CTG DUTY-FREE(SH:601888) HTSC·2024-10-16 02:03Investment Rating - The report maintains a "Buy" rating for China Duty Free Group (601888 CH) with a target price of RMB 76.44 [7][5]. Core Views - The company is experiencing temporary pressure on profitability and is awaiting a recovery in demand, particularly in the Hainan tourism sector, which has been affected by cross-border travel diversions [2][3]. - The airport duty-free segment is on a recovery path, while the offshore duty-free demand faces challenges [3][4]. - The company is focusing on enhancing consumer experience and is set to benefit from the rollout of city store policies, which may contribute to revenue growth in the medium to long term [4][5]. Summary by Sections Financial Performance - For the first nine months of 2024, the company expects revenue of RMB 43.021 billion, down 15.4% year-on-year, and a net profit of RMB 3.874 billion, down 25.4% year-on-year [2]. - In Q3 2024, revenue was RMB 11.756 billion, a decrease of 21.5% year-on-year, with a net profit of RMB 638 million, down 52.4% year-on-year [2][3]. - The gross profit margin for Q3 2024 was 31.6%, down 2.67 percentage points year-on-year, and the net profit margin was 5.4%, down 3.5 percentage points year-on-year [4]. Market Dynamics - The company’s airport duty-free stores in Beijing and Shanghai saw revenue growth of over 140% and nearly 60% respectively in the first nine months of 2024, aligning with the recovery in international passenger flow [3]. - In contrast, the offshore duty-free sales in Hainan faced a decline, with average daily sales of RMB 88 million, down 31.2% year-on-year [3]. Future Outlook - The company anticipates a gradual recovery in airport duty-free sales, while the Hainan market is still in a bottoming phase [2][5]. - The introduction of city store policies is expected to enhance the company’s competitive position and drive growth [4][5]. - The projected earnings per share (EPS) for 2024, 2025, and 2026 are RMB 2.40, RMB 2.73, and RMB 2.98 respectively [5][6].