\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 888 China Tourism Group Duty Free Corporation Limited(601888) )
China Tourism Group Duty Free Corporation Limited(601888) released the annual report of 2021 and the first quarterly report of 2022: 1) in 2021, the operating revenue was 67.676 billion yuan / + 28.67%, the net profit attributable to the parent company was 9.654 billion yuan / + 57.23%, and the net profit not attributable to the parent company was 9.534 billion yuan / + 59.77%; 2) In 2021q4, the operating revenue is 18.177 billion yuan / + 4.11%, the net profit attributable to the parent company is 1.163 billion yuan / – 60.93%, and the net profit not attributable to the parent company is 1.145 billion yuan / – 61.51%. The parent net interest rate was 6.4%, down 2.6pct from Q3 (excluding the impact of Beijing airport and income tax preference); 3) In 2022q1, the operating revenue was 16.782 billion yuan / – 7.45%, the net profit attributable to the parent company was 2.563 billion yuan / – 9.99%, and the net profit not attributable to the parent company was 2.559 billion yuan / – 9.72%.
Key investment points:
Structurally, Hainan will contribute more than 75% of its revenue in 2021. The income of stores in Sanya is 35.509 billion yuan / + 66.58%, and the net profit attributable to the parent company is 4.168 billion yuan (excluding wholesale profit); The revenue of Haimian is 15.962 billion yuan, and the net profit attributable to the parent company is 793 million yuan (excluding wholesale profit); The total contribution of Hainan business accounted for 76%. On the day, Shanghai’s revenue was 12.491 billion yuan, the net profit attributable to the parent was 690 million yuan, and the net interest rate attributable to the parent was 5.5%.
The decrease of gross profit margin, the increase of management expenses and the impairment of inventory are the three main factors, resulting in the low expectation of 2021q4 profit. 1) The gross profit margin of 2021q4 company was 26.44%, with a chain comparison of -4.83pct and a year-on-year comparison of -13.44pct; 2) The three fees increased year-on-year, and the management expenses increased significantly due to the increase of employee salary. The sales expenses of 2021q4 company were 1.8 billion yuan, an increase of 3.036 billion yuan month on month and 1.824 billion yuan year-on-year; The management fee was 974 million yuan, a month on month increase of + 144.47% and a year-on-year increase of + 28.46%; Financial expenses were – 100 million yuan, a month on month decrease of 143 million yuan and a year-on-year increase of 227 million yuan; 3) In 2021q4, the asset impairment loss was 346 million, mainly the provision of inventory impairment loss, which was in line with expectations.
Profitability returned to normal from January to February, and the impact of the epidemic in March dragged down performance. 1) From January to February, the profitability of the company returned to normal: from January to February, the operating revenue was 13.1 billion / + 20%, the net profit attributable to the parent company was 2.4 billion / + 20%, and the net interest rate attributable to the parent company was 18.32%, compared with 2021q1 + 2.61 PCT and 2021q3 + 9.36 PCT (Q3 is the operating profit margin after excluding income tax and rent return profit). The profitability recovered well, which verified our previous judgment that the short-term decline was caused by the decline of passenger flow caused by the epidemic; 2) In March, the gross profit margin of 2021q1 was lowered: affected by the epidemic in Hainan and the closure of Haitang Bay, the passenger flow decreased significantly in March, and the passenger flow of Haikou Meilan Airport was – 47.09% year-on-year. During the period of superposition of the drop of offline revenue and the rigidity of expenses, the profitability decreased significantly. In March, the operating revenue was 3.682 billion, the net profit attributable to the parent company was 163 million, and the net profit attributable to the parent company was 4.44%. The operating revenue and net profit attributable to the parent company both decreased by 43.78% / 86.38% from January to February, and the net profit attributable to the parent company decreased by 13.88 PCT from January to February. The gross profit margin in 2022q1 was 34%, with a month on month ratio of + 7.57 PCT and a year-on-year ratio of -5.11 PCT; 3) During the period, the expenses were reduced: the sales expenses in 2022q1 were 1.461 billion yuan, with a chain comparison of – 18.79% and a year-on-year comparison of – 17.55%; The management fee was 431 million yuan, a month on month increase of – 55.74%, a year-on-year increase of + 0.08%; Financial expenses were – 80 million yuan, with a month on month increase of 20 million yuan and a year-on-year decrease of 82 million yuan.
The supply side continues to make efforts, and the endogenous value of the company continues to improve, which is expected to usher in the post epidemic rebound and valuation repair. 1) Duty free in Hainan: in the future, the duty-free area in Hainan will increase rapidly and fully release the shopping potential. The roof steel structure project of Haikou international duty-free city has been completed and is expected to open in September. The commercial part of Lot 2 of Haitang Bay phase I has achieved the capping of the main steel structure. The Hexin Island project has introduced many strength and online brands to fill the vacancy of business format. 2) Port duty-free and intra city duty-free: outside Hainan, the company goes all out to win the bid for important inbound and outbound duty-free stores, continues to pay attention to the policy dynamics of intra city stores, strengthens communication with local governments, does a good job in the location of intra city stores in important cities, and looks forward to the second growth curve brought by the implementation of intra city store policies after the epidemic. 3) online business: expanding the scale of online business, improving official account numbers, video numbers, live broadcast, fans and other marketing matrix, and promoting the integration of online integration platform, tax-free booking and duty paid commodity sales platform integration, is an important supplement to shopping channels and is expected to contribute significantly. 4) Overseas planning: continue to expand the forward-looking layout of overseas markets such as Hong Kong and Macao, pay attention to the M & A opportunities of upstream brands and duty-free operators, and timely carry out vertical or horizontal M & A of the industrial chain.
Investment suggestion: China Tourism Group Duty Free Corporation Limited(601888) is the subject of epidemic damage. At present, the company’s fundamentals and valuation are close to the bottom. With the completion of new stores in Haikou and stores in the city in the future, the supply side of the company will be released quickly, and the tax-free area will be greatly expanded, which is basically oriented to the upward trend. At the same time, the current valuation does not reflect the long-term value of the company. With the recovery of the epidemic, the valuation of the company will be gradually repaired. We expect that from 2022 to 2024, the company will realize an operating revenue of 69.188/79.038114.129 billion yuan and a net profit attributable to the parent of 10.498141.31/17.394 billion yuan, corresponding to 32.92/24.45/19.87xpe. Maintain the company’s “buy” rating.
Risk tip: the epidemic situation in China repeatedly affects travel; China’s industry competition intensifies; Foreign duty-free merchants have the risk of price war; The opening time of the new store was postponed; Macro economy affects consumption enthusiasm.
