China Tourism Group Duty Free Corporation Limited(601888) (601888)
event
China Tourism Group Duty Free Corporation Limited(601888) announced that the company plans to acquire 100% equity of Hong Kong China Travel assets company held by the controlling shareholder China Travel assets, a wholly-owned subsidiary of China Travel Group, in cash by non-public agreement transfer, with a transaction price of 126 million yuan.
Key investment points
China exemption plans to acquire Hong Kong China Travel Service with RMB 12.6 billion to solve the problem of horizontal competition. The company plans to acquire 00% equity of Hong Kong China Travel Service under the controlling shareholder with RMB 126 million. After the transaction is completed, it will be included in the scope of the company’s consolidated statements.
Details of the acquisition target of Hong Kong China Travel: (1) scope of duty-free operation: for the sales of duty-free foreign exchange commodities (duty-free in the city), you can participate in the bidding of duty-free operation right nationwide, and the license is consistent with the duty-free license of China export service in the city; (2) Supply objects: Chinese, specifically including overseas Chinese, Taiwan compatriots, overseas Chinese, foreign nationals living in China, Chinese citizens visiting relatives abroad, personnel of diplomatic institutions resident abroad, overseas students, visiting scholars, labor workers abroad, foreign aid personnel and ocean sailors; (3) Shop opening: at present, CTS Hong Kong only operates one duty-free shop – Harbin overseas Chinese duty-free foreign exchange mall, an in city duty-free shop (70% equity), with a business area of 1000 square meters; (4) Financial situation: the revenue of q1-3 in 2019, 2020 and 2021 is RMB 302, 970 and 80000 respectively; The net profit is 610000 yuan, – 140000 yuan and – 990000 yuan respectively; The total assets at the end of the period were 8958.28 million yuan and 13.54 million yuan respectively, and the net assets were 674 million yuan, 659 million yuan and 11.98 million yuan respectively.
After the completion of this transaction, the horizontal competition between the company and China Tourism Group in tax-free business will be solved. In September 2016, China tourism group made a commitment to solve horizontal competition and promised to gradually reduce the business re merger between China Tourism Group and the company before December 26, 2021.
China tax exemption has supplemented the city tax-free license for Chinese people and opened up the whole tax-free consumption scene
After the completion of the transaction, China tax exemption obtained the city tax-free license for Chinese people, and has been qualified for all tax-free channels since then. Hong Kong China travel has the qualification to operate duty-free foreign exchange commodities and can operate foreign exchange duty-free shops, that is, the local duty-free shops that return home for supplementary purchase, which are mainly different from the tax-free licenses previously owned by China Travel: 1) object oriented: previously, the local duty-free shops of China travel were only for foreigners, while the local duty-free licenses of Hong Kong China travel can be for Chinese with entry-exit records; 2) China free duty-free shops in the city previously needed to pick up goods at the airport. The duty-free license of Hong Kong China Travel Service in the city is consistent with that of China export service, and the goods can be picked up immediately after placing an order. This transaction will help the company further integrate tax-free resources, open up the whole tax-free consumption scenario, and consolidate and improve the layout of tax-free business.
Duty free shops in China are in the ascendant, waiting for the implementation of the policy. As of December 2021, Only China free (including Hong Kong China Travel Service), China export service and Wangfujing Group Co.Ltd(600859) have municipal duty-free licenses. Among them, China free has opened five municipal duty-free stores in Beijing, Shanghai, Xiamen, Qingdao and Dalian, and is promoting many municipal duty-free projects in Wuhan, Xi’an, Changsha, Chengdu and Guangzhou; China export service has opened 12 municipal duty-free stores, Wangfujing Group Co.Ltd(600859) The project of duty-free stores in Beijing is being promoted.
The shareholding ratio of offshore supplementary purchase platform has changed from 51% to 100%. In the future, online Under the line, Qi Fa Li, according to the official account number of CDF member purchasing Hainan (Islands purchasing platform), the platform’s main business has changed from sea free to Hainan (China) wisdom Retail Technology Co., Ltd. (the 100% group holding company of Sanya group, Exempt Company), which means that the shareholding ratio of China and Taiwan has changed from 51% to 100%, and will enhance the company’s performance.
Profit forecast and valuation
After the opening of the country and the implementation of the tax exemption policy in the city, the company is expected to expand its coverage through the full tax exemption scenario and Wuxi Online Offline Communication Information Technology Co.Ltd(300959) dual channel layout, create a new growth pole and maintain a high-speed growth trend. Under the comprehensive layout of outlying islands + online + Airport + city, we think the company still has great growth space. We estimate that the net profit attributable to the parent company from 2021 to 2023 will be RMB 11.51 billion, RMB 13.56 billion and RMB 16.5 billion respectively. Without considering the dilution impact of issuing H shares, EPS will be RMB 590, RMB 6.95 and RMB 8.45 per share respectively, maintaining the “buy” rating.
Risk statement
The policy is less than expected, the tax-free sales of outlying islands are less than expected, the industry competition intensifies the risk, etc.
