Investment Rating - The report maintains a "Buy" rating for the company with a target price of 116.10 CNY [5][18]. Core Insights - The acquisition of DFS's Greater China business is expected to significantly enhance the company's premium capability and international influence in the global luxury goods sector, positioning it as a competitive player in tourism retail [2][3]. - The company forecasts net profits for 2025, 2026, and 2027 to be 3.947 billion CNY, 5.328 billion CNY, and 6.126 billion CNY respectively, with corresponding EPS of 1.91 CNY, 2.58 CNY, and 2.96 CNY [3][4]. Financial Summary - Total revenue for 2023 is projected at 67.54 billion CNY, with a decrease to 56.47 billion CNY in 2024, followed by a gradual recovery to 68.96 billion CNY in 2026 and 87.76 billion CNY in 2027, reflecting a growth rate of 28.7% and 27.3% respectively [4][12]. - The net profit attributable to the parent company is expected to decline to 4.267 billion CNY in 2024, before increasing to 5.328 billion CNY in 2026 and 6.126 billion CNY in 2027, indicating a recovery trend [4][12]. - The company's return on equity (ROE) is projected to improve from 7.0% in 2025 to 9.8% in 2027 [4][12]. Acquisition Details - The company plans to acquire DFS's Greater China tourism retail business for up to 395 million USD, which includes 100% equity of DFS Cotai Limitada and key assets in Hong Kong [3][12]. - The acquisition is fully funded by the company's own capital, ensuring that existing operations remain unaffected [3][12]. Strategic Partnerships - The company has signed a strategic cooperation memorandum with LVMH, aiming for deep collaboration in product sales, store openings, brand promotion, cultural exchange, tourism services, and customer experience [3][12].

Group 1 - China Duty Free Group (CDFG) announced the acquisition of DFS Group's travel retail business in Greater China for up to $395 million in cash, which includes 100% equity of DFS Cotai Limitada and related assets from DFS Singapore and DFS Hong Kong [1] - The acquisition encompasses various assets such as personnel, lease contracts, fixed assets, inventory, and intangible assets including brand ownership and membership systems [1] Group 2 - CDFG signed a strategic cooperation memorandum with LVMH to establish a partnership in retail, aligning with LVMH's current business model [2] - The collaboration aims to leverage the strengths of both companies to deepen cooperation in Greater China, focusing on product sales, store openings, brand promotion, cultural exchange, tourism services, and customer experience [2] - The transaction is subject to customary closing conditions and is expected to be completed in approximately two months, allowing CDFG to expand its service network and enhance its international business platform [2]

Investment Rating - The investment rating for the company is "Buy" (maintained) [6] Core Views - The acquisition of DFS Cotai Limitada and related assets is expected to enhance the company's position in the high-end tourism retail market in Hong Kong and Macau, integrating a quality retail network and promoting domestic products overseas [1][4] - The transaction is valued at a maximum of USD 3.95 billion, with a total consideration of up to HKD 9.24 billion through the issuance of new H shares [1][4] - The company aims to leverage the acquisition to strengthen its competitive edge and market share in the region [1][4] Summary by Sections Acquisition Details - The company announced its intention to acquire 100% equity of DFS Cotai Limitada and related assets from DFS Singapore and DFS Hong Kong for up to USD 3.95 billion [1] - Post-transaction, the company will issue up to 7.33 million and 4.64 million H shares to LVMH's subsidiary and Miller family trust, respectively, at a subscription price of HKD 77.21 per share [1] Financial Performance - The valuation of nine stores in the Macau region is approximately RMB 31.34 billion (around USD 4.41 billion) [3] - Revenue for DFS in the Macau region reached RMB 41.49 billion and RMB 27.54 billion for the first nine months of 2024 and 2025, respectively, with net profits of RMB 1.28 billion and RMB 1.33 billion [3] Strategic Significance - The acquisition is strategically significant as it consolidates market position and scale, enhances operational efficiency through the integration of DFS's brand and membership system, and optimizes capital structure by introducing strategic shareholders [4] - The company expects to benefit from the operational experience of DFS and build a platform for domestic products to enter international markets [4] Profit Forecast and Valuation - The company's net profit forecasts for 2025-2027 have been adjusted to RMB 39.60 billion, RMB 52.41 billion, and RMB 61.83 billion, respectively, reflecting increases of 8%, 10%, and 10% [5] - The target price for A-shares has been raised to RMB 115.75 and for H-shares to HKD 104.36, corresponding to 46x and 38x PE for 2026 [5]

Group 1 - The core point of the article is that China Duty Free Group (CDFG) announced a cash acquisition of DFS Group's travel retail business in Greater China for up to $395 million (approximately 2.75 billion RMB) [1] - The acquisition includes 100% equity of DFS Cotai Limitada and related assets from DFS Singapore and DFS Hong Kong, covering various physical and intangible assets such as personnel, lease contracts, fixed assets, inventory, brand ownership, membership systems, and intellectual property [1] - The transaction aims to deepen cooperation between CDFG and LVMH, enhancing CDFG's position in the travel retail market in Hong Kong and Macau [1] Group 2 - LVMH and the Miller family will participate in a capital increase for CDFG by subscribing to newly issued H-shares in Hong Kong, with the subscription amount being part of the sale consideration, to be completed after the transaction closes [2] - CDFG's core business focuses on duty-free retail, covering a wide range of products including tobacco, alcohol, cosmetics, and apparel, while also engaging in the investment and development of duty-free commercial complexes [2] - CDFG has previously expanded into overseas markets through asset acquisitions, including acquiring duty-free retail assets from Hong Kong's Huamao Group and establishing a presence in Southeast Asia and East Asia [2] Group 3 - CDFG's financial performance has been volatile due to market conditions, with projected revenues of 54.433 billion RMB, 67.54 billion RMB, and 56.474 billion RMB for 2022, 2023, and 2024 respectively, and net profits of 5.03 billion RMB, 6.714 billion RMB, and 4.267 billion RMB for the same years [3] - The company is expected to see a decline in revenue and net profit in 2024, with year-on-year decreases of 16.38% and 36.44% respectively [3] - For the first three quarters of 2025, CDFG reported total revenue of 39.862 billion RMB, a year-on-year decrease of 7.34%, and a net profit of 3.052 billion RMB, down 22.13% year-on-year [3]

Investment Rating - The investment rating for the company is "Buy" (maintained) [6] Core Views - The acquisition of DFS Cotai Limitada and related assets is expected to enhance the company's position in the high-end tourism retail market in Hong Kong and Macau, allowing for better integration of quality retail networks and strengthening core competitiveness [1][4] - The transaction is valued at a maximum of USD 3.95 billion, with a total consideration of up to HKD 9.24 billion through the issuance of new H shares to LVMH and the Miller family trust [1][4] - The acquisition is anticipated to improve operational efficiency by leveraging DFS's established brand and membership system, while also facilitating the export of domestic products through the Hong Kong and Macau markets [4] Financial Summary - The total valuation of nine DFS stores in the Macau region is approximately RMB 31.34 billion (around USD 4.41 billion), with projected revenues of RMB 41.49 billion and RMB 27.54 billion for the years 2024 and 2025 respectively [3] - The net profit for the DFS stores in the Macau region is expected to be RMB 1.28 billion and RMB 1.33 billion for the same periods, with corresponding PE ratios of 25X and 23X [3] - The company's cash reserves as of Q3 2025 stand at RMB 319.69 billion, indicating a strong liquidity position [3] Profit Forecast and Valuation - The company's net profit forecasts for 2025, 2026, and 2027 have been adjusted upwards to RMB 39.60 billion, RMB 52.41 billion, and RMB 61.83 billion respectively, reflecting increases of 8%, 10%, and 10% [5] - The target price for A-shares has been raised to RMB 115.75 and for H-shares to HKD 104.36, corresponding to PE ratios of 46X and 38X for 2026 [5] - The company is expected to maintain a consistent growth trajectory with projected revenues increasing from RMB 55.10 billion in 2025 to RMB 67.51 billion in 2027 [10]

Core Viewpoint - China Duty Free Group (CDFG) has announced an agreement to acquire DFS Group's travel retail business in Hong Kong and Macau, along with intangible assets in Greater China, aiming to enhance its service network and international business expansion [1][2] Group 1: Acquisition Details - The acquisition is expected to be completed in approximately two months, pending customary closing conditions [1] - LVMH Group and Robert Miller's family will participate in CDFG's capital increase by subscribing to newly issued H-shares in Hong Kong, with the subscription amount corresponding to part of the sale price [1] Group 2: Strategic Cooperation - CDFG and LVMH Group have signed a strategic cooperation memorandum to establish partnerships in retail areas where their strategies align [1] - The collaboration aims to leverage each party's strengths to deepen cooperation in Greater China, focusing on product sales, store openings, brand promotion, cultural exchange, tourism services, and customer experience [1] Group 3: Management Perspective - CDFG's General Manager, Chang Zhujun, emphasized that the transaction will expand CDFG's service network, enhance the retail economy in Hong Kong and Macau, and support high-quality development in the region [2] - The acquisition is part of CDFG's strategy to accelerate international business layout and implement the Guangdong-Hong Kong-Macau Greater Bay Area strategy [2]

高盛上周举办了一场投资者电话会议，与一位旅游零售及免税专家进行交谈，该专家在海南免税业务发 展与营运方面拥有多年经验。展望2026年，专家对海南免税销售增长持审慎乐观态度。该行预计中国中 免将维持其70%至80%市场份额，并认为未来2至3年内不太可能出现新的免税市场进入者；又认为独立 的关税制度将有助进口外国产品，并随着时间推移吸引更多投资，但相关物流和海关功能需时完善。高 盛将重点关注中免集团即将发布2024年第四季初步业绩中的利润率趋势，以评估其对最终盈利的影响。 ...

Core Viewpoint - The company's acquisition of DFS stores and related assets in the Hong Kong and Macau regions will rapidly expand its retail presence locally, while the partnership with LVMH and subsequent H-share issuance will strengthen their collaboration, allowing both retailers and brands to leverage complementary advantages, further consolidating China Duty Free Group's position in the global travel retail market. Post-issuance, China Tourism Group will maintain a solid controlling stake, supporting its long-term international strategy [1]. Group 1: Transaction Overview - The company announced that its wholly-owned subsidiary, China Duty Free International, will acquire DFS's Greater China travel retail business for up to $395 million in cash [2]. - The acquisition includes nine DFS stores in Hong Kong and Macau, as well as related intangible assets in Greater China [3]. - The final price of the transaction will be determined based on an agreed price adjustment mechanism [6]. Group 2: Strategic Partnerships - A strategic cooperation memorandum was signed with LVMH to establish a partnership in the retail sector, aligning with LVMH's current business model [7]. - The collaboration is expected to enhance LVMH's brand presence in China Duty Free's channels, particularly benefiting from high-quality customer traffic in duty-free zones [4]. Group 3: H-Share Issuance - The company will issue up to 11,967,500 H-shares at a price of HKD 77.21 per share, which represents less than 0.58% of the total share capital post-issuance [5]. - This issuance will bind the two parties at the equity level, with the potential to increase overseas retail revenue by over 4 billion yuan according to projected financials for 2024 [5][11]. - The issuance will not significantly dilute existing shares, maintaining China Tourism Group's controlling stake at 50.01% [9]. Group 4: Asset Valuation - The valuation of the nine DFS stores in Hong Kong and Macau is approximately RMB 313.38 million, translating to about $44.1 million, with an assessed appreciation rate of 1701.84% [10]. - The transaction is based on a total enterprise value of $400 million, subject to customary adjustments [10]. Group 5: Financial Projections - The company maintains its profit forecasts for 2025 to 2027 at RMB 4.149 billion, RMB 5.190 billion, and RMB 6.348 billion, respectively, with current share prices corresponding to P/E ratios of 47X, 37X, and 30X [5][11].

Core Viewpoint - China Duty Free Group Co., Ltd. (China Duty Free, 601888.SH, 01880.HK) announced the acquisition of DFS Group's travel retail business in Greater China for up to $395 million in cash, which includes 100% equity of DFS Cotai Limitada and related assets [1][2]. Group 1: Acquisition Details - The acquisition involves the purchase of equity and assets from DFS Venture Singapore and DFS Group Limited, including two stores in Hong Kong and Macau, as well as intangible assets like brand ownership and membership systems [1][2]. - Post-transaction, DFS Cotai Limitada will be fully owned by China Duty Free, enhancing its presence in the travel retail market [2]. Group 2: Strategic Partnerships - China Duty Free signed a share subscription agreement with Delphine SAS and Shoppers Holdings HK, planning to issue up to 7,330,100 and 4,637,400 H shares respectively at a price of HKD 77.21 per share [3]. - A strategic cooperation memorandum was also signed with LVMH to explore collaboration in retail sectors, aiming for mutual benefits in product sales, store openings, and brand promotion [3]. Group 3: Market Impact and Future Prospects - The acquisition is expected to strengthen China Duty Free's market position in Hong Kong and Macau, facilitating the export of domestic brands and enhancing the quality of retail experiences for tourists [4]. - The company anticipates that this transaction will lead to industry upgrades, improved service levels, and increased core competitiveness, aligning with its long-term development strategy [4]. - As of January 19, the stock prices of China Duty Free rose significantly, with A-shares up 5.62% and H-shares up 6.65% [4][5].

Summary of China Tourism Group Duty Free Conference Call Company and Industry Overview - **Company**: China Tourism Group Duty Free (1880.HK) - **Industry**: Consumer sector in China/Hong Kong, specifically focusing on duty-free retail in Hainan Key Takeaways - **Sales Performance**: Hainan duty-free sales have reaccelerated in January 2026 after a moderation in December 2025, with a year-over-year increase of 37% during January 11-17, 2026 [10] - **Shopper Metrics**: The number of shoppers increased by 23% and per capita spending rose by 11% compared to the previous year [10] - **Sales Growth Drivers**: Key growth drivers include promotional activities, improved product offerings, and enhanced shopping experiences, particularly for higher ticket size items [10] - **Margin Considerations**: Margin is a critical factor for earnings growth, as emerging product categories tend to have lower margins compared to existing duty-free products, which have a gross profit margin of approximately 37% [10] Financial Metrics - **Market Capitalization**: Rmb 181,182.3 million [5] - **Enterprise Value**: Rmb 150,711.5 million [5] - **Stock Price Target**: HK$89.00, with a current stock price of HK$81.95 as of January 16, 2026 [5] - **52-Week Stock Price Range**: HK$88.80 - HK$43.15 [5] - **Average Daily Trading Value**: HK$214 million [5] Sales Data Insights - **Daily Sales Performance**: Average daily duty-free sales in Hainan showed fluctuations, with a notable increase in sales per shopper [4][10] - **Sales Comparison**: Excluding the peak sales period from December 18-24, where sales grew by 55%, the remaining days in December showed only a 5% increase [10] Risks and Opportunities - **Upside Risks**: Favorable policy outcomes for Hainan Free Trade Zone (FTZ) and increased consumer spending, especially in beauty and luxury products [14][15] - **Downside Risks**: Economic slowdown affecting disposable income, price competition among retail channels, and intensified competition if the government further opens the duty-free market [14][15] Valuation Methodology - **P/E Ratio**: The target P/E for 2026 is set at 35x, which is 1 standard deviation above the average since 2017, indicating a strong growth outlook for the Hainan travel retail market [12] Conclusion - The conference call highlighted a positive outlook for China Tourism Group Duty Free, driven by strong sales growth in Hainan and favorable market conditions, while also addressing potential risks that could impact future performance.