\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 888 China Tourism Group Duty Free Corporation Limited(601888) )
Matters:
Company announcement: the company released the operating data from January to February, and the revenue and performance from January to February increased by about 20% year-on-year.
Guoxin social service’s view: 1) the company’s revenue and performance increased by about 20% from January to February, and the net interest rate attributable to the parent reached 18%, which was flat year-on-year. It was significantly improved month on month compared with the net interest rate attributable to the parent (9% and 6%) in Q3 and Q4 last year, which helped to alleviate the previous market concerns about its profit center. 2) Considering the epidemic situation in China, the phased closure of Haitang Bay store for 4.5 days in early March and the impact of last year’s high base, the performance in the next March still needs further observation. It is temporarily neutral that the overall revenue or high single digit growth of the company in Q1 is expected, and the parent company’s performance is flat or slightly increased year-on-year. 3) Under the epidemic situation and competition, the subjective kinetic energy of central enterprises is stimulated. From scale to quality, they want benefits from management, and the comprehensive efficiency is expected to be improved in an all-round way. 4) Based on the recent epidemic situation, we slightly reduced the company’s EPS from 21 to 23 to 4.91/6.01/7.67 yuan (previously 4.91/6.14/7.68 yuan, mainly due to the slight reduction of Hainan passenger flow in 22 years). Corresponding to pe38 / 31 / 24x, the valuation has a good margin of safety. The repeated impact of the short-term epidemic still exists, but the recent performance shows that the company confirms the development demands of revenue and profit. Based on the dimensions from June to December and above, and with the continuous consolidation of the first position of global tax exemption, the company actively deepens the omni-channel layout and tap the potential of traffic, and the growth potential can be expected. If the medium and long-term outbound tourism is gradually liberalized, although the competitive environment may be more diversified, the long-term market space will be broader and the buy rating will be maintained. 5) Epidemic situation and other systemic risks, policy risks, etc.
Comments:
The company expects the revenue and performance from January to February to increase by about 20% year-on-year, and the profit center rebounded significantly month on month
Company announcement: from January to February, the company realized an operating revenue of about 13.1 billion yuan, an increase of about 20% at the same time; The parent company’s performance was about 2.4 billion yuan, an increase of about 20% in the same period. Since this year, the company has emphasized “seeking benefits from management”, scientific marketing, narrowing the discount level, paying attention to the assessment of profit indicators, and promoting the significant improvement of gross profit margin. Recently, the company has continued to introduce new heavy brands, and the brands of boutiques, watches and aromatics have continued to be enriched. At the same time, the company has opened a fashion category comprehensive store Co-Lab on the third floor of Sanya International duty-free City, contributing to the good performance from January to February.
Profitability rebounded significantly month on month, which is the core focus. From January to February this year, the net interest rate attributable to the parent company was about 18%, which was significantly higher than that of Q3 and Q4 last year (9% and 6%). On a year-on-year basis, the return to parent net interest rate from January to February this year was basically the same. Although there were income tax concessions (Hainan had an income tax rate of 25% in the same period last year and 15% this year) and airport rent return differences, it is also expected to have the adverse impact of brand rebate differences. Overall, the profitability of the company’s operating level from January to February is expected to be close to the same year-on-year. Considering the business trend and competitive pressure since the second half of 2021, the profitability of the company still improved significantly from January to February this year, which further verified that the profit assessment guidance of the company began to strengthen this year, and also helped to alleviate the previous market concerns about the profit center of the middle line.
In the short term, we still need to track the epidemic trend and follow-up prevention and control policy changes
Objectively speaking, the situation of the company in March needs to be observed again: first, the base number was high in March last year; second, the Haitang Bay Shopping Center, the company’s core profit-making body, closed its stores for 4.5 days in March; third, under the recent repeated epidemic, there is still pressure on the follow-up prediction of passenger flow in Hainan. In the middle of March last year, the free income was 7.2 billion, the parent performance was 850 million, and the net interest rate was 12% (seasonal changes and promotion). We expect the income and performance in March to be under pressure. Overall, we temporarily expect the company’s Q1 overall revenue or high single digit growth, and the parent company’s performance is flat or slightly increased year-on-year.
According to the Shanghai Securities News and other reports in January, Hainan Province will strive to achieve 100 billion yuan in the sales of duty-free shops on outlying islands in 2022. It should be noted that the above is the sales caliber, and includes tax exemption + tax. The follow-up epidemic trend and follow-up prevention and control policy changes this year are still key. From the company’s recent performance, the company is actively promoting the balanced growth of revenue and profit. From January to February 2022, the passenger flow of Haikou and Sanya airports recovered to 70% and 80% of the same period in 2019 respectively, but the company’s business performance has far exceeded that in 2019, indicating that the company’s customer group conversion ability has been significantly enhanced. At the same time, it is expected that there will be watch Festival and other activities in China free Hainan at the end of March. The second consumer Expo is expected to be held in Hainan in April, and diversified activities are also expected to bring stage highlights.
Comprehensively consolidate the first position in the world, actively respond to the epidemic and competition, and fully stimulate the subjective driving force of the company from scale to quality
Since the second half of last year, due to the repeated epidemic, the net interest rate has been under pressure, and the market is worried about the profit center of the company under the competition outside China in the future, which is subject to the valuation stage. However, the company continues to consolidate its position as the world’s No. 1 tax exemption (it is expected to continue to be the world’s No. 1 tax exemption scale in 2021) and actively improve its comprehensive operation strength. Based on our previous analysis, first, under the multi-party game of brands, tax-free and tax-free operators, the future price system is expected to return to rationality; Second, China tax exemption should actively respond and take multiple measures (see the table below). From scale to quality, it should seek benefits from management. The strengthening of subjective momentum is expected to help the recovery of profit margin.
In the middle line, under the logic of government support for consumption return, the continuous expansion of China’s duty-free cake has the core support. If outbound tourism is liberalized in the future, the market is worried about the impact on the passenger flow in Hainan, but first of all, we expect that the pace of outbound tourism liberalization still needs to be tracked, and we don’t rule out the need after next year. Secondly, the passenger flow in Hainan in 2021 is only 75-80% of that in 2019 before the epidemic, and there is still room for improvement. Third, after the liberalization of outbound tourism, considering the outflow of Chinese consumption before the epidemic and the recovery of tax exemption in South Korea this year, we expect that after the recovery of subsequent outbound tourism, the continued return of Chinese residents’ consumption will remain the core of the government. Therefore, when outbound tourism is liberalized in the future, the policy of duty-free shops for Chinese people leaving the city is expected to be strengthened in the future, and its policy space is expected to be relatively broad (155 million Chinese outbound tourists in 2019).
In this case, China free can make use of its advantages in the layout of all-round channels at the airport, in the city and online to create a comprehensive new retail format and strengthen the connection of internal traffic (including the connection of airport, in the city and online traffic, and the connection between outbound stores and Hainan stores). The first core is to closely follow the preferences of Chinese people and comprehensively enrich products SKU (including limited and popular models), Second, the comprehensive price advantage is leading. Third, the marketing service experience is comprehensively optimized, so as to continuously improve its comprehensive ability to participate in international competition and win market share, and bring new growth points.
Investment suggestion: from January to February, the trend was good, the profit center rebounded significantly, and the “buy” rating was maintained
Based on the company’s performance from January to February and the repeated impact of the recent epidemic, we slightly reduced the company’s EPS from 21 to 23 to 4.91/6.01/7.67 yuan (previously 4.91/6.14/7.68 yuan, mainly due to the slightly reduced assumption of Hainan passenger flow in 22 years, about 1%), corresponding to pe38 / 31 / 24x, the valuation has a good margin of safety. The repeated impact of the short-term epidemic still exists, but the company expects to pay equal attention to increasing income and efficiency in 2022, and seek benefits from management in the follow-up, which is expected to help the recovery of the middle line of the profit center. Based on the dimensions from June to December and above, the company is expected to comprehensively strengthen its cooperation with brands under the continuous consolidation of the first position of global tax exemption; Second, we should deepen the layout of all channels and tap the potential of traffic. Relying on the resonance of the city + Airport + online channels, the cooperation between the upstream and the sales transformation of the downstream are expected to speed up; Third, under the internal and external competition, the subjective driving force of central enterprises continues to strengthen, and seek benefits from management from scale to quality. If the medium and long-term outbound tourism is gradually liberalized, although the competitive environment may be more diversified, if the policy is implemented, the market space will be broader from the 30 million passenger flow market in Hainan to the 155 million + outbound tourism market + the linkage of the original market in Hainan. The company is based on the dominant position of global tax exemption, comprehensively optimizing all aspects of supply chain and channels, with medium and long-term growth space, and maintaining the buy rating.
Risk tips
Repeated outbreaks, lower than expected passenger flow recovery, faster pace of opening up outbound tourism, lower than expected policies, significantly reduced China’s duty-free access, macro systemic risks, exchange rate risks, etc.
