\u3000\u3000 China Tourism Group Duty Free Corporation Limited(601888) (601888)
Event: the company announced that it expects to achieve a net profit of 9.4 ~ 10.1 billion in 2021, an increase of about 3.3 billion yuan to 4 billion yuan over the same period of last year, a year-on-year increase of about 54% to 66%, slightly lower than the market expectation. The pre increase in performance is mainly due to 1) the substantial year-on-year growth of tax-free business on outlying islands. 2) The subsidiaries of the company and capital airport reached an agreement on the rent concession of the third contract year and signed a supplementary agreement. 3) Some subsidiaries of the company in Hainan can enjoy the preferential corporate income tax rate of 15% from January 1, 2020. Q4 is expected to achieve a profit of 909 ~ 1.609 billion, a year-on-year decrease of 46% ~ 70%, excluding the impact of Q4 Shanghai International Airport Co.Ltd(600009) rent reduction in 2020, a year-on-year decrease of 20% ~ 57%; It fell 48% ~ 70% month on month. Excluding the impact of income tax and rent reduction of capital airport, it was - 27% ~ + 29% month on month. It is expected that the gross profit margin will decline mainly due to the impact of covid-19 epidemic in some areas and discount promotion.
Comments: according to the data released by the Department of Commerce of Hainan Province, the total sales of 10 outlying island duty-free stores in Hainan in 2021 were 60.173 billion yuan, a year-on-year increase of 84%. Among them, the tax-free sales volume was 50.49 billion yuan, a year-on-year increase of 83%; The number of duty-free purchases was 53.4925 million, a year-on-year increase of 71%. In the second half of 2021, the epidemic situation continued in some parts of China, and the overall tax-free sales maintained a high growth rate by means of discount promotion. The weakening range of discount promotion in the future still depends on the epidemic degree in China, and the company's gross profit margin is still under pressure in a short time. However, there is still much room for growth at the revenue end in the future. Haikou duty-free city will be opened in 2022, with an estimated sales area of 150000 square meters, which is another driving force for the company's sales growth in the future.
Pay attention to the marginal changes brought about by the short-term stable growth policy, and pay more attention to the long-term value: in December 2021, the central economic work conference proposed that the meeting revisited counter cyclical regulation, requiring all regions and departments to shoulder the responsibility of stabilizing the economy and launch stable economic policies to stabilize the macro-economic and social situation. In the future, under the policy of maintaining stability, consumption is expected to usher in marginal improvement, and the company's dependence on discount promotion is expected to be reduced, resulting in a rebound in favorable gross profit margin. In the long run, we pay more attention to the company's excellent management ability. Looking back on the epidemic, in addition to the relaxation of the tax exemption policy on outlying islands, the company has quickly arranged online (tax) business to effectively make up for the losses of airport business caused by the epidemic. In 2020, the sales revenue of tax business reached 19.708 billion, accounting for 37.5% of the overall revenue (2.4% in 2019), In 2021, the tax business as a whole is expected to continue to maintain rapid growth. Since the layout of Haitang Bay in 2014, China tax exemption has grown into an absolute leader in China's tax exemption, with a market share of more than 90%. In addition to the license advantage, the forward-looking operation is also an important factor in the growth of the company, and there is no need to worry too much about the future of the company.
Profit forecast, valuation and rating: considering that the discount and promotion will continue in the future and the cost investment brought by the climbing period at the initial stage of new project construction, we reduced the EPS from 21 to 23 to 4.89, 6.17 and 7.76 yuan (13% / 18% / 23% respectively), corresponding to 41 / 32 / 26 times of PE from 2021 to 2023. However, as an absolute tax-free leading company, it continues to innovate and lay out online during the epidemic, The introduction of tax exemption policies on outlying islands has been positive. At present, the valuation is at a historical low. We are optimistic about the long-term value of the company and maintain the "buy" rating.
Risk tip: under the influence of the epidemic, the purchasing power of residents decreased and the implementation of policies was less than expected.
