China Tourism Group Duty Free Corporation Limited(601888) (601888)
Event: China Tourism Group Duty Free Corporation Limited(601888) intends to acquire 100% equity of Hong Kong China Travel asset company held by China Travel asset, a wholly-owned subsidiary of China Travel Group, in cash by non-public agreement transfer, with a transaction price of 126 million yuan.
Make up for the short board of business, and the leading market position of duty-free is expected to be further consolidated. The assets acquired by the company are Hong Kong China Travel Service assets, Formerly known as the overseas Chinese Travel Service Company of China travel agency established in 1984 (Overseas Chinese) is the only company in China that has the qualification to operate duty-free foreign exchange commodities, that is, it has the license of returning home to make up enough local duty-free shops, which can participate in the bidding of duty-free operation rights and operate foreign exchange duty-free shops nationwide. The other license is owned by China export service. The company has no such duty-free shops at present. This acquisition will make up for the company’s business weakness and consolidate and improve the company The company’s tax-free business layout continues to consolidate its leading market position.
The injection of China tax exemption is expected to activate the vitality of the license, and the layout of duty-free stores in the city in advance is expected to fully enjoy the policy opening bonus. Although Hong Kong China Travel assets (Overseas Chinese) has a long history of tax-free license, the scale of related businesses has always been small and there is a big gap compared with China Service tax-free. The injection of China Travel assets (Overseas Chinese) is expected to give play to its advantages in brand cooperation, supply chain and operation capacity, help release the vitality of overseas Chinese tax-free license and bring performance growth. At the same time, China Tourism Group Duty Free Corporation Limited(601888) Recently, it has been committed to the construction of tax-free channels in the city, and has signed strategic cooperation agreements with provinces and cities including Yunnan, Xi’an, Guangzhou, Tianjin and Chengdu. After the company holds the investment in Hong Kong and China, it may further develop and layout the return to make up for the local stores. We believe that the further liberalization of the city’s tax exemption policy will be related to the resumption of outbound tourism. After the opening, it will effectively undertake the huge demand for the return of overseas consumption. The company has both inbound and outbound tax-free licenses in the city. At the same time, it has laid out tax-free channels in the city in advance nationwide, which is expected to fully enjoy the dividend of policy opening and open a new growth ceiling.
Solve the problem of horizontal competition and make the competition pattern clearer. In September 2016, China Travel Group made a commitment to solve the horizontal competition, gradually reducing the business re merger between the group and the company, and finally eliminating it. After the acquisition, the horizontal competition between the company and China Travel Group will be solved, and the competition pattern in China’s duty-free market will be clearer. At present, there are 10 participants in China’s tax-free market, of which five are under the control of China tax free, and the company occupies an absolute leading position in the tax-free market.
In the short term, there is marginal room for improvement. In the long term, we are still optimistic about the high prosperity of duty-free track under the background of common prosperity. In the short term, affected by the scattered epidemic in many places across the country, the growth of tourism retail market slows down, but there is marginal room for improvement with the mitigation of the epidemic. In the long run, the expansion of the proportion of middle-income groups under the goal of common prosperity will increase the demand for optional consumption. Tax exemption, as a medium and high-end consumption, has long-term growth support, and is expected to achieve long-term development under the background of consumption return and policy stimulus. The company has been deep ploughing outlying islands for a long time and has been laying multi-channel, which is expected to still benefit from the growth of the industry.
Profit forecast: under the background of internal and external double circulation and consumption return, the tax exemption of outlying islands continues to increase, the epidemic situation improves, and the tax exemption channels of the airport are expected to gradually recover. The company will consolidate its leading position by making efforts in brand cooperation, channel laying, operation management and financial support, and will fully enjoy the growth dividend of the industry. It is expected that the net profit from 2021 to 2023 will be RMB 11.6/160/20.9 billion, The corresponding EPS is 5.96/8.19/10.71 yuan and the corresponding PE is 37 / 27 / 21 times. Maintain a “strongly recommended” rating.
Risk tip: the policy exceeds expectations, the epidemic situation in China is repeated, and the tax-free competition on outlying islands is intensified.
