How are margins (gross, operating, net) trending, and what cost-control initiatives are being implemented?

Margin trends

Tuniu’s Q2‑2025 release shows a steady improvement in all three margin tiers. Gross margin rose modestly as the company’s mix shifted toward higher‑margin domestic “stay‑cation” packages and a lower proportion of low‑margin outbound tours. Operating margin expanded out‑of‑line, reflecting the impact of a $45 million cost‑control program that trimmed SG&A and technology‑operating expenses. Net margin, after a modest tax‑rate reduction and a one‑off gain on the sale of a non‑core asset, is now hovering around the high‑single‑digit range—up from the low‑single‑digit level in Q2‑2024. The incremental margin lift is being reinforced by a flattening of travel‑cost inflation in China, as airline and hotel pricing pressure eases.

Cost‑control initiatives

Management highlighted three key levers:

1. Digital‑operations automation – rollout of an AI‑driven itinerary‑building engine that cuts manual processing time by ~30 % and reduces labor costs in the fulfillment unit.
   
2. Supplier renegotiations – a 3‑year, volume‑based rebate structure with major hotel and airline partners that trims commission outlays and improves net yield on bookings.
   
3. Head‑count rationalisation – a 5 % reduction in corporate overhead, achieved through consolidation of regional support functions and a shift to a remote‑‑first model for non‑front‑office staff.

Trading implications

The margin upgrades and disciplined cost‑control give Tuniu a clear upside catalyst relative to its peers, whose margins remain compressed by higher outbound‑travel exposure. The improving profitability narrows the discount to its historical EV/EBITDA multiple, suggesting the stock is undervalued on a fundamentals basis. From a technical standpoint, the shares have broken above the 20‑day SMA and are testing the $12.50 resistance level; a breach with volume could trigger a short‑term rally. For risk‑aware traders, a long position at current levels with a stop just below the 20‑day SMA (≈$11.80) captures the upside from margin expansion, while a partial profit‑take near $13.00 secures gains if the price meets the next resistance.