Trip.com faces RMB5.2b antitrust fine as BofA cuts target to HKD471

China's antitrust regulator hit Trip.com with a RMB5.2 billion fine, removing a cloud that had hung over the online travel giant for months.

China's market regulator fined Trip.com Group RMB5.2 billion for anti-monopoly violations, a ruling BofA Securities said removes major regulatory uncertainty even as it forces the company to book the charge in the second quarter.

"The ruling has removed major regulatory uncertainty, while the earnings reset creates an attractive entry point ahead of a potential recovery," BofA Securities said in a research note. The broker reiterated its Buy rating on the stock.

Trip.com will recognize RMB123 million in revenue deductions and the full RMB5.2 billion fine in Q2 2026. BofA cut its H-share price target to HKD471 from HKD502 and its US-listed ADS target to USD60 from USD64, reflecting the fine and remediation costs. The broker forecasts Q2 net revenue of RMB15.5 billion, up 4% year over year, with accommodation revenue rising 8% and transportation revenue falling 2%, the latter reflecting weak travel demand in June because of heavy rainstorms.

The fine resolves an antitrust overhang that had weighed on Trip.com's shares, but the company now faces a period of compliance upgrades and operational adjustments. Management has already begun removing automated pricing tools and commissioned distribution programs in tier-one and tier-two cities, contributing to a slowdown in hotel revenue growth to high-single-digit or low-double-digit levels in the second quarter.

BofA lowered its non-GAAP net profit forecasts for fiscal 2026 and 2027 by 4% each. It now projects non-GAAP operating profit of RMB17.1 billion for fiscal 2026 and RMB19 billion for fiscal 2027, with non-GAAP ADS earnings per share of USD3.3 and USD4, implying price-to-earnings ratios of 14 times and 11 times, respectively.

The broker expects revenue growth of 6.6% in fiscal 2026 and 11.4% in fiscal 2027, driven by 0% and 6% growth in China operations and 31% and 28% growth in international operations, assuming only a mild recovery in the second half of 2026.

Management has said the regulatory changes should not structurally affect hotel average daily rates or commission rates, which are primarily driven by industry supply-demand dynamics. Over the long term, the required changes may enhance traveler lifetime value and partner retention rates while advancing the company's globalization and quality-focused G2 strategy, according to BofA.

The State Administration for Market Regulation's ruling comes as Beijing intensifies its campaign against excessive competition that erodes corporate profits across China's internet sector. The fine against Trip.com, one of China's largest online travel platforms with a market capitalization of about USD28 billion, shows regulators are targeting pricing practices that squeeze smaller competitors and hotel partners. The last major antitrust action against a Chinese internet platform was Alibaba's USD2.8 billion fine in 2021, which preceded a period of heightened regulatory scrutiny across the sector.

BofA cited a resilient customer base, stable domestic competition, rapid international business expansion and easing concerns about AI disruption as supporting factors for its Buy rating. Risks include severe weather, escalating geopolitical tensions and further regulatory actions.

This article is for informational purposes only and does not constitute investment advice.