HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

China Tourism Group Duty Free Corp Ltd / Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/china-tourism-group-duty-free-corp-ltd" target="_blank" data-smartkarma-citation="entities:12278:1" rel="noopener">China Tourism Group Duty Free Corp Ltd (601888 CH)</a> expects recurring net profit of Rmb2.834bn for 1Q21, compared with a loss of Rmb120m in 1Q20. On a QoQ basis, this is down by a marginal 3.8% with a retreat in operating margin. Despite so, we still see this set of result as decent, and it represents about 25% of the full-year consensus forecasts.Share price of CTG Duty Free was off 10% yesterday before the earnings announcement, with various concerns including border-opening in Hong Kong, anti-trust risk and clamp down of duty free grey-market, among others. We, however, think that fundamentals stay solid and these concerns are overplayed. With share price already fallen by 34% from the peak, value starts to emerge for this duty free leader in China, in our view.

China Tourism Group Duty Free Corp Ltd (601888 CH) expects recurring net profit of Rmb2.834bn for 1Q21, compared with a loss of Rmb120m in 1Q20. On a QoQ basis, this is down by a marginal 3.8% with a retreat in operating margin. Despite so, we still see this set of result as decent, and it represents about 25% of the full-year consensus forecasts.Share price of CTG Duty Free was off 10% yesterday before the earnings announcement, with various concerns including border-opening in Hong Kong, anti-trust risk and clamp down of duty free grey-market, among others. We, however, think that fundamentals stay solid and these concerns are overplayed. With share price already fallen by 34% from the peak, value starts to emerge for this duty free leader in China, in our view.  

CTG Duty Free (601888 CH): 1Q21 Profit Is Still Quite Decent

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

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.

Quantitative Analysis

In our weekly Shanghai/Shenzhen Connect Ideas series, we aim to highlight key stocks and sectors which the mainland investors traded via the northbound Shanghai and Shenzhen Connect, as analyzed by our proprietary data engine and highlight interesting trade ideas. In this insight, we will have an overview of the weekly inflows into the A-share market via Shanghai/Shenzhen connect, top inflow and top three outflow stocks. We will also cover inflows and holdings by sectors, after which we will highlight top five inflows and outflows on a relative basis for large-cap and mid-cap stocks: stocks with a market capitalization above $5 bn, and those between $1 bn and $5 bn. In this insight, we will highlight inflows into <a href="https://www.smartkarma.com/entities/wuxi-apptec-co-ltd" target="_blank" data-smartkarma-citation="entities:27092:1" rel="noopener">WuXi AppTec Co Ltd (603259 CH)</a>, as well as outflows from <a href="https://www.smartkarma.com/entities/gree-electric-appliances-inc-of-zhuhai" target="_blank" data-smartkarma-citation="entities:7622:1" rel="noopener">Gree Electric Appliances (000651 CH)</a> and <a href="https://www.smartkarma.com/entities/china-tourism-group-duty-free-corp-ltd" target="_blank" data-smartkarma-citation="entities:12278:1" rel="noopener">China Tourism Group Duty Free Corp Ltd (601888 CH)</a>.

In our weekly Shanghai/Shenzhen Connect Ideas series, we aim to highlight key stocks and sectors which the mainland investors traded via the northbound Shanghai and Shenzhen Connect, as analyzed by our proprietary data engine and highlight interesting trade ideas.  In this insight, we will have an overview of the weekly inflows into the A-share market via Shanghai/Shenzhen connect, top inflow and top three outflow stocks. We will also cover inflows and holdings by sectors, after which we will highlight top five inflows and outflows on a relative basis for large-cap and mid-cap stocks: stocks with a market capitalization above $5 bn, and those between $1 bn and $5 bn.  In this insight, we will highlight inflows into WuXi AppTec Co Ltd (603259 CH), as well as outflows from Gree Electric Appliances (000651 CH) and China Tourism Group Duty Free Corp Ltd (601888 CH).

SH/​​SZ Connect Flows: Wuxi Apptec, Gree, China Tourism

<a href="https://www.smartkarma.com/entities/china-tourism-group-duty-free-corp-ltd" target="_blank" data-smartkarma-citation="entities:12278:1" rel="noopener">China Tourism Group Duty Free Corp Ltd (601888 CH)</a> pre-announced its FY20 result with a 55.1% YoY growth in recurrent earnings to Rmb5.94bn, beating market expectation by significant magnitude. The strong result is driven by a 3.3pp expansion in operating margin, supported by good sales of high-margin products; and we believe the market should welcome this set of encouraging result.As for FY21, CTG Duty Free will benefit from the government's support of domestic consumption, improved portfolio of premium brand names and the slow recovery of outbound overseas travel appetite. While the Chinese New Year sales may be negatively affected by the resurgence of local COVID-19 cases, we expect full-year effect of the new Hainan duty free policies will help lift bottom line with an impressive earnings growth of over 80%.

China Tourism Group Duty Free Corp Ltd (601888 CH) pre-announced its FY20 result with a 55.1% YoY growth in recurrent earnings to Rmb5.94bn, beating market expectation by significant magnitude. The strong result is driven by a 3.3pp expansion in operating margin, supported by good sales of high-margin products; and we believe the market should welcome this set of encouraging result.As for FY21, CTG Duty Free will benefit from the government's support of domestic consumption, improved portfolio of premium brand names and the slow recovery of outbound overseas travel appetite. While the Chinese New Year sales may be negatively affected by the resurgence of local COVID-19 cases, we expect full-year effect of the new Hainan duty free policies will help lift bottom line with an impressive earnings growth of over 80%.

CTG Duty Free Corp (601888 CH): Beating Market Expectations on Pre-Announced FY20 Result

Shanghai International Airport / Equity Bottom-Up

The announcement by <a href="https://www.smartkarma.com/entities/shanghai-international-airport-co-ltd" target="_blank" data-smartkarma-citation="entities:6511:1" rel="noopener">Shanghai International Airport (600009 CH)</a> of a loss of between Rmb1.2-1.3bn for FY20 will disappoint the market due to the significant QoQ deterioration, in our view. While weaker domestic traffic and limited recovery of international traffic are reasons, the less favourable duty free agreement reached with Sunrise duty free, a subsidiary of <a href="https://www.smartkarma.com/entities/china-tourism-group-duty-free-corp-ltd" target="_blank" data-smartkarma-citation="entities:12278:1" rel="noopener">China Tourism Group Duty Free Corp Ltd (601888 CH)</a>, has further added to the loss in last year.Based on the current pace of international traffic recovery, we believe SIAC will be difficult to achieve the required traffic for the minimum guarantee rental in the next two years, and this will have a negative effect on its bottom line. Since 2020, share price of SIAC has outperformed <a href="https://www.smartkarma.com/entities/guangzhou-baiyun-international-airport" target="_blank" data-smartkarma-citation="entities:10819:1" rel="noopener">Guangzhou Baiyun International Airport (600004 CH)</a> by over 20pp. With SIAC's new agreement and GBIA's stronger FY20 result, we believe there is room for SIAC to give back some of such outperformance in the near term.

The announcement by Shanghai International Airport (600009 CH) of a loss of between Rmb1.2-1.3bn for FY20 will disappoint the market due to the significant QoQ deterioration, in our view. While weaker domestic traffic and limited recovery of international traffic are reasons, the less favourable duty free agreement reached with Sunrise duty free, a subsidiary of China Tourism Group Duty Free Corp Ltd (601888 CH), has further added to the loss in last year.Based on the current pace of international traffic recovery, we believe SIAC will be difficult to achieve the required traffic for the minimum guarantee rental in the next two years, and this will have a negative effect on its bottom line. Since 2020, share price of SIAC has outperformed Guangzhou Baiyun International Airport (600004 CH) by over 20pp. With SIAC's new agreement and GBIA's stronger FY20 result, we believe there is room for SIAC to give back some of such outperformance in the near term.

Shanghai International Airport (600009 CH): Dragged by Unfavourable Duty Free Agreement

The approvals of more players in the Hainan duty free market at end-2020 is likely to pose challenge to <a href="https://www.smartkarma.com/entities/china-tourism-group-duty-free-corp-ltd" target="_blank" data-smartkarma-citation="entities:12278:1" rel="noopener">China Tourism Group Duty Free Corp Ltd (601888 CH)</a> only in the long term, given the weaker relative competitiveness of the new entrants, CTG Duty Free's established strengths and the sustained positive growth in the overall market. Despite so, we see a trend of rise in competition in China's duty free industry, which is a threat that it cannot overlook in the long run.With the Dec (up to 28th) duty free sales value maintained a solid growth of over 150% YoY, the sustained market growth will offer CTG Duty Free a near-term buffer to competition. The low base in 1H20 as well as the limited appetite of overseas travel due to new coronavirus strains will continue to be positive factors for the company at least in the next six months.

The approvals of more players in the Hainan duty free market at end-2020 is likely to pose challenge to China Tourism Group Duty Free Corp Ltd (601888 CH) only in the long term, given the weaker relative competitiveness of the new entrants, CTG Duty Free's established strengths and the sustained positive growth in the overall market. Despite so, we see a trend of rise in competition in China's duty free industry, which is a threat that it cannot overlook in the long run.With the Dec (up to 28th) duty free sales value maintained a solid growth of over 150% YoY, the sustained market growth will offer CTG Duty Free a near-term buffer to competition. The low base in 1H20 as well as the limited appetite of overseas travel due to new coronavirus strains will continue to be positive factors for the company at least in the next six months.

CTG Duty Free Corp (601888 CH): Facing More Competition in a Rapidly Growing Market

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 Corp Ltd (601888 CH)

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China Tourism Group Duty Free Corp Ltd (601888 CH)

CTG Duty Free (601888 CH): 1Q21 Profit Is Still Quite Decent

CTG Duty Free announced a decent 1Q21 recurring profit and we believe concerns on sales diversion and domestic competition are overplayed. We are...

Osbert Tang, CFA

SH/SZ Connect Flows: Wuxi Apptec, Gree, China Tourism

We highlight inflows into WuXi AppTec Co Ltd (603259 CH), as well as outflows from Gree Electric Appliances (000651 CH) and China Tourism Group...

Ke Yan, CFA, FRM

CTG Duty Free Corp (601888 CH): Beating Market Expectations on Pre-Announced FY20 Result

Strong FY20 result with good margin expansion should lead to market earnings forecast upgrades. The first full-year impact of new Hainan duty free...

Osbert Tang, CFA

Shanghai International Airport (600009 CH): Dragged by Unfavourable Duty Free Agreement

We see SIAC's FY20 unencouraging, mostly due to the unfavourable duty free agreement reached which will erode its profitability. It is possibly...

Osbert Tang, CFA

CTG Duty Free Corp (601888 CH): Facing More Competition in a Rapidly Growing Market

New players to Hainan duty free market will not bring near-term impact to CTG Duty Free's leadership, but can be long-term challenges. However,...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

CTG Duty Free (601888 CH): 1Q21 Profit Is Still Quite Decent

CTG Duty Free announced a decent 1Q21 recurring profit and we believe concerns on sales diversion and domestic competition are overplayed. We are...

Osbert Tang, CFA

SH/​​SZ Connect Flows: Wuxi Apptec, Gree, China Tourism

We highlight inflows into WuXi AppTec Co Ltd (603259 CH), as well as outflows from Gree Electric Appliances (000651 CH) and China Tourism Group...

Ke Yan, CFA, FRM

CTG Duty Free Corp (601888 CH): Beating Market Expectations on Pre-Announced FY20 Result

Strong FY20 result with good margin expansion should lead to market earnings forecast upgrades. The first full-year impact of new Hainan duty free...

Osbert Tang, CFA

Shanghai International Airport (600009 CH): Dragged by Unfavourable Duty Free Agreement

We see SIAC's FY20 unencouraging, mostly due to the unfavourable duty free agreement reached which will erode its profitability. It is possibly...

Osbert Tang, CFA

CTG Duty Free Corp (601888 CH): Facing More Competition in a Rapidly Growing Market

New players to Hainan duty free market will not bring near-term impact to CTG Duty Free's leadership, but can be long-term challenges. However,...

Osbert Tang, CFA

SH/SZ Connect Flows: Wuxi Apptec, Gree, China Tourism