Report released this week
North Industries Group Red Arrow Co.Ltd(000519) : cultivating diamonds, rising in the wind, military business waiting to be improved
Industry view this week (this week refers to April 4 to April 10, 2022, the same below)
Event: the closure of Shanghai is still continuing, and sporadic outbreaks occur frequently all over the country. What is the impact on the duty-free industry?
The fermentation of the epidemic has a negative impact on population mobility. As of April 9, 278000 people (including Hong Kong, Macao and Taiwan) had been diagnosed and 174000 people were asymptomatic. 2691 people were newly diagnosed and 23815 people were asymptomatic on the same day. The main sources of new asymptomatic cases were Shanghai and Jilin Province. The fermentation of the epidemic has led to the continuous closure of Shanghai and the maintenance of tight control and flow restriction in many places.
As the largest area in China’s duty-free market, Hainan Province, duty-free sales revenue is directly related to the flow of tourists to the island. The daily passenger throughput of Haikou Meilan Airport and Sanya Phoenix Airport accounts for about two-thirds of the passenger flow of the whole island, which is referential. According to our tracking, the daily inbound sorties of Haikou Meilan Airport and Sanya Fenghuang airport have a downward trend since the diagnosis in Sanya in March and the outbreak in many places across the country, falling from the daily average of 220 / 175 in February to 49 / 17 on April 8. Sanya has designated a number of closed areas, and several duty-free shops have been closed since April 2. If the epidemic situation exceeds market expectations, there is a risk of downward adjustment in the performance forecast of tax-free businesses.
The promotion of duty-free merchants’ online direct mail platform has increased, which is expected to stimulate online platform sales to alleviate the pressure of offline store closure. We have observed that in the past week, the CDF members under the CDF have launched double points and full refund and other promotion mechanisms. As a supplement and enhancement of offline sales, the trend of online retail discount of duty-free merchants provides a quantitative perspective on the actual promotion of the company. In our on-line discount tracking system of China free aromatics, the discount of China free aromatics decreased this week. The downward discount is expected to stimulate online sales, relieve the pressure of offline store closure and maintain stable business operation.
Recommended target: focus on the tax exemption leader China Tourism Group Duty Free Corporation Limited(601888) , which is suppressed by pessimistic expectations and is expected to see marginal improvement in the future, and Hainan Development Holdings Nanhai Co.Ltd(002163) , Beijing Qianjing Landscape Co.Ltd(603778) , which is expected to inject tax-free assets.
Risk warning: the scope and extent of epidemic spread exceed market expectations; The prosperity of terminal consumption decreased; Intensified market competition, etc.
