\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 888 China Tourism Group Duty Free Corporation Limited(601888) )
Key investment points
At the current time point, the epidemic has suppressed the short-term profits of the medium-term exemption, and the market has responded relatively fully. However, the medium-term supply release and the dividend expectation of relevant policies have gradually increased. It is both cost-effective and catalyst, so it is appropriate to focus on the layout.
The passenger flow in Hainan is suppressed by the epidemic, and the market has been relatively fully expected. Adjust the profit forecast and reiterate the “buy” rating. As the core variable of tax exemption in Hainan, passenger flow was severely suppressed by the epidemic in the short term. Haikou Meilan Airport handled 978000 passengers in March 22, a year-on-year decrease of 52.7%. Considering that the development of the epidemic has exceeded expectations in the past 22 years and the company’s short-term performance has been greatly affected by the epidemic, we adjusted the company’s profit forecast. It is estimated that the company’s net profit attributable to the parent company from 2021 to 2023 will be 9.6/103/15.2 billion yuan respectively (previously 9.6/12.5 billion yuan. This 23-year profit forecast considers liberalizing some international diversion and some hedging policies of local stores), and reiterated the “buy” rating.
Core highlights in the next 6-12 months: the release of new supply of China tax exemption and the landing of tax exemption policy dividends exceeded expectations. On the one hand, Haikou new harbor and Haitang Bay phase II, which are laid out by China free in Hainan, will be opened successively in 22q4 and 23, respectively, breaking the supply bottleneck of Haitang Bay and becoming a new growth focus; On the other hand, with the gradual promotion of the construction of Hainan free trade port, the city store policy is expected to be further released in the next year, bringing double improvement of profitability and valuation.
Catalyst: in terms of policy, the Hainan government’s support has not decreased. The fourth anniversary of the “April 13” speech, the old appearance has changed into a new one. According to the “April 13” press conference in Hainan in 2022, “3 + 1” modern industries (tourism, modern service industry, high-tech industry and high-efficiency agriculture with tropical characteristics) have become the pillar industries of Hainan. Tax exemption for outlying islands is an important starting point for the construction of “Hainan international tourism consumption center”. In the past four years, the tax exemption policy support for outlying islands in Hainan has not been reduced. The expansion and strengthening of tax exemption on outlying islands is inseparable from the implementation subject – tax-free operators, of which China tax exemption is the most important force.
In the long run, the competitive advantage of China tax exemption will not decrease but increase:
1. Offline channels in Hainan: in addition to the policy impact, the variable that has the greatest impact on the competition pattern on the island is whether the duty-free operators grasp the core needs of Hainan tourists. Since shopping is only one link in the whole tourism process, we believe that there are two core needs of tourists: (1) convenience; (2) Good shopping. In view of (1), we see whether duty-free merchants have grasped the main transportation channels on outlying islands. At present, China tax exemption has completed the transportation card positions of sea, land (xinhaigang duty-free store) and air (Haikou and Sanya airport duty-free store) on Hainan Island. The layout of offshore channels is significantly ahead. After 25 years, if Hainan is closed, the strategic significance of traffic card will be highlighted. At that time, from the perspective of duty-free shopping, the duty-free shops at Hainan’s main airports may be equivalent to those at inland entry airports. Compared with the duty-free shops at international airports in Beijing and Shanghai, Hainan may have lower discount rate and greater passenger flow. For (2), we look at the cooperative brands of duty-free merchants, the property and design of duty-free shop projects. In terms of cooperative brands, the high-end trend of China free is very obvious, which is determined by the scale advantages, first mover advantages and CDF brand advantages of China free. From the perspective of upstream cooperative brands, high-end brand channels are always scarce. The layout in a region is exclusive, and medium and low-end brand channels are not scarce. Therefore, winning high-end brands means that we can obtain decisive advantages from the perspective of brand richness. In terms of property and design of duty-free shop project, Sanya Haitang Bay project, which we like to avoid, was put into operation in 2014. At present, the property and project design are still not backward compared with other duty-free merchants on the island, which is enough to reflect the ability of China free in this regard. It is expected that the new seaport project and Haitang Bay phase 2 project newly invested in the future will be a substantial iterative and upgraded version of the existing Haitang Bay project in terms of property and project design. Therefore, behind the “easy shopping” means that because of the rich brands, tourists can solve their shopping needs one stop; The property and design of the project are very attractive, and tourists can also use it as a tourist destination. In the long run, the competitive advantage of China exemption will become more and more significant.
2. Other channels: Wuxi Online Offline Communication Information Technology Co.Ltd(300959) Tongfa.
Online channels: tax exemption + tax + cross-border coexistence of three business forms. Compared with other duty-free e-commerce, China free e-commerce has a higher customer base; Compared with Internet e-commerce, it has a certain price advantage. We believe that there are two growth logics in online channels. One is that brands continue to settle in. At present, the tax and cross-border platforms mainly focus on aroma chemicals. The category layout is expected to be gradually improved and the brand richness is greatly improved. The other is the continuous improvement of the customer base. The online customer base of China free is China free members. According to the prospectus of China free Hong Kong stocks, the number of registered members of China free in 2018 / 2019 / 2020 was 400000 / 1.2 million / 12 million respectively, and the CAGR reached 547.7%. However, compared with the hundreds of millions of middle-class and above groups, there is still much room for improvement.
Non Hainan offline channels: Airport stores and City stores wait for the end of the epidemic. In December 21, China tax exemption announced that the overseas Chinese tax exemption license would be assigned to the listed company, realizing the layout of the whole license. It can be predicted that after the end of the epidemic, the country will open, and the proportion of airport stores and City stores in China Tourism Group Duty Free Corporation Limited(601888) ‘s revenue structure will increase significantly. Compared with the annual tax-free quota of 100000 yuan for outlying islands, the tax-free quota of airport stores and City stores is currently low, and the market expects that relevant policies may be released after the end of the epidemic. In addition, the prospectus of China free Hong Kong shares pointed out that “continue to explore overseas channels and further enhance global competitiveness”. We also understand another meaning of “consumption return”, that is, the layout of Chinese duty-free stores in overseas tourist destinations of Chinese people.
Risk warning: repeated epidemic situation; The opening of new projects of duty-free shops is not as expected; The tax exemption policy has not progressed as expected.
