\u3000\u3000 China Tourism Group Duty Free Corporation Limited(601888) (601888)
Event:
China Tourism Group Duty Free Corporation Limited(601888) released the performance express for 2021: in 2021, it is expected to achieve an operating revenue of 67.669 billion yuan / + 28.65%, a net profit attributable to the parent company of 9.592 billion yuan / + 56.23%, and a net profit not attributable to the parent company of 9.472 billion yuan / + 58.73%. In the fourth quarter, it is expected to achieve an operating revenue of 18.170 billion yuan / + 4.07%, a net profit attributable to the parent company of 1.101 billion yuan / – 63.00%, and a net profit not attributable to the parent company of 1.083 billion yuan / – 63.60%.
Key investment points:
The tax exemption of Hainan outlying islands has achieved the annual goal. The company is the leader in the industry and occupies the main share. Under the scale expansion, the advantage of the supply chain is further enhanced. According to the Department of Commerce of Hainan Province, the total sales of duty-free shops on Hainan outlying islands in 2021 was 60.173 billion yuan, an increase of 84% year-on-year, meeting the annual target. Among them, the tax-free sales volume was 50.49 billion yuan, a year-on-year increase of 83%; The number of duty-free shoppers was 9.6766 million, a year-on-year increase of 73%; The number of duty-free purchases was 53.4925 million, a year-on-year increase of 71%. According to the General Administration of customs, in 2021, Haikou customs supervised 49.5 billion yuan of duty-free shopping on Hainan outlying islands, 6.72 million people, 70.45 million pieces of shopping, and 7368 yuan per capita, an increase of 80%, 49.8%, 107% and 20.2% respectively compared with the previous year. As the leader of Hainan market, the company occupies the main market share, performs well in revenue growth, further improves its voice over brand suppliers, and further enhances its advantages in the supply chain.
We judged that inventory impairment, employee compensation bonus and integral expenses were the main reasons for the low profit expectation in the fourth quarter. In 2021, the company increased its commodity procurement efforts, and the inventory balance increased significantly year-on-year. The main reasons may be: 1) repeated overseas epidemics, coping with the risk of international transportation obstruction, and then increasing the strategic reserve of inventory; 2) The overseas sales of the brand are not smooth, and there is an increase in the demand for shipments in China. In order to consolidate the relationship with the brand, the company helps to strengthen procurement. Under the principle of prudence, the significant increase of inventory balance leads to the significant increase of inventory impairment. In addition, the company made great efforts to develop members in 2021. At present, the number of members has reached about 20 million, and the member points and related bonus expenses are expected to increase significantly.
In the second half of the year, the pressure on passenger flow is a short-term impact, the elasticity of income recovery is higher than that of passenger flow, and the long-term growth trend remains unchanged. In the second half of 2021, due to the repeated impact of epidemic situations all over the country, the passenger flow pressure in Hainan led to a short-term decline in revenue, but the impact of the decline in passenger flow on revenue is limited, the elasticity of revenue recovery is greater than that of passenger flow recovery, and the growth momentum is still growing. According to the data of Haikou customs, in July 2021, the duty-free sales of outlying islands increased by 47% year-on-year, but it began to be affected by the Nanjing epidemic at the end of July. In August, the passenger throughput of Sanya / Haikou airport decreased by 64.08% / 60.30% year-on-year, and the duty-free sales of outlying islands decreased by 45% year-on-year; After the epidemic situation eased relatively in September, the decline of passenger flow at Sanya / Haikou airport narrowed to – 38.88% / – 24.07%, but at the same time, sales rebounded strongly, realizing a positive growth of 13% year-on-year. In the fourth quarter, the passenger flow throughput of Sanya / Haikou airport decreased by 33% / 34% year-on-year respectively, but the tax-free sales of outlying islands were 13.956 billion yuan, a year-on-year increase of 23%.
In 2022, the company’s strategy focuses on assessing profits. With the increase of revenue scale and the narrowing of discounts, the profit margin is expected to be improved. The decline of the company’s profit margin is short-term pressure, which is related to the decline of offline revenue, the increase of online share and the greater discount. The epidemic prevention and control will be gradually promoted in 2022, and the passenger flow is expected to improve year-on-year, driving the increase of revenue scale; At the same time, vicious competition has a great impact on profits, and the company’s discount has been narrowing since 2022. Strategically, the company adopts the way of growth first and then quality improvement. In 2021, the company takes scale expansion as the main goal to further optimize the relationship with the brand and enhance the advantages of the supply chain. Since 2022, with profit as the key assessment objective, emphasizing quality development, the profitability is expected to be significantly improved.
Investment suggestion: according to the work report of Hainan provincial government, the sales of duty-free stores in Hainan will strive to reach 100 billion in 2022. In 2022, the company’s new stores Haikou duty-free city and phase II of Sanya Phoenix Airport will be opened soon, with more supply catalysts and continuous improvement of revenue. With the rational discount, the expansion of income scale and the dilution of expenses, considering that Hainan business enjoys a preferential tax rate of 15%, the company’s profitability is expected to be significantly improved in 2022. Under the current scale, the company has further enhanced its voice over the brand, improved its advantages in the supply chain, and continuously consolidated its leading position. It is estimated that from 2021 to 2023, the company will realize an operating revenue of RMB 67.669/94.121/120.240 billion and a net profit attributable to the parent of RMB 9.592/120.53/15.127 billion, corresponding to 40.85/32.50/25.90xpe. For the first time, give a “buy” rating.
Risk tip: the epidemic situation in China repeatedly affects travel; China’s industry competition intensifies; Foreign duty-free merchants have the risk of price war; The opening time of the new store was postponed; Macro economy affects consumption enthusiasm.
