Core Viewpoint - China Duty Free Group (01880, 601888.SH) is actively planning for its development in 2026 to seize opportunities from the expected opening of Hainan, despite weak consumer sentiment [1] Group 1: Financial Performance and Forecasts - The third-quarter performance has led to a downward revision of net profit forecasts for 2025 and 2026 by 6% and 1% respectively, while the forecast for 2027 has been increased by 3% [1] - The target price for H-shares has been raised from HKD 56 to HKD 61.7, and the target price for A-shares has been increased from CNY 60 to CNY 69, maintaining a "Hold" rating [1] Group 2: Market Conditions and Opportunities - The anticipated active capital market may support luxury goods sales, despite the current weak consumer sentiment [1] - The sales recovery momentum for duty-free business at ports is expected to be stronger from 2028 to 2035 [1]

Core Viewpoint - Macquarie has raised the target price for China Duty Free Group (01880) to HKD 90, maintaining an "outperform" rating, citing improvements in the company's Hainan operations in October, with increased conversion rates and average transaction sizes [1] Financial Projections - Macquarie has adjusted the net profit forecasts for the fiscal years 2025 and 2026 downwards by 13% and 5.9% respectively, primarily due to the inclusion of non-operating items and actual data from the third quarter of 2025 [1] - Revenue forecasts for the fiscal years 2025, 2026, and 2027 have been increased by 0.6%, 4%, and 9.6% respectively, attributed to the adjustments made [1]

Core Viewpoint - Macquarie has raised the target price for China Duty Free Group (601888) (01880) to HKD 90, maintaining an "Outperform" rating, citing improvements in the company's Hainan business in October [1] Financial Performance - The conversion rate and average ticket size have improved in October, contributing to a better performance [1] - Third-quarter sales decreased by 0.4% year-on-year, which is better than Macquarie's growth expectations [1] - Operating profit declined by 7.5%, a significant improvement compared to a 26.5% decline in the second quarter [1] Profitability and Margin Adjustments - Gross margin is expected to increase by 0.5 percentage points year-on-year when excluding low-margin electronic device sales [1] - Net profit forecasts for fiscal years 2025 and 2026 have been reduced by 13% and 5.9%, respectively, due to non-operating items and actual data from the third quarter of 2025 [1] - Revenue forecasts for fiscal years 2025, 2026, and 2027 have been adjusted upward by 0.6%, 4%, and 9.6%, respectively, reflecting actual data from the third quarter of 2025 and the recovery of sales in Hainan duty-free stores [1] - Gross margin expectations for fiscal years 2025, 2026, and 2027 have been lowered by 0.4, 0.8, and 0.6 percentage points, respectively, due to an increase in the proportion of low-margin products [1] - Operating profit margin expectations for fiscal years 2025 and 2026 have been reduced by 0.7 and 0.5 percentage points, respectively, influenced by actual data from the third quarter of 2025 and the downward adjustment of gross margin expectations [1]

Core Viewpoint - Macquarie has raised the target price for China Duty Free Group (01880) to HKD 90, maintaining an "Outperform" rating, citing improvements in the company's Hainan business in October [1] Financial Performance - The conversion rate and average transaction size in Hainan have improved, leading to a projected 0.5 percentage point year-on-year increase in gross margin when excluding low-margin electronic device sales [1] - The company's Q3 sales decline has narrowed to 0.4% year-on-year, which is better than Macquarie's growth expectations [1] - Operating profit decreased by 7.5%, a significant improvement compared to a 26.5% decline in Q2 [1] Earnings Forecast Adjustments - Macquarie has lowered net profit expectations for FY2025 and FY2026 by 13% and 5.9% respectively, primarily due to the inclusion of non-operating items and actual data from Q3 2025 [1] - Revenue forecasts for FY2025, FY2026, and FY2027 have been raised by 0.6%, 4%, and 9.6% respectively, reflecting actual data from Q3 2025 and the recovery of sales in Hainan duty-free stores [1] Margin and Profitability Outlook - Gross margin expectations for FY2025, FY2026, and FY2027 have been reduced by 0.4, 0.8, and 0.6 percentage points respectively, mainly due to an increase in the proportion of low-margin products [1] - Operating profit margin expectations for FY2025 and FY2026 have been lowered by 0.7 and 0.5 percentage points respectively, attributed to actual data from Q3 2025 and the downward revision of gross margin expectations [1]

Core Viewpoint - Jefferies has released a research report indicating that China Duty Free Group is actively planning for its development in 2026 to capitalize on the expected opening of Hainan, further expanding opportunities brought by increased openness [1] Group 1: Financial Forecasts - Despite weak consumer sentiment, the anticipated active capital market may support luxury goods sales [1] - Based on third-quarter performance, net profit forecasts for 2025 and 2026 have been reduced by 6% and 1% respectively, while the 2027 forecast has been increased by 3% [1] Group 2: Target Price Adjustments - The target price for H-shares has been raised from HKD 56 to HKD 61.7, and the target price for A-shares has been increased from CNY 60 to CNY 69 [1] - The "Hold" rating is maintained [1] Group 3: Market Recovery Expectations - The sales recovery momentum for duty-free business at the port is expected to be stronger from 2028 to 2035 [1]

大华继显将中国中免A股评级上调至买进。 ...

Summary of China Tourism Group Duty Free (601888.SS) Conference Call Company Overview - **Company**: China Tourism Group Duty Free (CTGDF) - **Ticker**: 601888.SS - **Market Cap**: Rmb157.4 billion / $22.1 billion - **Enterprise Value**: Rmb132.1 billion / $18.6 billion - **Price Target**: Rmb70.00 - **Current Price**: Rmb76.07 - **Downside**: 8.0% Key Financial Results - **3Q25 Net Profit**: Rmb452 million, down -29% YoY to Rmb412 million excluding one-off items, significantly lower than Rmb1.9 billion in 1Q25 and Rmb657 million in 2Q25, totaling Rmb3 billion for 9M25, which is 72% of the full-year forecast [1][21] - **Revenue Stabilization**: Revenue stabilized with a flattish YoY change in 3Q25 compared to -11% and -8% in 1Q25 and 2Q25 respectively, maintaining a gross margin of ~32% [1][21] - **G&A Expenses**: Higher general and administrative expenses contributed to operating de-leverage [1][21] - **Net Interest Income**: Rmb129 million, down from Rmb212 million in 2Q25 [1] Dividend Declaration - **Interim DPS**: First-time declaration of an interim dividend of Rmb0.25, representing only 16.9% of earnings in 9M25, with management considering this as a potential regular practice due to strong financial position (Rmb28.8 billion net cash at end-3Q25) [2][21] Hainan Duty-Free Sales - **Sales Recovery**: Hainan DFS sales turned positive since September (+3% YoY), continuing into the Golden Week holidays (+14%) [2][18] - **Shopper Metrics**: Per-shopper spending stabilized at Rmb5-6k, but shopper conversion ratio bottomed at 17-18% [18] - **Policy Relaxation**: New DFS policy effective from November 1st, expanding eligible product categories and allowing travelers from other countries to make purchases in Hainan [18][27] Airport and Online Sales - **Airport DFS Revenue**: Estimated to have bounced back by +15% YoY, while online sales faced intense competition, resulting in a -5% YoY decline [19] - **Revenue Breakdown**: Excluding Hainan DFS, airport and online segments generated Rmb6.3 billion in 3Q25, a +2% YoY increase [19] Cost Management and Future Projects - **Cost Control**: Management aims to maintain gross margins at 32-33% through economies of scale and favorable supplier negotiations [19] - **Inventory Management**: Inventory days reduced from 215 to 135, then increased to 193/195 due to product replenishment ahead of peak season [19][20] - **New Project**: Sanya downtown DFS mall phase 3 is on track for launch in FY26E [20] Valuation and Outlook - **Revised EPS Estimates**: FY25E EPS estimates revised down by -12%, with FY26-27E forecasts largely unchanged [21] - **Target Price Adjustment**: 12-month target price raised to Rmb70/HK$61, applying a mid-cycle P/E multiple of 30x [21] - **Neutral Rating**: Maintained due to skepticism about resuming high double-digit growth rates seen in FY20-22 [21] Additional Insights - **Competitive Pricing**: CTGDF remains competitive against cross-border e-commerce and duty-free channels in Japan, Korea, and Hong Kong [18] - **Market Trends**: Improvement in sales trends aligns with broader high-end spending recovery observed in other industries [21]

Investment Rating - The industry rating for tourism retail is "Recommended" [2][4] Core Insights - The new policies aim to enhance the flexibility of duty-free operations by expanding product categories, relaxing approval processes, and improving service delivery, thereby stimulating duty-free shopping consumption [2] - The recent announcement on October 17 regarding Hainan's duty-free shopping policy includes an expansion of the product range, allowing domestic goods sales, adjusting the shopping age, and extending the applicable population, which is expected to boost duty-free consumption [3] - The continuous release of favorable duty-free shopping policies is anticipated to invigorate consumption in both offshore and inbound duty-free sectors, with significant growth potential for city duty-free stores [4] Summary by Sections Policy Overview - The new policies effective from November 1, 2025, include four core upgrades: empowering domestic products, expanding product categories, decentralizing approval processes, and optimizing services [1] - Specific product categories added include mobile phones, drones, sports goods, health foods, over-the-counter drugs, and pet foods [2] Hainan Duty-Free Policy Adjustments - The number of duty-free product categories has increased from 45 to 47, with new inclusions such as pet supplies and portable musical instruments [3] - Domestic products like clothing, ceramics, and tea can now be sold in duty-free stores, treated as exports for tax purposes [3] Investment Recommendations - The report identifies key beneficiaries of the new policies, including China Duty Free Group, Wangfujing, Hainan Airport, and others, suggesting potential performance improvements for these companies [4]

Summary of Conference Call on China Duty-Free Industry Industry Overview - The conference call discusses the duty-free industry in China, particularly focusing on China Duty Free Group (CDFG) and its performance amid new policies and market conditions [2][3][4]. Key Points and Arguments 1. **Impact of New Duty-Free Policies** The recent implementation of new duty-free policies is expected to significantly enhance conversion rates and drive the expansion of duty-free businesses, especially benefiting pilot stores in Beijing and Shanghai, with rapid growth anticipated in 2026 [2][3]. 2. **Performance of China Duty Free Group (CDFG)** CDFG's profits have declined from approximately 10 billion in previous years to around 4 billion in 2025 due to intensified channel competition, consumer downgrade, and the crackdown on purchasing agents. However, the new policies and the closure of Hainan's offshore market are expected to boost performance, with profits projected to reach between 5 billion to 6 billion in 2026 [2][4][5]. 3. **Benefits to Other Licensed Companies** Other licensed companies such as Zhuhai Duty Free, Wangfujing, and Hainan Airlines Group are also expected to benefit from the new offshore and exit optimization policies. Wangfujing is projected to reduce losses to around 400 million in 2026, while Hainan Airlines Group is anticipated to gain from its affiliate's development in Hainan [2][6]. 4. **Investment Timing** The current period is considered a favorable time for investing in duty-free concept stocks, as valuations are relatively low with noticeable marginal changes. It is recommended to allocate investments in large companies like CDFG for relative returns, especially with potential stock price improvements expected around the Spring Festival [2][7]. 5. **Consumer Impact of Hainan Closure** The closure of Hainan has not resulted in lower consumer goods tax rates but has created price advantages through the offshore duty-free framework. This change has limited consumer benefits but presents significant opportunities for licensed companies, particularly large firms like CDFG [2][8]. 6. **Market Trends and Seasonal Factors** The overall market trend for 2026 is optimistic, with expectations of improving data. However, attention should be paid to potential seasonal weaknesses in data post-Spring Festival, as well as monthly data changes, key time points, and government regulatory movements [2][3][9]. Additional Important Insights - The new policies have notably increased market attention and are expected to enhance the purchasing process for returning travelers, which could lead to a substantial increase in sales at city duty-free stores [3]. - Investors are advised to monitor the performance of smaller companies like Wangfujing and Hainan Airlines Group, assessing their valuations based on specific circumstances [7].

Investment Rating - The report indicates a neutral investment rating for the consumer sector, with a focus on the potential recovery signals in the liquor industry [4]. Core Insights - The consumer sector showed mixed performance in the last week, with retail, textiles, and home appliances showing positive growth, while food and beverage, and beauty care sectors faced declines [4]. - A new policy from the Ministry of Commerce aims to enhance duty-free shopping, which is expected to boost consumer spending and attract overseas consumption back to domestic markets [4]. - The liquor industry is undergoing a period of adjustment, with major players like Kweichow Moutai showing stable revenue despite a weak consumption backdrop, while smaller regional brands are struggling with high inventory and declining profits [4]. Summary by Sections Market Weekly Review - The consumer sector's performance varied, with retail (+1.63%), textiles (+1.04%), and home appliances (+0.74%) gaining, while food and beverage (-0.23%) and beauty care (-2.21%) declined [4]. - Key stocks that led gains included Richen Co. (+17.79%) and Dechang Co. (+18.35%), while ST Chuntian (-7.92%) and Stone Technology (-12.34%) were among the biggest losers [4]. Industry News and Key Company Announcements - The Ministry of Commerce and other departments issued a notice to improve duty-free store policies, effective November 1, which includes expanding product categories and easing approval processes [4][15]. - The liquor sector is experiencing accelerated adjustments, with Kweichow Moutai reporting Q3 revenue of 39.81 billion yuan (up 0.35% YoY) and net profit of 19.22 billion yuan (up 0.48% YoY), while smaller brands face significant profit declines due to high inventory levels [4][18]. - Various companies reported their Q3 earnings, with notable performances including Jinbo Biological (+31.1% YoY revenue growth) and Midea Group (+10.06% YoY revenue growth) [17][19].