1、 Core view
Focus on the marginal improvement of tax-free sales on outlying islands in the short term, see policy catalysis in the medium term, and the long-term scale is king. 1) Short term: before the recovery of international passenger flow, the tax exemption on outlying islands is the main battlefield. The rebound of passenger flow and the narrowing of discount will bring about the improvement of sales margin. 2) Medium term: the policy is the core driving force for the development of the tax-free industry, and the implementation of the tax-free policy in the city is expected to open up the growth space of the industry. 3) Long term: the premium of tax-free license will be converted into scale premium, and the scale advantage is the king in the game with upstream brands, owners and downstream consumers.
2、 2022 outlook
The tax-free sales of outlying islands in 2021 will be 60.17 billion yuan, and it is expected to exceed 80 billion yuan in 2022; The Ministry of transport predicts that the passenger volume of Spring Festival transportation in 22 years is expected to double year-on-year, the passenger flow of Meilan Airport T2 is expected to increase significantly after it is put into operation, and the discount is expected to narrow when the proportion of individual passengers increases. We believe that the free profit margin in the first half of 22 years is expected to improve quarter by quarter. 1) According to the preliminary prediction of the Ministry of transport, the passenger volume of spring transportation in 2022 is expected to more than double year-on-year, or even exceed 2020; At the same time, in the past, the discount free during the Spring Festival transportation was relatively small, and we believe that both volume and price are expected to rise in the first half of the year. 2) Covid-19 specific drugs have been approved for marketing and the vaccination rate has continued to improve. We believe that duty-free sales at the airport are expected to recover gradually in the next year.
3、 Future highlights of key stocks
Recommendation China Tourism Group Duty Free Corporation Limited(601888) : 1) under the trend of consumption return, benefiting from the policy dividend, the tax-free market potential of Hainan outlying islands is large. With obvious leading advantages, the performance of China tax exemption is expected to grow rapidly. Meilan Airport Phase II duty-free store has opened in December 2021 (9313 square meters), Sanya Phoenix Airport duty-free store is expected to expand in 2022 (about 5000 square meters), 22 Haikou international duty-free city is expected to open in the second half of the year (about 88600 square meters). The company will usher in a new store volume period in 22-23 years, and the sales model in Hainan will increase significantly. 2) The company’s 21q4-22q2 profit margin is expected to improve quarter by quarter. Meilan Airport T2 is put into operation, the impact of the epidemic situation is weakened, and the passenger flow in Hainan is expected to recover significantly. Considering that the 22q1 Spring Festival is the peak tourism season in Hainan, the proportion of individual tourists is relatively high, and the task pressure in the first half of the year is relatively light, we believe that the discount is expected to be narrowed, and the company’s 21q4-22q2 profit margin is expected to improve quarterly. 3) Under the comprehensive layout of outlying islands + online + Airport + city, the company still has great growth space. The company has completed the city tax-free license for Chinese people. Meanwhile, H-share IPO Financing (currently suspended due to the epidemic) is expected to provide financial support for overseas layout, expanding new stores and consolidating China’s tax-free status. The company is expected to consolidate its leading position in the global tourism retail market. 4) At the end of December 2021, the PE of China free’s share price corresponding to the performance of the current year is about 40x, and the performance of 2022 is about 33x. We believe that it has the configuration cost performance under the condition that the 22h1 profit margin is expected to improve quarter by quarter.
4、 Catalyst
1) The passenger flow in Hainan recovered more than expected; 2) The growth rate of tax-free sales scale exceeded expectations; 3) Tax exemption policy exceeded expectations
