CSC SECURITIES (HK) LTD·2024-07-15 09:30Investment Rating - The investment rating for China Duty Free Group (601888.SH/1880.HK) is "Trading Buy" [1][6]. Core Insights - The report highlights that the airport duty-free business and gross profit margins are continuously improving. Despite a decline in overall revenue, the company has seen significant growth in airport duty-free store revenues due to the recovery of international flights and inbound/outbound passenger flow [1][4]. - The company has adjusted its profit forecasts for 2024-2026, expecting net profits of RMB 6.28 billion, RMB 7.47 billion, and RMB 8.49 billion respectively, reflecting a decrease of 6.5% in 2024, followed by growth in subsequent years [4]. Summary by Sections Company Basic Information - Industry: Leisure Services - A-share price as of July 12, 2024: RMB 67.75 - Market capitalization: RMB 132.28 billion - Major shareholder: China Tourism Group Co., Ltd. (50.30%) [2]. Financial Performance - Net profit for 2023 was RMB 6.71 billion, with a year-on-year increase of 33.46%. The forecast for 2024 is a net profit of RMB 6.28 billion, a decrease of 6.5% [3][4]. - Earnings per share (EPS) for 2023 was RMB 3.25, with a forecast of RMB 3.03 for 2024 [3][4]. - The company’s gross profit margin improved by 2.62 percentage points to 32.94% in H1 2024 [4]. Revenue Insights - H1 2024 revenue was RMB 31.26 billion, a year-on-year decrease of 12.8%. The second quarter revenue was RMB 12.46 billion, down 17.4% year-on-year [4]. - The decline in revenue was primarily due to challenges in the Hainan offshore duty-free market, which faced competition from outbound shopping and e-commerce promotions [4]. Future Outlook - The report anticipates a recovery in duty-free sales in H2 2024, driven by the summer peak season and improved shopping experiences [4]. - The current stock price reflects the operational pressures faced in Q2, suggesting a safety margin in valuation [4].