China National Travel Service (601888) Tracking Express: Outbound Stores Will Release Tenders as Scheduled
The five ministries and commissions, including the Ministry of Finance, issued the “Notice on the Interim Measures for the Administration of Printing and Distributing Outbound Duty-Free Shops at Ports”, which released 南京桑拿网 bids for free-of-charge shops at international ports to all qualified tax-exempt businesses, in line with expectations.
We think the key points worth attention are as follows: The business qualifications have been liberalized: We believe that the opening of the bidding for outbound duty-free shops can be a further continuation of the policy ideas of the relevant tax-exempt industry in February 2016.
In addition, the “Notice” mentioned that “the owner of the airport port or the bidder may not interfere with the successful bidder to prevent other duty-free goods operating companies from setting up duty-free goods pick-up points at the airport.” Our interpretation is that the city will not rule out tax exemptions in the future.The store policy will also be liberalized to other existing tax-exempt businesses.
But again, the operational advantages of China Immunity will help it maintain its leading position.
Although the acquisition of store resources has not yet been dated, the China Exemption has strong purchasing advantages and operational capabilities, which can ensure the sustainable development of the industry with limited impact.
The liberalization of geographic and category restrictions on operating duty-free shops has not increased the licenses, especially the tax-free licenses have not been released to private or foreign enterprises. Therefore, we believe that industry competition is still controlled between the existing four duty-free shops.
The China Exemption (including the exemption from the sea and Japan) has a market share of more than 90% in 2018, which has an overwhelming advantage in the domestic tax-exempt market. It has advantages in procurement, operation, management and other three tax-exempt companies.
The impact on the performance of China Exemption is limited.
1) We think that after re-tendering, the percentage of commissions for outbound stores is likely to increase, but due to the restrictions in the “Notice”, the increase in deduction points is expected to be limited; coupled with the advantages of China Exemption in operating capabilities and product richness,It is expected that China Exemption will have a high probability of winning the new round of bidding; 2) China Exemption Outbound Stores have limited revenue and profit contribution: Although the number of outlets of the Outbound Duty Free Stores has decreased, the single store revenue is very low.The corresponding store revenue for the period is 800-1000 million, the company holds 51% of the shares, and after the re-tendering, all the bids are exempted but the deduction rate is increased by 15pcs; otherwise, the company’s net profit is expected to decrease by about 0 within three years.
6 trillion, an average of about 20 million per year, reducing the profit ratio by about 0.
4%, very limited.
Risk factors: Slower-than-expected increase in gross profit margin; lower-than-expected tax exemption policy and airport bidding; lower-than-expected Haitang Bay project operation; risks of slower-than-expected progress in state-owned enterprise reform.
Investment suggestion: The company’s core investment logic lies in the policy flexibility in the context of attracting consumption substitution. Several national documents strengthen the management of the duty-free industry, and administrative guidance controls the bidding price. This is to a certain extent also maintaining the global competitive advantage of China’s duty-free industry.
Although the deregulation of outbound stores has certain challenges for short-term and mid-term operations, as China’s tax-free leader, China Travel has far outperformed its competitors in terms of procurement and operation advantages. We believe it will ultimately benefit from the release of the entire market.
We maintain our performance forecast: net profit for 2019-2021 is 46.
9.7 billion / 46.
34 billion / 53.
44 trillion, corresponding to EPS 2.
74 yuan, the current price corresponds to PE37X / 37X / 32X.
This document affects our recommendation to be neutral, to maintain a “Buy” rating, and to maintain a sustained allocation.