Equity Analyst

Steve Zhou, CFA

Equity Bottom-Up

China Tourism Group Duty Free / Equity Bottom-Up

<ul>
<li>Since my previous insight on <a href="https://www.smartkarma.com/entities/china-tourism-group-duty-free" target="_blank" data-smartkarma-citation="entities:36229:1" rel="noopener">China Tourism Group Duty Free (1880 HK)</a> in October 2023, the stock has declined 33%, and year-to-date, the stock has declined 13%.</li>
<li>The company faces headwinds from continued overall weakness in Hainan duty free sales and potentially increased competition in Hainan.</li>
<li>The company already announced preliminary 1Q24 results, with sales down 9% yoy and net profit flat.  The company is trading at 18x 2024 earnings.</li>
</ul>


Since my previous insight on China Tourism Group Duty Free (1880 HK) in October 2023, the stock has declined 33%, and year-to-date, the stock has declined 13%.
The company faces headwinds from continued overall weakness in Hainan duty free sales and potentially increased competition in Hainan.
The company already announced preliminary 1Q24 results, with sales down 9% yoy and net profit flat.  The company is trading at 18x 2024 earnings.


China Tourism Group Duty Free (1880 HK):  Headwinds Persist

HK/China Equity Long-Short

Osbert Tang, CFA

<ul>
<li>Our earnings projections for <a href="https://www.smartkarma.com/entities/china-tourism-group-duty-free-corporation-limited" target="_blank" data-smartkarma-citation="entities:36229:1" rel="noopener">China Tourism Group Duty Free Corp Ltd (1880 HK)</a> are 14% and 18% below market consensus respectively. We think these are more realistic expectations.</li>
<li>At IPO price of HK$158, CDFC H-share sits on 23.9x FY23F PER. We think it is difficult to trade above 22x - the average for top consumer discretionary names.</li>
<li>Weakened visitor appetite to Sanya, potentially higher discounts, increase in border opening, higher fixed cost and uncertainties for duty free policies beyond 2025 are negative earnings factors.</li>
</ul>


Our earnings projections for China Tourism Group Duty Free Corp Ltd (1880 HK) are 14% and 18% below market consensus respectively. We think these are more realistic expectations.
At IPO price of HK$158, CDFC H-share sits on 23.9x FY23F PER. We think it is difficult to trade above 22x - the average for top consumer discretionary names.
Weakened visitor appetite to Sanya, potentially higher discounts, increase in border opening, higher fixed cost and uncertainties for duty free policies beyond 2025 are negative earnings factors.


CTG Duty Free (1880 HK): Our Earnings Forecasts and Views on H-Share Fair Value

<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-tourism-group-duty-free" target="_blank" data-smartkarma-citation="entities:36229:1" rel="noopener">China Tourism Group Duty Free (1880 HK)</a> announced preliminary results for 3Q23 which came in below market expectations.</li>
<li>Compared to the previous quarter 2Q23, sales declined by 1% q-o-q, while net profit margin declined from 10.4% in 2Q23 to 8.9% in 3Q23. </li>
<li>The company (H-share) is trading at 26x 2023E PE and 23x 2024E PE, still expensive as visibility is low and derating continues. </li>
</ul>



China Tourism Group Duty Free (1880 HK) announced preliminary results for 3Q23 which came in below market expectations.
Compared to the previous quarter 2Q23, sales declined by 1% q-o-q, while net profit margin declined from 10.4% in 2Q23 to 8.9% in 3Q23. 
The company (H-share) is trading at 26x 2023E PE and 23x 2024E PE, still expensive as visibility is low and derating continues. 


China Tourism Group Duty Free (1880 HK):  Weak Golden Week Trends And Still Expensive

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

Midea Group Co Ltd A / Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/midea-group-co-ltd-a" target="_blank" data-smartkarma-citation="entities:16185:1" rel="noopener">Midea Group Co Ltd A (000333 CH)</a>, one of the world’s largest home appliance producers, aims to raise up to  US$5bn in its H-share listing.</li>
<li>Midea Group is one of the world’s largest home appliance manufacturing companies with a presence in over 200 countries. Its A-shares have been listed since 2013.</li>
<li>In this note, we look at its past performance and other deal dynamics that might impact the listing.</li>
</ul>



Midea Group Co Ltd A (000333 CH), one of the world’s largest home appliance producers, aims to raise up to  US$5bn in its H-share listing.
Midea Group is one of the world’s largest home appliance manufacturing companies with a presence in over 200 countries. Its A-shares have been listed since 2013.
In this note, we look at its past performance and other deal dynamics that might impact the listing.


Midea A/H Listing - Early Look - Probably Raising Acquisition Currency

Greater China Equity Long/Short Analyst

Eric Chen

Hainan Meilan International Airport / Equity Bottom-Up

<ul>
<li>Meilan Airport is both a strategic asset and a key beneficiary in China’s blueprint for Hainan. The hub holds an indispensable yet underappreciated position in Hainan’s DFS market.</li>
<li>While jump in depreciation and plunging passenger traffic in 2022 dealt heavy blow to the company, they also pave the way for a strong turnaround as re-opening revives travel demand.</li>
<li>We expect the company’s net profit to reach RMB600 million in 2023 and further double to RMB1.2 billion by 2025, driving share price to double in three years.</li>
</ul>


Meilan Airport is both a strategic asset and a key beneficiary in China’s blueprint for Hainan. The hub holds an indispensable yet underappreciated position in Hainan’s DFS market.
While jump in depreciation and plunging passenger traffic in 2022 dealt heavy blow to the company, they also pave the way for a strong turnaround as re-opening revives travel demand.
We expect the company’s net profit to reach RMB600 million in 2023 and further double to RMB1.2 billion by 2025, driving share price to double in three years.


Meilan Airport (357 HK): A Strategic Asset to Ride on Hainan DFS Investment Theme

China

China Tourism Group Duty Free Corporation Limited engages in sales of duty free goods and tax goods. The Company sells tobacco, wine and spirits, perfume, cosmetics, fashion and accessories, watches, jewelry, food, luggage products,and other products. China Tourism Group Duty Free also engages in investment and development of tourism destination commercial complexes.

China Tourism Group Duty Free (1880 HK)