HK Apr CPI Up 1.1% YoY, below forecast

The Hong Kong Census and Statistics Department (C&SD) published the April Consumer Price Index (CPI). Overall CPI rose 1.1% YoY in April, down 0.9ppt from 2.0% in March. Excluding the impacts of one-off relief government measures, the Composite CPI rose by 0.9% YoY, compared to 1.0% in March. The respective increases in the CPI(A), CPI(B) and CPI(C) were 1.1%、1.0% and 1.1%. In terms of categories, alcohol and tobacco recorded the biggest jump, up 20.8% YoY, which was the main reason for the increase in April. Price of electricity, gas and water decreased by 9.3% YoY. Basic food prices also dropped by 0.4%. The YoY decline in durable goods prices stood at 0.8%. However, clothing, dining out and takeaways, transportation, miscellaneous services and goods all increased.

The underlying consumer price inflation stayed modest in April. While prices of meals out and takeaway food increased at a relatively fast pace, prices of basic food edged down. Prices of energy-related items declined notably. Price pressures on other major components remained broadly in check. Looking ahead, overall inflation should remain contained in the near term. Domestic costs may face some upward pressures along with continued economic growth. External price pressures should remain on a broad downward trend. In terms of the Hong Kong stock market, the Hang Seng Index is consolidating, and it is expected to fluctuate between 18,100-19,200 points.

In terms of industry, although retail spending in China was relatively weak, tourism showed a much stronger rebound, boosting related stocks.

Trip.com(9961.HK) delivered strong results in 1Q24. Net revenue amounted to RMB11.9 billion up 29% YoY. In terms of business segment, Accommodation reservation revenue stood at RMB4.5 billion, up 29% YoY. Transportation ticketing revenue increased by 20% YoY to RMB5.0 billion. Packaged-tour revenue surged by 129% YoY to RMB883 million. Corporate travel revenue reached RMB511 million, up 15% YoY. Net income amounted to RMB4.3 billion, compared to RMB3.4 billion for the same period in 2023. Adjusted EBITDA stood at RMB4.0 billion. Adjusted EBITDA margin was 33%, improved from 31% in 1Q23.

Meanwhile, both domestic and international businesses maintained robust growth in 1Q24. Domestic hotel and airline bookings each increased by over 20% YoY. Outbound hotel and airline bookings both increased by over 100% YoY. Total revenue generated from the global OTA platform, Trip.com, increased by around 80% YoY. It is recommended to buy at HK$394.0, target at HK$459.0, and stop loss at HK$378.0.

Tongcheng Travel(780.HK) continued to obtain solid results in 1Q24. Total revenue increased by 49.5% YoY to RMB3.9 billion. In terms of business segment, revenue from transportation ticketing services increased by 25.6% YoY to RMB1.74 billion, driven by the surge in ticketing volume as well as the enhancement of the value-added products and services. The airline ticketing business achieved record highs in business volume with domestic airline ticketing volume recording a significant YoY increase of 30% and the international airline ticketing volume also witnessing extraordinary growth of over 260%. The accommodation business once again achieved solid results in volume and revenue. Revenue from the accommodation business was up by 15.6% YoY to RMB964.7 million. The adjusted net profit increased by 10.9% to RMB558.5 million, representing an adjusted net margin of 14.4%. The decrease in the adjusted net margin was mainly due to the consolidation of tourism business.

The effective traffic strategies and exceptional operational capabilities enabled Tongcheng to efficiently acquire users in the mass market. APUs for the twelve months ended March 31, 2024 increased by 14.3% YoY and reached 229.3 million. In 1Q24, the average MPUs grew by 2.9% YoY to 42.6 million. It is recommended to buy at HK$17.10, target at HK$19.90, and stop loss at HK$16.40.