\u3000\u3000 China Tourism Group Duty Free Corporation Limited(601888) (601888)
Events
China Tourism Group Duty Free Corporation Limited(601888) issued the announcement on the advance increase of annual performance in 2021. It is estimated that the net profit attributable to the parent company will be 9.4-10.1 billion yuan in 2021, with a year-on-year increase of 3.3-4 billion yuan, with a year-on-year increase of about 54% to 66%; It is expected to realize a net profit of 9.3-10 billion yuan. Among them, 21q4 is expected to realize a net profit attributable to the parent company of RMB 900-16 million.
Key investment points
In 2021, China exemption is expected to realize a net profit attributable to the parent company of 9.4-10.1 billion yuan, corresponding to Q4 of 9-1.6 billion yuan. According to the company’s performance pre increase announcement, it is expected to realize a net profit attributable to the parent company of 9.4-10.1 billion yuan in 2021, a year-on-year increase of 3.3-4 billion yuan, a year-on-year increase of about 54% to 66%; It is expected to realize a net profit of 9.3-10 billion yuan. Among them, 21q4 is expected to realize a net profit attributable to the parent company of RMB 900-1.6 billion, a year-on-year decrease of 70% – 46% in 20q4; 21q4 deduct the net profit not attributable to the parent company of RMB 900-16 million. According to the situation in the fourth quarter of history, we expect that the company has withdrawn the inventory falling price reserves in 21q4 or based on the principle of prudence (909 million yuan of inventory falling price reserves such as cigarettes in 20q4).
According to the announcement of the company, the pre increase of performance in 2021 is mainly based on the following reasons:
1) year on year growth of duty-free sales in Hainan outlying islands: according to the data of Hainan Department of Commerce, the sales of duty-free shops in Hainan outlying islands in 2020 were 32.7 billion yuan (including 27.5 billion yuan of duty-free sales and 5.2 billion yuan of taxable sales), and the sales of duty-free shops in Hainan outlying islands in 2021 were 60.2 billion yuan, a year-on-year increase of 84%, including 49.5 billion yuan of duty-free sales / + 80%, The taxable sales amount is 10.7 billion yuan / + 106% (the taxable business income of duty-free stores includes the supplementary purchase income of outlying islands and the traditional taxable sales income). Among them, the sales volume of China free Hainan in 2021 is about 55 billion yuan, and the market share is about 91%.
Quarterly, according to Haikou customs data, the tax-free sales of 21q1-4 outlying islands were 13.6 billion yuan, 13.2 billion yuan, 8.8 billion yuan and 14 billion yuan respectively, and the passenger throughput of Haikou airport was 4.74 million, 5.23 million, 3.75 million and 3.8 million person times respectively, of which the passenger flow in the second half of the year continued to be repeatedly affected by China’s local epidemic.
2) rent reduction and exemption for the third contract year of capital airport: the company and capital airport agreed that the tax-free rent for the third contract year (2020.2.11-2021.2.10) was 280 million yuan, the corresponding 21q3 sales expense was reduced by 2.77 billion yuan, and the net profit of 21q3 was 1.14 billion yuan.
3) the tax rate of tax-free business in Hainan outlying islands is reduced by 15% (dating back to January 1, 2020): 20q1-21q3 tax preference thickens the company’s 21q3 net profit attributable to the parent company of 740 million yuan.
In January 2022, some aromatherapy brands began to increase their prices, the tax-free discount of China free outlying islands narrowed, and the profit margin is expected to improve month on month. Through continuous tracking, we found that the universal discount of aromatherapy in China free outlying islands duty-free mall was 30% off for 3 pieces for most of the second half of 2021, with multiple points of members superimposed, and the actual discount is less than 70%, This is also an important reason why the company’s gross profit margin in 21q3 decreased by 6.2pct to 31.3% month on month. We believe that this is mainly because the local epidemic in China continued to affect the passenger flow in Hainan in the second half of the year. On the basis of the decline of individual passenger flow, the company strengthened the discount. At the same time, the increase in the proportion of online channel sales with relatively low net profit margin also had a certain impact on the profitability.
At the beginning of 2022, some aromatherapy brands began a new round of price increase, while the discount intensity of China free was also narrowed, and the profit margin of 22q1 is expected to improve month on month. From January 4, 2022, we found that the prices of some star products of Estee Lauder and Lancome in the off Island duty-free channels increased by 4.6% – 9.1%. At the same time, the universal discount of aromatherapy in China free Sanya Haitang Bay duty-free store was narrowed from 30% off to 75% off for 3 pieces, and the universal discount of aromatherapy purchased by CDF members in Hainan (off Island supplementary purchase) was also raised to 75-85% off for 3 pieces. If this trend continues, We expect that the free profit margin of 22q1 is expected to improve month on month.
Profit forecast and valuation
Under the comprehensive layout of outlying islands + online + Airport + city, we think the company still has great growth space. We estimate that the net profit attributable to the parent company of China exemption from 2021 to 2023 will be RMB 9.8 billion, 12.0 billion and 14.5 billion respectively, and the EPS will be RMB 5.02, 6.17 and 7.43/share respectively, giving the company 40 times the PE in 2022, corresponding to the target price of RMB 246.64/share, maintaining the “buy” rating.
Risk tips
The policy is less than expected, the tax-free sales of outlying islands are less than expected, the industry competition intensifies the risk, etc.
