\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 888 China Tourism Group Duty Free Corporation Limited(601888) )
The company is the only fully licensed duty-free operator in China. It has airport duty-free, city duty-free and outlying island duty-free licenses. Its main business is duty-free, including the wholesale and retail of duty-free commodities such as tobacco, alcohol, incense and fine products. By the end of May 21, the company had operated 195 stores, covering 188 stores in 29 provinces of China (more than 90 cities), as well as 6 overseas duty-free stores in Hong Kong, Macao and Cambodia. Sales channels are all over China’s large hub airports such as the capital, Shanghai and Guangzhou airports, Asia Pacific international airports such as Hong Kong and Macao airports and Sanya outlying island duty-free city.
Duty free industry: heavy snow on Changpo helps consumption return. China’s tax-free industry began in 1979 and began with the reform and opening up. China’s duty-free market is developing rapidly. The scale of China’s tourism retail market in 19 years was 91 billion yuan, the CAGR in 16-19 years was 25.1%, the tax exemption accounted for 55.1%, the scale was 50.1 billion yuan, and the CAGR in 16-19 years was 28.8%, the growth rate was much higher than that of the global and Asia Pacific tax-free markets in the same period. With the effective control of the epidemic and the superposition of policy support, China’s duty-free market has shown resilience. In the past 20 years, the sales of duty-free goods in China still reached 32.9 billion yuan, a year-on-year decrease of 34.2%, while the global and Asian sales decreased by 60.9% / 40.2% respectively in the same period. In the post epidemic era, China’s share in the global tourism retail market has further increased. As a leader, the company has fully benefited and become the world’s largest tourism retail operator.
Tax exemption on outlying islands: the policy continues to be relaxed, and China free extension store is blessed. As a free trade port, Hainan has developed tax-free business to undertake the return of overseas consumption. In recent years, the tax-free policy of outlying islands has been continuously relaxed and the license has been liberalized. Many operators have entered the market to jointly make a big cake. At present, 6 of the 10 duty-free stores in Hainan are under the China free. It is difficult to shake the leading position of the company in terms of the number and volume of stores. In the future, with the implementation of the projects of Haikou international duty-free city and Sanya International duty-free City Phase I and site 2, the position is expected to be consolidated.
Airport Tax Exemption: endogenous extension of the same force, card key airport. In terms of entry tax exemption, in 2016, after the Ministry of finance, the Ministry of Commerce, the General Administration of customs, the State Administration of Taxation and the National Tourism Administration jointly agreed to set up 13 new airport entry duty-free stores, China tax exemption successively won the bid for 8 such as Kunming, Shenyang and Nanjing. In terms of exit tax exemption, China tax exemption has successively renewed the exit tax-free stores of several important bid sections, such as Guangzhou airport, Hangzhou Airport, Qingdao airport, etc. Through the acquisition of RISHANG China and RISHANG Shanghai, it monopolizes the inbound and outbound tax-free business in Beijing and Shanghai to realize the advantage of card position.
Tax exemption in the city: everything is ready and waiting for the east wind. In 19 years, the company began to lay out the local duty-free business. The outbound local duty-free shops in Qingdao, Xiamen, Dalian, Beijing and Shanghai opened one after another. Through the acquisition of overseas Chinese duty-free, the company obtained the local duty-free license for returning home. So far, the company has pocketed the two types of local duty-free licenses. In March 20, the national development and Reform Commission proposed to “improve the policy of duty-free shops in the city”. With the release of entry and exit after the global epidemic is improving, the policy of duty-free shops in the city is expected to be further relaxed and improved.
Tax: the epidemic background gives birth to member purchase, which has a huge space. Under the background of covid-19 epidemic in the past 20 years, all ports were basically closed, and the tax-free operation was blocked. The company launched online supplementary tax payment e-commerce platforms in the form of CDF member purchase. The company has more than 20 million members, and the taxable business space formed based on the strong membership system is huge.
Investment suggestion: the company is the absolute leader in China’s duty-free industry, with complete licenses and joint efforts of endogenous and extension. With the opportunity of covid-19 epidemic, the company has jumped to the largest tourism retail operator in the world. In the future, with the new stores gradually put into use, the entry-exit recovery brought by the global epidemic and the liberalization of tax exemption policies in the city, the company still has great space and growth potential. It is estimated that the net profit attributable to the parent company will be 9.6/12/16.1 billion yuan on 21 / 22 / 23 / with a same increase of 56% / 25% / 34%. The corresponding PE of the current stock price is 35x / 28x / 21x. The valuation is of great configuration value. It is covered for the first time and given a “buy” rating.
Risk warning: tax exemption policy changes; Tax free market competition intensifies; Risk of recurrent outbreaks; Macro systemic risk.
