China Galaxy ** shares *** Gu Ximin recently conducted research on China Duty Free and released a research report "Performance meets expectations, 24 years of focus on rental cost optimization, policy catalysis", this report gives China Duty Free ** rating, the current stock price is 80$17.
China Duty Free (601888).
Core viewpoint: Event: The company released its 2023 performance report, and the company achieved revenue of 675 in 20237.6 billion yuan, +24% year-on-year, net profit attributable to the parent company was 67200 million yuan, +335%。Among them, in 4Q23, the company achieved revenue of 1673.9 billion yuan, +11% year-on-year, net profit attributable to the parent company of 151 billion yuan +276% year-on-year, net profit margin attributable to the parent company of 90%, unchanged from Q3.
Q4 demand recovery is relatively stable, profitability improvement is expected to benefit from cost optimization and management efficiency improvement.
Referring to the data of Haikou Customs, the duty-free sales of Hainan Islands in Q4 were 8.9 billion yuan, a year-on-year increase of +14%, and the number of shoppers was 1.51 million, a year-on-year increase of +74%, and the growth of passenger traffic was consistent with the growth trend of Hainan Airport, and the overall performance was stable. However, the unit price of duty-free customers on Hainan Island in Q4 was only 5,878 yuan, a year-on-year increase of -34%, reflecting that the recovery of demand is still affected by factors such as consumption power and ** reduction.
In terms of profitability, according to the performance report, we estimate that the company's gross profit margin is 30 in 4Q235%, +95pct, an improvement of 4 compared to 20212pct, -3 month-on-month8pct, we believe that it is mainly affected by the exchange rate and Q4 Double 11** activity. In addition, we expect Q4 companies to see significant improvements in cost optimization and management efficiency, with a Q4 margin of 124%, +61pct, +16pct, which is expected to be mainly related to the optimization of airport rental costs and the improvement of operation and management efficiency.
Sales growth is expected to remain solid in '24, with rent optimization and in-city store policies expected to provide incremental growth.
On the whole, considering the month-on-month improvement in the number of domestic and outbound tourists during the New Year's Day holiday, the growth of the company's duty-free channels at airports and Hainan Islands is expected to maintain a steady growth. According to Haikou Customs data, the average daily duty-free sales of Hainan Islands during the New Year's Day holiday is about 1600 million yuan +13% year-on-year, and the number of people is still the main growth driver (about 220,000 person-times, +53% year-on-year;The unit price of customers was 7228 yuan, a year-on-year increase of -26%). With the signing of new supplementary agreements to duty-free contracts with Shanghai Airport and Capital Airport, we expect that the company's airport rental expenses will be optimized from 2024 to 2025, and the improvement trend of profitability is more certain. In addition, the company has also negotiated with the core hub airport on the deduction mode of pick-up points in the city store within the supplementary contract, indicating that the duty-free shopping policy for Chinese people in the city has been promoted, and it is expected to provide incremental highlights in the future.
Investment suggestion: We believe that the underlying logic of China's duty-free industry has not changed, and China's duty-free card is the core duty-free traffic channel in China, and with the promotion of consumption recovery, the company's multi-dimensional layout of outlying islands + airports + online + cities will open up long-term space. It is expected that the net profit attributable to the parent company in 2023-25 will reach 100 million yuan, and the corresponding PE will be 23X, 18X, and 14X respectively, maintaining the "recommended" rating.
Risk Warning: The risk that the duty-free sales of outlying islands are lower than expected;The risk that the policy implementation is lower than expected.
*According to the calculation of the research report data released in the past three years, the research team of CITIC Li Zhenhuan has conducted in-depth research on the stock, and the average accuracy of the past three years is as high as 9989%, and its **2023 attributable net profit is 65400 million, and the **PE converted according to the current price is 2385。
The latest profit** breakdown is as follows:
A total of 32 institutions have rated the stock in the last 90 days, with ** rating 24 rating and 8 overweight ratingsThe average institutional price target over the last 90 days is 11357。
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