The net profit of nearly 10 billion yuan in 2021 is the best performance in the history of China Tourism Group Duty Free Corporation Limited(601888) set. However, the company’s share price has been “falling endlessly” since late February last year. So far, the share price has halved, and the market value has evaporated more than 400 billion yuan. This has something to do with the rise in sales costs. This year, with the opening of some overseas destinations and the impact of the low price strategy of South Korea’s duty-free industry, whether China Tourism Group Duty Free Corporation Limited(601888) can continue to maintain high performance growth is also a question that must be considered by operators.
market value evaporates over 400 billion
China Tourism Group Duty Free Corporation Limited(601888) although the performance of China Tourism Group Duty Free Corporation Limited(601888) , known as “tax-free Mao”, has increased significantly in the past year, its share price has halved.
On April 27, at the 2021 annual performance presentation meeting held by China Tourism Group Duty Free Corporation Limited(601888) chairman Peng Hui said that China Tourism Group Duty Free Corporation Limited(601888) 2021 achieved a total profit of 14.801 billion yuan, a year-on-year increase of 53.04%; The net profit attributable to shareholders of listed companies was 9.654 billion yuan, a year-on-year increase of 57.23%. This means that although affected by the epidemic, China Tourism Group Duty Free Corporation Limited(601888) ‘s performance has still achieved substantial growth.
Specifically, in China Tourism Group Duty Free Corporation Limited(601888) 2021, the duty-free business of Hainan outlying islands continued to maintain a high growth. Among them, the duty-free stores in Sanya achieved an operating revenue of 35.509 billion yuan, a year-on-year increase of 66.58%, and a net profit of 4.168 billion yuan, a year-on-year increase of 40.46%; Haimian achieved an operating revenue of 15.962 billion yuan, a year-on-year increase of 61.05%, and a net profit of 793 million yuan, a year-on-year increase of 20.75%.
According to the financial report, the substantial growth of the company’s performance during the reporting period was mainly due to the continuous high growth of the company’s business in Hainan. In addition, the rent concession of capital airport and the preferential enterprise income tax enjoyed by some subsidiaries in Hainan also had a positive impact on the company’s profits.
However, behind the sharp increase in performance, China Tourism Group Duty Free Corporation Limited(601888) ‘s share price also experienced a decline in 2021. According to China stock market news, China Tourism Group Duty Free Corporation Limited(601888) shares have soared since the implementation of the new tax-free policy for Hainan outlying islands in 2020. Until February 2021, the share price hit a record high of 402.78 yuan, and the market value once exceeded 780 billion yuan. After that, the stock price fell all the way. By the end of December 2021, China Tourism Group Duty Free Corporation Limited(601888) share price has dropped to around 200 yuan / share. At the end of March this year, China Tourism Group Duty Free Corporation Limited(601888) share price fell to about 160 yuan / share, almost evaporating more than 400 billion yuan compared with the market value in the previous peak period.
or due to increased cost of sales
When the stock price went down so far, China Tourism Group Duty Free Corporation Limited(601888) ‘s star shareholders had obvious differences. Some long-term holders began to reduce their positions, and some early holders began to copy the bottom.
According to the analysis of insiders, the decline of China Tourism Group Duty Free Corporation Limited(601888) share price in the past year is not only related to the impact of the epidemic and the market environment, but also due to the rise of the sales cost of China Tourism Group Duty Free Corporation Limited(601888) duty-free goods.
According to China Tourism Group Duty Free Corporation Limited(601888) financial report, in 2021, its commodity sales revenue was 66.941 billion yuan, with a gross profit margin of 33.08%, a year-on-year decrease of 7.14 percentage points. Among them, the sales revenue of duty-free commodities was 42.936 billion yuan, the sales operating cost was 26.697 billion yuan, the operating cost increased by 49.71% and the gross profit margin decreased by 7.08 percentage points, 37.82%. Although the sales of duty-free goods have increased, the gross profit has decreased, which means that if you sell the same goods, you don’t make as much money as before.
The implementation of the new tax-free policy for Hainan outlying islands in 2020 will allow China Tourism Group Duty Free Corporation Limited(601888) to enjoy the dividends of Hainan tax-free market. However, judging from its performance, China Tourism Group Duty Free Corporation Limited(601888) is also relatively dependent on Hainan sector. According to the data, the total revenue in Hainan accounted for nearly 7.888 billion yuan.
Insiders pointed out that although the Hainan sector gave China Tourism Group Duty Free Corporation Limited(601888) a lot of “sweets”, last year, as Hainan was also affected by the epidemic and the number of tax-free enterprises entering Hainan was increasing, China Tourism Group Duty Free Corporation Limited(601888) was inevitably involved in the price war of duty-free goods. Therefore, we have repeatedly used commodity promotion activities to attract consumers to buy duty-free goods.
Beijing Business Daily reporter learned that during the “double 11” period, China Tourism Group Duty Free Corporation Limited(601888) launched the “cloud 11.11 Shopping Festival”, and consumers can sign up for double points; In addition, during the “double 12” period last year, China Tourism Group Duty Free Corporation Limited(601888) also opened the year-end Carnival Shopping Festival and launched activities such as registration, bonus points and preferential gift bags. The preferential activities attracted many tourists, but also made China Tourism Group Duty Free Corporation Limited(601888) a lot of profits in the sales of duty-free goods.
future boost bet on Hainan
What solution will China Tourism Group Duty Free Corporation Limited(601888) give to the decline of gross profit?
At the performance presentation meeting, Peng Hui said that in 2022, the company will further strengthen the management of duty-free business in Hainan outlying islands, including the integrated management of stores in Hainan and the aspects of warehousing, logistics, operation and marketing. The financial report also shows that during the reporting period, the roof steel structure project of Haikou international duty-free city project has been completed, and the construction of curtain wall, electromechanical and fine decoration projects is progressing in an orderly manner; The commercial part of Sanya international duty free city phase I land 2 project has achieved the capping of the main steel structure; The first phase of Hainan International Logistics Center has been completed and delivered. It is not difficult to see that China Tourism Group Duty Free Corporation Limited(601888) will continue to bet on Hainan market in the future.
However, in the face of fierce competition in the international duty-free market, China Tourism Group Duty Free Corporation Limited(601888) inevitably has to cross over overseas duty-free enterprises such as Lotte in South Korea, dufry in Switzerland and overseas purchasing agents. In this regard, Peng Hui said that the tax-free purchasing in South Korea has affected China’s tax-free and taxable market. However, the company will focus on its own development, adhere to focusing on the main business of tax exemption, continue to improve the capabilities of business planning and design, brand investment promotion, logistics distribution, operation management, marketing and digitization, and further consolidate the leading position of global tourism retail.
“At the same time, we have greatly improved and improved the level of supply chain management, achieving the effect of centralized inventory integration and reducing the overall capital occupation. The company attaches importance to the development of online business and carries out live broadcasting and other promotion activities on new retail channels, so as to further improve the online service quality and brand image.” Peng Hui also said.
According to Wang Xingbin, a senior tourism expert, Hainan’s tourism commodities have certain particularity, with a large range of tax exemption. There are also some high-quality commodities loved by consumers outside China, so China Tourism Group Duty Free Corporation Limited(601888) has a large business in Hainan. At present, China Tourism Group Duty Free Corporation Limited(601888) mainly faces the problem that its business is mainly located in China and Hainan, and China Tourism Group Duty Free Corporation Limited(601888) is still in its infancy to become a well-known tax-free enterprise in China and even in the world.
“When inbound and outbound tourism recovers gradually, China Tourism Group Duty Free Corporation Limited(601888) will face the competition from international and Chinese tax-free enterprises, so China Tourism Group Duty Free Corporation Limited(601888) should be prepared to meet the competition. At the same time, China Tourism Group Duty Free Corporation Limited(601888) should further study the shopping characteristics of tourists from outside China, meet the needs of different markets, and make use of its strong marketing ability to make products with its own characteristics.” Wang Xingbin also said.
In the view of insiders, whether China Tourism Group Duty Free Corporation Limited(601888) which relies too much on Hainan duty-free market can break through the siege and become a leading enterprise in China and even the global duty-free industry also makes operators have to consider how to go in the future.
