selling and seasonal recovery in take rate. However, Morgan saw broad-based slowdown across sectors in July.
It reduced its 2019-21 revenue estimates 4-8% but kept its net profit estimates largely unchanged thanks to leverage on S&M expenses.
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