Chinese Leisure Travel Recovery And Omnichannel Expansion Will Drive Stronger Long Term Earnings

Catalysts

About Tuniu

Tuniu is a China based online and offline travel service provider specializing in packaged tours, self guided trips and corporate travel solutions.

What are the underlying business or industry changes driving this perspective?

• Structural recovery and ongoing expansion of both domestic and outbound leisure travel in China, evidenced by sustained double digit growth in packaged tour revenues and holiday GMV, may support a multi year rebound in top line revenue and earnings.
• Scaling of higher value outbound, long haul and niche destination products such as long haul islands and Americas tours may lift average selling prices and product mix quality, which can translate into stronger gross profit and wider net margins over time.
• Rapid adoption of self guided and self drive travel, underpinned by Tuniu's Hotel plus X and dynamic packaging technology, broadens the addressable market into all provinces and lower tier cities, which may drive incremental transaction volume and recurring revenue.
• Deepening omnichannel reach through profitable live streaming partnerships and expanding offline flagship stores in major tourist hubs enhances customer acquisition efficiency and conversion, which can improve marketing ROI and support margin expansion.
• Ongoing investment in technology tools and AI enabled operations to streamline product development, supply chain and financial management may enhance operating leverage, helping to convert mid to high single digit revenue growth into faster growth in net income and earnings per share.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Tuniu's revenue will grow by 9.9% annually over the next 3 years.
• Analysts assume that profit margins will increase from 1.0% today to 6.9% in 3 years time.
• Analysts expect earnings to reach CN¥51.0 million (and earnings per share of CN¥0.43) by about December 2028, up from CN¥5.4 million today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 31.9x on those 2028 earnings, down from 113.3x today. This future PE is greater than the current PE for the US Hospitality industry at 23.3x.
• Analysts expect the number of shares outstanding to decline by 2.54% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.94%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Despite strong secular growth in Chinese leisure travel, Tuniu's gross profit declined by 10% year over year in the third quarter of 2025 while net revenues grew 9%. This suggests competitive pressure and discounting could structurally compress take rates and weigh on gross margins and earnings.
• The strategy of aggressively expanding long haul islands, niche outbound destinations and nationwide self drive coverage may require sustained higher research and product development spending, already up 15% year over year. This could outpace revenue growth and limit operating leverage and net margins.
• Heavy reliance on packaged tours, which contributed 89% of net revenues in the third quarter, exposes Tuniu to a long term shift toward independent booking platforms and direct supplier channels. This could erode transaction volumes and revenue growth if consumer behavior continues to favor more fragmented, do it yourself travel planning.
• Scaling live streaming and offline flagship stores deepens omnichannel reach but also locks the company into structurally higher sales and marketing and personnel costs, already up 2% year over year. This may cap profitability and keep net income growth below expectations if conversion or traffic in these channels weakens during future travel slowdowns.
• Management is targeting non GAAP breakeven or profitability in traditionally low season quarters. However, the need to stimulate demand through price competitive offerings and promotions for off peak, ice and snow and niche products could pressure pricing power and lead to weaker net revenues and thinner net margins during cyclical or macro downturns.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of $1.7 for Tuniu based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be CN¥739.4 million, earnings will come to CN¥51.0 million, and it would be trading on a PE ratio of 31.9x, assuming you use a discount rate of 8.9%.
  
• Given the current share price of $0.74, the analyst price target of $1.7 is 56.4% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.