CITIC Securities: Tongcheng Travel (00780) wholly acquires Wanda Liquor Management to maintain “buy” rating

The Zhitong Finance App learned that CITIC Securities released a research report saying that Tongcheng Travel (00780) recently announced the wholly-owned acquisition of Wanda Hotel Management (Hong Kong) for 2,497 billion yuan to further improve its hotel management business layout. Wanda Liquor, the target of this acquisition, uses an asset-light operating model. It currently manages 204 high-end and luxury hotels, and has 17 million high-end membership resources, which complements Yilong Liquor's existing membership system. In the medium to long term, the company's core OTA business is expected to continue to lead the industry with traffic advantages and technological empowerment. The company is expected to help the company gradually transform from an OTA platform to an integrated travel service platform through new businesses such as PMS, travel agencies, and hotel management, which are endogenous epitaxial development, and maintain a “buy” rating.

From a valuation perspective, this acquisition is equivalent to 9.5 times EV/EBITDA in 2023 and is at the center of valuation for comparable companies such as Huazhu and Jinjiang. Considering the scarcity of Wanda Brewery brands in the high-end hotel market, the transaction pricing is reasonable. It is estimated that after the acquisition is completed, Wanda Brewery will contribute more than 200 million yuan of incremental pre-tax profit to Tongcheng every year. Since 2021, Tongcheng has accelerated the development of its hotel management business. Through this acquisition, it has successfully filled the gap in the luxury and high-end hotel market, enabling Elong Liquor Technology to form a complete brand matrix from economy to luxury, from limited service to full service.