Review of the secondary market: the secondary market of the industry was suppressed by the epidemic and showed weak performance. Since the second half of 2021, affected by the epidemic, many places have implemented the “circuit breaker” mechanism of inter provincial tourism. Travel restrictions have a great impact on the industry, the trend of the sector is poor, and continue to outperform the market. As of November 30, the leisure service sector as a whole fell by nearly 23%, the Shanghai and Shenzhen 300 index fell by nearly 8% in the same period, and the industry significantly underperformed the market by 15 percentage points. Among the 28 Tier-1 industries in Shenwan, leisure services ranked 27th in terms of rise and fall since the beginning of the year, second only to household appliances, and ranked lower in the consumer industry. The industry trend was weak, showing a volatile downward trend. The performance of each sub industry is differentiated. Among the sub sectors, except for the hotel industry, which rose by 4.59%, other sectors fell. Among them, the scenic spots and tourism sectors limited by population flow fell significantly, significantly underperforming the Shanghai and Shenzhen 300 index, with declines of 17.39% and 28.43% respectively. At present, the PE valuation of leisure service sector is 49.03 times, which is near the historical center since 2010, with a certain margin of safety.
Industry fundamentals: the epidemic has repeatedly dragged down the overall recovery process of the industry, and the superposition of consumption return and consumption upgrading may become a new growth point of the industry. This year, the tourism market has shown a recovery trend from high to low. Since the second half of the year, the epidemic has been repeated and scattered, which has weakened the residents’ travel enthusiasm, and the residents’ travel modes are mainly peripheral, suburban and short distance. In the case of sporadic outbreaks in the future, the complete recovery of tourism is still under pressure; The overall consumption of residents was weak under the epidemic, and the recovery of industry profits was less than expected. Except that the performance of the tax-free sector increased year-on-year compared with the same period in 2019, other sectors did not return to the pre epidemic level; At present, China is facing great pressure on economic growth. Under the background of economic structure transformation, stabilizing domestic demand and promoting consumption is one of the important strategic policies of the country under the dual cycle development pattern. It is expected that the consumption stimulus policy will follow up or will follow up. Under the background of the gradual normalization of epidemic prevention in the future, consumption return and consumption upgrading are the new performance growth points of the industry in the future.
Duty free industry: the disturbance of the epidemic situation has gradually dissipated, and the high prospect of duty-free is expected to continue. The performance of the duty-free sector is less than expected under the background of the decline of passenger flow in Hainan. With the epidemic being gradually controlled, the number of tourists to Hainan is expected to gradually pick up. The landing of Meilan Airport Phase II expansion project is expected to continue to drive the scale of duty-free sales in Hainan; Under the background of the state’s guidance to expand domestic demand and consumption return, it is expected that the tax-free industry will bring greater growth space in the next three years. With the continuous release of tax-free policy dividends, the restrictions on consumption quota, sales categories and sales channels will be gradually relaxed, the tax-free supply side will be continuously optimized, and the tax-free industry will usher in new development opportunities.
Hotel Industry: the trend of chain and high-end remains unchanged. The epidemic has repeatedly disturbed the recovery process of business travel, but on the whole, the demand for business travel is relatively rigid. Covid-19 vaccine plus specific drug research and development may promote or bring marginal improvement expectations. Business travel at the demand side of the hotel industry is expected to continue to recover in the future; The epidemic situation accelerated and the stock of hotels was cleared, and the competitive pattern of survival of the fittest in the industry was significant; Looking forward to the future development trend of the industry, compared with developed countries such as Europe and the United States, China’s hotel chain rate still has great room for improvement. Stimulated by the upgrading of consumption and the improvement of short-distance travel consumption capacity, it is expected that China’s hotel industry will upgrade and transform from economic type to medium and high-end room type.
Investment suggestion: looking forward to 2022, the epidemic development and the recovery of residents’ consumption demand are still the main factors affecting the overall repair degree of the industry. At present, although the clinical data of South American omic velvet variant virus show that its harm is weaker than the previous delta virus, we still need to pay attention to the uncertainty brought by the complexity of the epidemic situation to the global epidemic situation. However, we believe that the trend of further upward repair of the industry in fluctuations remains unchanged. Among them, we suggest to focus on: 1) the tax-free industry benefiting from the upgrading of residents’ consumption level, the restriction of consumption return from overseas travel, and the continuous release of dividends from the tax-free policy of outlying Islands. 2) The hotel sector with the upgrading and optimization of the industry pattern under the catalysis of the epidemic. On the demand side, the demand for business travel will be gradually passivated by the impact of the epidemic in the future normalized epidemic prevention situation, and the demand is relatively rigid; On the supply side, the epidemic has promoted the transformation of the industry to a chain and high-end trend. Pay attention to individual stocks: 1) industry leader China Tourism Group Duty Free Corporation Limited(601888) , the company has high barriers to competition. Although the current performance is disturbed by the epidemic, with the landing of new projects and the gradual stabilization of the epidemic, it is expected that the repair speed of business performance will be accelerated in the future. 2) In terms of enterprise scale, business performance, room rental rate and hotel market share, there is a thick moat of Shanghai Jin Jiang International Hotels Co.Ltd(600754) .
