Event comments
On January 19, 2022, the Ministry of finance, the Ministry of Commerce, the Ministry of culture and tourism, the General Administration of customs and the State Administration of Taxation issued a notice on adjusting the operation and bidding period of inbound and outbound duty-free stores at ports during the epidemic period. The notice said that in order to alleviate the impact of the epidemic on market subjects, duty-free stores that have been approved to set up and completed bidding in accordance with the management measures can extend the business period determined at the time of bidding for duty-free stores on the basis of friendly negotiation, which can only be extended once for up to 2 years. The business term after extension can exceed 10 years; From July 2020 to June 2022, for duty-free stores approved to be established according to the management measures but not yet completed the bidding, the time limit for completing the bidding within 6 months from the date of approval of establishment may not be subject to, but the bidding shall be completed before December 31, 2022 at the latest.
The liberalization of business term and bidding time limit will provide sufficient development time and space for tax-free enterprises and help enterprises show more brilliant performance. The extension of the operation period will help some tax-free enterprises to achieve greater development in brand strength, and play a strong supporting role in improving brand strength and deepening business layout of tax-free enterprises. At the same time, for the duty-free stores that have completed the bidding, if the operation period is extended, it will also help the leading enterprises with scale advantages to consolidate their leading position and further improve and expand their business and scale. Duty free shops that have not completed the bidding but have been approved to set up will benefit from the extension of the bidding time limit, obtain more sufficient development time and improve the corresponding business layout.
The national policy supports the development of the duty-free industry and is optimistic about the long-term prosperity of the industry. The tax-free industry is closely related to relevant policies. At present, China’s tax-free industry policies are continuously liberalized, helping the tax-free industry enter a period of rapid growth. In terms of the tax exemption policy for outlying islands, the tax exemption limit was increased to 100000 yuan, and the number of times was unlimited. At the same time, the purchase object was also relaxed from the foreign tourists (including residents of Hainan Province) who were over 18 years old and left Hainan Island by plane but did not leave the country in 2011 to the railway and ship outlying passengers over 16 years old in 2017. The liberalization of the operation period and bidding period further reflects the overall trend of limited relaxation of the policy, which is expected to provide more sufficient time and space for the development of tax-free enterprises. Under the severe situation of the epidemic, the tourism retail industry and tax-free industry have been impacted in the short term or due to the decline of passenger flow such as airports. However, in the long run, the tax-free industry is still expected to achieve strong growth under the logic of consumption return + policy support + continuous improvement of its own brand strength and product strength.
Investment advice
We are optimistic about the long-term good trend of the tax-free industry with the support of policies. At present, consumption return + policy support + self strength improvement has become a relatively certain long-term growth logic of the tax-free industry. The further liberalization of the business period and bidding time limit will give the tax-free industry a broader development space and the overall long-term improvement of the industry in the future. We are optimistic about China Tourism Group Duty Free Corporation Limited(601888) with significant leading scale advantages.
Risk tips
Tip 1: repeated epidemic impact;
Tip 2: macroeconomic fluctuations;
Tip 3: policy fluctuation risk.
