\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 888 China Tourism Group Duty Free Corporation Limited(601888) )
The scale effect is obvious and the importance of scale is prominent. The tax-free expenses of outlying islands are relatively rigid. At the store level, the expenses are mainly composed of depreciation and labor. The rigidity of expenses leads to less flexibility of net profit margin to gross profit margin. The increase of revenue brought by the increase of discount can effectively offset the adverse impact of the decrease of net profit margin. Taking the offline business of Haitang Bay as an example, according to our calculation, the gross profit margin decreased from 38% to 32%, the net profit margin decreased by only 1PCT, the revenue increased by 6 billion to 28.1 billion, and the net profit attributable to the parent increased by 590 million to 3.81 billion yuan, highlighting the scale effect. From the perspective of the company, we expect that the landing of the new harbor will have a limited impact on the expenses at the headquarters level, so as to reduce the expense rate of the headquarters and improve the profitability of the stores and the group.
The new harbor strengthens the scale effect. CITS investment, a wholly-owned subsidiary of China tax exemption Corporation, plans to invest 12.86 billion yuan to build a new harbor duty-free city. We expect that the new harbor duty-free city will start operation in the second half of 2022. Xinhaigang duty-free city covers an area of 693000 square meters and is expected to be the largest tourism retail complex in Asia. The advantages of volume and brand categories are expected to lead China tax exemption out of the second growth curve. We expect that the new harbor duty-free city will realize a revenue of 15 / 39.3 billion yuan and a net profit of 2 / 5.6 billion yuan respectively in 2023 and 2024. It is expected that the revenue will exceed that of Haitang Bay duty-free store around 2025.
Hainan tourism market and outbound tourism market are non-zero sum games. Hainan’s natural resource endowments are superimposed, and its duty-free business forms are booming. The drainage capacity has been continuously enhanced. According to the split of passenger flow attributes, we expect that the original inbound tourists and foreign inbound tourists will return to above the pre epidemic level. Before that, the relationship between outbound tourism and Hainan tourism is not a zero sum game. Based on the current passenger flow recovery of 70-80% of Hainan airport and taking into account the potential growth rate of tourist arrivals in Hainan, we believe that there is still a lot of room for passenger flow recovery in Hainan.
Investment suggestion: the drainage capacity of Hainan continues to be enhanced to help the subsequent passenger flow recovery. The tax-free revenue of outlying islands continues to grow, superimposed on the landing of the new harbor tax-free City, with prominent scale effect, which is expected to drive the continuous improvement of the profit end of China tax exemption. We expect that the company will realize a net profit attributable to the parent company of 9.592 billion yuan / 11.461 billion yuan / 16.068 billion yuan in 2021, 2022 and 2023, respectively corresponding to pe4.4 billion yuan 6/27.7/19.8X。 Maintain the “buy” rating.
Risk warning: the tax-free sales of outlying islands are less than the expected risk; The recovery of international passenger flow is less than the expected risk; Local epidemic recurrence risk; Competition on the island intensifies risks.
