China Duty Free, a leader in the duty-free industry, once stood out from the crowd and firmly occupied the top spot in the industry. In the past two years, the stock price has soared more than ten times, and the market value has soared, once breaking through the sky of 800 billion yuan, becoming a giant in the A** field, unbeatable. However, three years have passed in the blink of an eye. The market value of China Duty Free seems to have experienced a storm, falling from the clouds, and now the market value is less than 200 billion, as if it has returned to the starting point of 2019.
In 2010, China Duty Free was only a rising star among the world's duty-free operators, ranking 10th. However, just ten years later, in 2020, it has turned around and has become the number one market share in the global travel retail industry. In the past decade, China's luxury market has shown unprecedented prosperity, not only contributing more than half of the growth rate to the global luxury market, but also making Chinese consumers rise to become the largest force in luxury consumption, and the wave of "consumption upgrading" has swept in. In this wave of mid-to-high-end consumption, operating income and stock price have achieved an astonishing leap. In 2010, the operating income of China Duty Free was only 960.9 billion yuan, and by 2020, this figure has soared to more than 50 billion yuan, an increase of more than 5 times. Although Chinese consumers already account for more than one-third of the global luxury market, one striking phenomenon is the "exodus" of luxury consumption. The scale of overseas purchases of duty-free goods is huge, which has become a unique landscape. In 2019, the total scale of duty-free goods purchased by Chinese residents abroad reached 180 billion yuan, compared with the domestic duty-free market size of only about 50 billion yuan. This phenomenon not only highlights the enthusiasm of Chinese consumers for duty-free shopping, but also leaves a huge space for the further development of China's duty-free market. During the haze of the epidemic, entry and exit restrictions were restricted, and overseas duty-free consumption shifted to China, which brought continuous growth in the performance of CDF. In 2021, CDF's operating income jumped to 67.6 billion yuan, a year-on-year increase of 28., against the backdrop of the overall market downturn67%。The net profit attributable to shareholders of listed companies reached 965.4 billion yuan, a year-on-year increase of 5723%, setting the best performance in the history of CDF. 
The intensive release of Hainan's duty-free policy has brought unprecedented opportunities for China Duty Free. As the biggest beneficiary of the duty-free policy on Hainan Island, China Duty Free has naturally become the focus of market attention. ** They have poured into China Duty Free, and the number of shareholders has gone from 5 to 5 in just one year30,000 households surged to 1620,000 households, a threefold increase. This boom caused the share price of China Duty Free to reach its peak in February 2021, once approaching 400 yuan. However, the good times did not last long, and by the end of 2021, the share price of China Duty Free was sharply **, almost halved. The reason behind it is that this duty-free business, which is regarded as a "golden job bowl", is ushering in new changes. The duty-free business has always been known as the "golden job" because of its extremely high gross profit margin. Compared with the 18%-20% gross profit margin of ordinary department stores, domestic and foreign duty-free giants can easily reach a gross profit margin of about 50%. This also makes the approval of tax-exempt licenses extremely stringent. In the domestic market, in addition to China Duty Free and its subsidiaries such as Rishang Duty-Free Shop, there are only a few listed duty-free operators such as Wangfujing and Haiqi Group, but their scale is obviously not in the same order of magnitude as that of China Duty Free. Behind China Duty Free, stands the towering tree of China Tourism Group. China Tourism Group holds 50% of the total share capital of China Duty Free and has an absolute controlling stake, while the State-owned Assets Supervision and Administration Commission (SASAC) behind it holds 100% of the shares. Therefore, the deep cultivation of China Duty Free in the duty-free industry can be said to have firmly grasped this "golden rice bowl" and is at the right time. However, after experiencing rapid growth in 2020 and 2021, the performance and stock price of China Duty Free in 2022 and 2023 continued to be under pressure. Whether this "golden rice bowl" can continue to shine will take time to verify. 
The first challenge is the invisible threshold of the consumption environment. In 2022, China Duty Free will only record an operating income of 54.4 billion yuan, a sharp drop of nearly 20% year-on-year, and its net profit will drop sharply to 50300 million yuan, a significant increase of nearly 50% year-on-year. Although there are endless calls for consumption recovery in 2023 after the relaxation of epidemic policies, this so-called "revenge consumption" is fleeting. The duty-free sales data on Hainan Island is a vivid example: at the beginning of the year, the average daily sales exceeded the 200 million yuan mark, but then gradually declined. Even during the Spring Festival, although the sales data has rebounded, the overall trend is still not optimistic.
The K-shaped differentiation of the consumer market is becoming increasingly obvious, the mid-end consumption power is weak, and the fragrance industry, which is crucial in duty-free sales, has also entered a downward cycle of destocking. These factors are like heavy shackles, which have brought heavy pressure to the performance of China Duty Free. Although the operating income is still growing, the profit of China Duty Free has been declining continuously. In the first half of 2023, China Duty Free achieved an operating profit of 495.3 billion yuan, down 650%；Net profit attributable to shareholders of listed companies 386.6 billion yuan, a year-on-year decrease of 183%。Although the net profit attributable to the parent company of China Duty Free rebounded to 5.2 billion yuan in the third quarter, a year-on-year increase of 1249%, but compared to 84 in the third quarter of 2021Compared with 900 million yuan, it is still nearly 30%. The core contradiction between net revenue growth and negative profit growth is like two ends of the scale, one end is revenue growth, and the other end is the heavy pressure of costs and expenses. In the first half of 2023, the sales expense ratio of China Duty Free climbed to 1192%, up 508%。This jump is like a storm, making the sales expenses soar to 4.3 billion yuan like a flood, an increase of 126% year-on-year. The main driver of this increase is the significant increase in airport rentals, which is undoubtedly another insurmountable mountain facing CDF. The relationship between the airport and CDFG is like a partner on the stage, when consumers spend at the duty-free shop at the airport, a part of the income is like applause in the spotlight and goes to the airport, while the other part is like a wonderful performance on the stage and goes to CDF. The airport provides the flow of people and the venue, like the backdrop and lighting of the stage, while the CDFG provides goods and rental, like the actors and props on the stage. Therefore, when the passenger flow is large, the airport and China Duty Free are like tacit dance partners, jointly performing a "win-win" waltz. However, once the passenger flow drops, the draw and guarantee will be like a stumbling block on the dance floor, becoming a game between the airport and China Duty Free. Last year, the airport's rent reduction plan for China Duty Free was like a spring breeze, and after the news came out, the stock prices of several major airports were generally **, like falling leaves in autumn, indicating the far-reaching impact of this plan on the airport. After the official implementation of the rent reduction and point reduction agreement at the end of the year, the stock prices of A-share airport listed companies also generally fell slightly, like fluctuations on the strings, trembling gently, but lingering. For CDF, although this agreement is good news, in the long run, the cooperative relationship between CDFG and the airport is like a community with a shared future. When the airport is facing the slow recovery of international passenger flow, CDFG is also under the pressure of performance, like a small boat rocking in the wind and waves, it needs to constantly adjust its course in order to maintain a stable progress. In addition to its own problems, CDFG is also facing competitive pressure from the outside world. The first chain and procurement of China Duty Free have always been regarded as its core competitiveness, like the sword of the king, extremely sharp. In the operation of duty-free shops, CDFG actually plays the role of a wholesaler, like a tycoon in the market, skipping the intermediate distributor link and purchasing goods directly from brands and even manufacturers. Coupled with the huge purchase volume of China Duty Free, it should have considerable bargaining power in procurement, as if it has the pulse of the market. However, with the vigorous development of cross-border e-commerce, the original low-cost advantage of China Duty Free has gradually disappeared, like the afterglow of the sunset, gradually dimming. The selling price of cross-border e-commerce and airport duty-free has been decreasing, and the gross profit margin of perfume and cosmetics has dropped from more than 50% to about 20%. It's like a climber on a cliff face a steeper and steeper challenge. Furthermore, when the middle class becomes extremely sensitive, they find that online cross-border e-commerce can provide more preferential products. This is like a catfish in the market, stirring the pattern of the entire industry, bringing a lot of impact to the business of China Duty Free and even the entire duty-free sales industry.
The company's price-to-earnings ratio has fallen from its peak to an all-time low. What was once a dizzying price-to-earnings ratio of nearly 200 times has now stabilized at an all-time low of 32 times. This is a symbolic shift that symbolizes the market's re-perception and realignment of the company's value.
However, whether the company can achieve the previous performance growth again has become a key question before us. This is not only a severe test of the company's own strength, but also a major challenge to market confidence. After all, history is always strikingly similar, but every turn is full of unknowns and variables.
We can't simply measure the possibilities of the future with past achievements, but we also can't ignore the proven strengths and potentials. The company needs to dig deep into its core competitiveness, actively expand new market areas, and continuously improve the quality of products and services, in order to stand out in the fierce market competition and achieve brilliant performance growth again.
In this process, we need to keep a clear head and firm beliefs, not only to see the uncertainty and risks of the market, but also to see the opportunities and advantages of the company.