Since the outbreak of covid-19 epidemic, epidemic prevention policies, travel restrictions and repeated epidemics have had a serious impact on the consumption scenes of tourism, catering, hotels, food, drinks and other industries. At present, the epidemic situation is expected to continue to improve. The 14th five year development plan of tourism and other industries also looks forward to the liberalization of entry and exit when the epidemic situation allows. We believe that with the support of policy support + better prevention and control situation, the inflection point of consumption recovery is coming and the prosperity is expected to continue to rise. Looking forward to the future, how to layout the investment after the epidemic and how to interpret the recovery market, the large consumption team of East Asia Qianhai Securities Research Institute launched a series of in-depth reports on “foreseeing the recovery and layout after the epidemic”. This is series 3: tax exemption.
Core view
The release of the tourism development plan of the 14th five year plan has provided important support for the recovery of the prosperity of the tourism industry and related sub industries such as tax exemption. The plan requires innovation and improvement of China’s tourism under the condition of normalization of epidemic prevention and control, step-by-step and orderly development of inbound and outbound tourism under the premise of effective control of the international epidemic, and clearly release the signal to help the recovery of tourism. For the tax-free industry, the airport tax exemption is highly dependent on the airport passenger flow, and the tax exemption on outlying islands is also greatly affected by the passenger flow into Hainan. The recovery of tourism is of great significance to the tax-free industry. From the timing of the launch of this plan, the Winter Olympic Games and the Spring Festival can be regarded as the starting point of the recovery of tourism, tourism retail and other industries. With the gradual improvement of the epidemic situation, the cold winter of tourism and tourism retail industry will finally pass, waiting for the spring flowers to bloom after recovery.
The macro background of China’s consumption upgrading, coupled with the return of consumption and policy assistance during the epidemic, has jointly promoted the rapid growth of China’s tax-free industry. The steady growth of China’s economy and the rapid increase of per capita disposable income have made consumption upgrading the general trend of the current consumer industry. At the same time, the scale of China’s luxury market continues to expand, adding to the entry-exit restrictions under the epidemic, the share of foreign tax-free enterprises has significantly returned to China, and the phenomenon of consumption return is significant, which has helped China’s tax-free industry and the absolute leader of the industry to expand at a high speed. Looking at the global tax-free competition pattern, the international status of China’s tax-free industry has risen to a new height. In China Tourism Group Duty Free Corporation Limited(601888) 2020, the sales volume exceeded the traditional leader dufry and became the world’s largest tax-free retailer. As the birthplace of duty-free industry, Europe and the United States have strong tax-free strength of airports; Japan and South Korea, a traditional tax-free power in Asia, rely on advanced cosmetics brands and department stores, and the tax-free industry is booming. Although China’s tax-free industry started late, it is in the stage of rapid development under the impact of the epidemic due to its own ability improvement + external consumption return + national policy support. In terms of tax exemption for outlying islands, the state continues to liberalize relevant restrictions, and the continuous efforts of policy support + the construction of Hainan free trade port have helped the vigorous development of China’s tax exemption industry for outlying islands. At present, China is also actively learning from the experience of overseas mature tax-free markets. China tax exemption continues to make efforts in the international strategic layout, learn from each other’s strengths and complement each other’s weaknesses, and will continue to increase in the future.
Absolute leader China Tourism Group Duty Free Corporation Limited(601888) with its first mover advantage, scale advantage and supply chain advantage, it firmly occupies the leading position in China’s tax-free industry and leads the development of the industry. The business layout of the company is extensive, and the leading advantages are obvious: the scale of airport tax exemption is expanded, and the channel monopoly advantage is obvious; The performance of the three outlying island duty-free stores is growing rapidly. In the future, with the implementation of Haikou international duty-free city project, it will be further expanded; China’s tax-free business in the city has been actively promoted, and the internationalization strategy abroad is also in full swing. Looking forward to the post epidemic era, the performance of China’s duty-free industry is expected. The Spring Festival travel data reflects the rising willingness of people to travel and travel, and the continuous improvement of the epidemic situation. For the tourism, tourism retail and tax-free industries, the negative impact of the early performance impact on the valuation is weakened. We are optimistic about the improvement of the industry fundamentals and the recovery of profitability under the improvement of prosperity. The winter of duty-free industry is coming, and it is expected to achieve sustained high growth in a broad space for development.
Investment advice
With the continuous improvement of the epidemic situation, the starting point for the recovery of tourism retail industry and tax-free industry has come. China’s duty-free industry is expected to show sustained and rapid development under the support of policy support + consumption return + pick-up of passenger flow. With the improvement of the epidemic situation, the absolute leader China free is expected to reduce the discount, increase the proportion of offline consumption and continue to improve the pressure on the profit side. China’s offshore duty-free industry is developing rapidly. With the rapid development of offshore duty-free, China tax free is expected to achieve sustained high-speed growth under the trend of consumption return + policy support + continuous upgrading of its own products and service quality. The key targets related to the duty-free industry are: China Tourism Group Duty Free Corporation Limited(601888) . Other related targets include: Wangfujing Group Co.Ltd(600859) , Hainan Development Holdings Nanhai Co.Ltd(002163) .
Risk tips
Repeated epidemic impact; Macroeconomic fluctuations; Policy fluctuation risk.
