\u3000\u3000 China Tourism Group Duty Free Corporation Limited(601888) (601888)
Event: the company released the performance express for 2021. During the reporting period, the company achieved a total operating revenue of 67.669 billion yuan / + 28.65%, an operating profit of 14.736 billion yuan / + 52.02%, and a net profit attributable to shareholders of listed companies of 9.592 billion yuan / + 56.23%.
Among them, Q4 company achieved operating revenue of 18.17 billion yuan / + 4.07%, operating profit of 1.306 billion yuan / – 76.14%, net profit attributable to shareholders of listed companies of 1.101 billion yuan / – 63%, and net profit attributable to shareholders of listed companies of 1.084 billion yuan / – 63.56%.
Under the influence of the epidemic, the passenger flow on outlying islands has declined, and the company’s promotion has increased. Q4 China’s epidemic continues to recur, multi provincial team tours are suspended, people’s travel is limited by prevention and control policies, and the passenger flow on Hainan’s outlying islands has fallen sharply year-on-year. From the perspective of ensuring sales, the company continues to strengthen promotion. The discount of aromatherapy products is mainly 30% off for 3 pieces, and the discount of some promotional funds is lower. Under the background of Q4 peak season, the company achieved a revenue of 18.17 billion yuan, an increase of 30% month on month compared with Q3. It is expected that the increase will mainly come from Hainan business, and the revenue of Q4 company in Hainan is about 14 billion yuan.
Expense amortization factors affect Q4 profit margin. The net interest rate of Q4 company is 6.06%, a year-on-year decrease of nearly 11pct, which is expected to be affected by expense amortization. According to the practice of previous years, the company will accrue the amortization of inventory falling price reserves, deferred member points, bonus expenses and other expenses in Q4. Since the new tax-free policy, the company’s sales have increased significantly. In order to meet the purchase demand of consumers, the company has strengthened the purchase of tax-free goods, and the inventory has increased from 8 billion in 2020q1 to 19.8 billion in 2021q3. It is expected that the corresponding inventory falling price reserves will also be greatly improved. The company has more than 20 million members, and the growth of sales also brings the improvement of member points. From the perspective of the whole year, the company’s revenue and net profit have increased significantly compared with 2020, and the provision of bonus expenses is expected to increase to a certain extent.
In the short term, the discount intensity of China free will return to normal, and the gross profit margin is expected to rise. After new year’s day, the company’s discount efforts gradually return to the normal level. Q1 Hainan has entered the peak season, and the passenger flow is expected to pick up to a certain extent. From the situation of previous years, the passenger unit price during the Spring Festival is significantly higher than that in other periods. It is expected that the proportion of sales of high unit price categories such as jewelry, watches and bags will increase, and the problem of decline in China’s free gross profit margin is expected to be alleviated.
In the medium and long term, although the performance fluctuates in the short term affected by the epidemic, the company’s medium and long-term competitive advantage remains unchanged. From the perspective of supply chain, as the No. 1 duty-free operator in the world, China tax exemption has maintained high sales growth. In 2022, Hainan Province set the target of 100 billion sales of duty-free stores on outlying islands. China tax exemption will have a stronger voice in the existing supply chain and will get more policy preference in procurement in the future; In terms of the introduction of new brands, China tax exemption continued to optimize the brand layout. Recently, Vanke Yabao, De Beers eternal mark and other luxury brands have successively settled in Sanya duty-free city. From the perspective of channels, the 9300 square meters of Meilan Airport Phase II has been opened, the 3000 square meters of Phoenix Airport Phase II has been opened during the Spring Festival, Haikou international duty-free city opened at the end of September this year, and the No. 2 land of Sanya phase I is expected to open before the end of the year. The channel advantages of China free in 2022 will be further strengthened. In addition, the company’s advantages in management, membership and brand can not be ignored.
Investment suggestion: continue to be optimistic about the development space of China’s tax-free industry, and short-term fluctuations will not affect the medium and long-term development. Give a “buy” rating. Considering the latest performance express and the impact of the epidemic, we adjusted the company’s profit forecast. It is estimated that the net profit attributable to the parent company from 2021 to 2023 will be RMB 9.6 billion / 12.7 billion / 16.6 billion, corresponding to 41 / 31 / 24 times of PE.
Risk tips: systemic risk, epidemic risk, policy promotion, lower than expected business conditions and other risks.
