\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 888 China Tourism Group Duty Free Corporation Limited(601888) )
Key investment points
China’s tourism retail industry complies with the general trend of consumption return, with a potential scale of hundreds of billions, and the pattern of China Tourism Group Duty Free Corporation Limited(601888) leader remains unchanged: as the leader of tourism retail, the main customers of China free travel are Chinese outbound tourists and tourists from Hainan Island. Before the outbreak, the number of annual customers of the two groups was 160 million and 80 million respectively; The scale of luxury consumption of Chinese residents exceeded 430 billion yuan. Two years after the epidemic, tax exemption on outlying islands has risen, and China tax exemption has bucked the trend to become the world’s largest tourism retailer. The supply chain continues to iterate and the operation capacity is continuously optimized.
Haikou international duty-free city and Sanya duty-free City Phase III will be put into operation in 2022 / 2023, and the duty-free share of China free outlying islands is expected to continue to increase: new outlying island duty-free license stores will be opened in 2020, and the duty-free share of China free outlying islands will be under pressure in 2021. However, 2022 / 2023 will enter the centralized landing cycle of China free benchmarking projects. Haitang Bay gathers high-end tourism and vacation demand, and Haikou international duty-free City intercepts ferry passengers on the island. After the implementation of the two benchmark projects, the area of China tax exemption’s stores in Hainan returned to 80.1% from 53.1% of the island’s duty-free merchants. We are optimistic about the continuous improvement of the share of outlying islands after the benchmark project is implemented.
Looking forward to the recovery after the epidemic, the recovery of tourism consumption is expected to further liberate the potential of tourism retail consumption in the short and medium term and international tourism in the medium and long term. China tax exemption may account for the flow of outlying islands and ports or become the largest beneficiary: at the level of departure tax exemption: China tax exemption accounts for more than 70% of the international passenger flow at airport ports (based on the international passenger flow in 2019); Tax exemption level of outlying islands: more than 90% of the passenger flow in and out of Hainan Island in 2021. Affected by the epidemic, the international passenger flow fell by more than 90%, and the passenger flow in and out of the island was also suppressed by the scattered epidemic. We believe that the recovery after the epidemic is the main investment opportunity for China exemption in the next three years.
Analysis framework of core competitiveness of tourism retail enterprises: integrating the core operation parameters of tourism retail enterprises into passenger flow × Store arrival rate × Conversion rate × Repurchase rate × Unit average price × The joint rate is divided into three hard strengths: flow, volume and operation. It is optimistic that China free will consolidate its leading edge through continuous iterative operation capacity in the advantages of gathering traffic and volume.
Profit forecast and investment rating: given that there is still room for tax exemption policy, the liberalization of epidemic control and the restoration of international routes are conducive to the market expansion of tax-free industry again; China tax exemption has a solid market position, and the new outlying island duty-free benchmark stores will be put into operation in 2022 / 2023 to re-enter the channel of increasing market share. It is estimated that the net profit attributable to the parent company from 2022 to 2024 will be RMB 11.25/15.38/17.31 billion respectively, corresponding to 28 / 20 / 19 times of PE. As a leading tourism retail leader in the world, the valuation is reasonably low and raised to the “buy” rating.
Risk warning: the risk of repeated impact of Chinese and international epidemic on Residents’ willingness to travel; The deterioration of regional conflicts affects international relations and then leads to policy risks; The risk that the implementation of the tax exemption policy does not meet the expectations; Industry competition intensifies risks.
